6% tax on international digital services will come into effect beginning January 1, 2020 after Service Tax (Amendment) Bill 2019 was passed in Parliament on Monday (April 8).
Deputy Finance Minister Datuk Amiruddin Hamzah said in his speech that the 6% rate is relatively lower if compared to the 25% digital tax imposed in Norway, 15% in New Zealand, and 18% in Russia.
Amiruddin also highlighted the unfairness faced by local digital services who need to pay taxes while the foreign services were exempted from the tax.
Netflix, the world’s leading video streaming service, has ranked Malaysians as its top bingers in Asia, ahead of Singapore, Philippines, Taiwan and Hong Kong.
Globally, the number of active Netflix users increases from year to year, from 200,000 members in 2013 to more than 5 million in 2017.
On the other hand, music streaming service Spotify hit 70 million subscribers in 2018 with Malaysians among the active users. An average Spotify user in Malaysia spends 148 minutes per day streaming music from the app.
Steam, a platform for purchasing and playing video games, has also witnessed a growing number of Southeast Asian users over the years, especially in sales.
With the 6% tax implementation on its way, these users and subscribers will have to pay service tax in 2020.