Taxing of digital businesses

In the recently concluded National Tax Conference (NTC) 2016, the subject of taxing of online or digital businesses was among the topics highlighted and given emphasis. In the keynote address at the NTC 2016, the Second Finance Minister said that the Government had formed a team to study the development of taxing on the digital economy.

With more businesses going digital, there is a need to look into the tax framework to address the taxing of online business as a new source of revenue and to create a level playing field between online and non-online business. It is understood that the Inland Revenue Board (IRB) is monitoring the development of digital business and studying these business activities to have them under the tax net.



Back in 2013, the IRB had already issued the Guidelines on Taxation of E-Commerce. The Guidelines seek to provide some guidance to the basic tax issues and income tax treatment in respect of e-commerce transactions. Further, with the implementation of goods and services tax in Malaysia, the Guide on E-Commerce Services (revised as at 18 Dec 2015) and Guide on Web Hosting Services (revised as at 21 Dec 2015) were issued by the Royal Malaysian Customs Department. However with more innovative business models being introduced, the current tax framework may not be adequate to address the tax challenges.

Those involved in digital businesses (or considering starting a digital business) should keep a lookout for any development on the tax framework by the IRB.