Introduction
The imported service tax Malaysia framework ensures that businesses acquiring services from overseas remain compliant with the Service Tax Act 2018. This article covers Type B: Imported Taxable Services and Type C: Digital Services, including exemptions, documentation, registration rules for foreign providers, taxable periods, and refund/offset procedures.
Section 1: Imported Taxable Services (Type B)
Imported taxable services refer to any taxable service acquired from overseas for business purposes. Since 1 January 2019, Malaysian businesses may be required to account for service tax on these imported services.
1. When Is Imported Service Tax Applicable?
Service tax is imposed when:
- A business acquires a taxable service (under Service Tax Regulations)
- The service is imported from an overseas provider, and
- The service is used for business in Malaysia
Tax is accounted for via self-recipient accounting unless exemption applies.
2. Exemption for Imported Taxable Services (Effective 1 Jan 2020)
The Minister grants exemptions when ALL four conditions are met:
✔ The business must be a registered person under Service Tax Act 2018
✔ They must provide the same service as the imported taxable service
✔ The imported service must be for furtherance of business, not personal use
✔ The taxable person has paid the foreign service provider
Qualifying service categories:
- Group G services (except employment & security services)
- Advertising services (Item 8, Group I)
3. Filing Requirements
Registered Person
- Must submit Form SST-02
Non-Registered Person
- Must submit Form SST-02A (Self-Recipient Accounting)
Section 2: Digital Services (Type C)
Effective 1 January 2020, foreign digital service providers must charge 6% Service Tax on digital services provided to Malaysian consumers.
4. What Counts as Digital Services?
A service is considered digital if:
- Delivered through IT or electronic networks
- Cannot function without the internet
- Automated with minimal human interaction
Examples include:
- Software, cloud service, apps
- Video games, digital content, streaming
- Online advertising
- Online training (except preschool–tertiary academic education)
- Database hosting
- Social media, search engines
5. Who Is Considered a Consumer?
A customer is considered a Malaysian consumer if any two (2) conditions are met:
- Payment using Malaysian bank/credit card
- Internet protocol (IP) address originates from Malaysia
- Physical residence in Malaysia, including Designated and Special Areas
Other factors: billing address, home address, selected country.
6. Mandatory Registration for Foreign Service Providers
A foreign registered person (FRP) must register if the value of digital services exceeds RM500,000 within 12 months.
Registration is based on:
A. Historical Method
If past 12 months exceeded threshold.
B. Future Method
If coming 12 months expected to exceed threshold.
7. Taxable Period for Digital Service Tax (DST)
DST taxable period is every 3 months (quarterly).
Example
| Activity | Date |
| Application for registration | 2 Jan 2020 |
| Effective date of registration | 1 Feb 2020 |
| First taxable period | Feb – Apr 2020 |
| Submission Deadline | 31 May 2020 |
Foreign registered persons may apply to RMCD to align taxable periods with their financial year-end.
DST Return Form
- Form DST-02
8. Offsetting or Refunding Service Tax on Imported Digital Services
Local service providers who paid service tax to foreign digital providers may claim refund by offset under Section 34(3)(b).
Qualifying Conditions
- Must be a registered person under Service Tax Act
- Provides the same digital service locally
- Service is used for business, not personal
- Foreign provider must be a foreign registered person
- Service tax must have been paid to the foreign provider
Key Takeaways
- Imported services are taxable unless exemption conditions are met.
- Digital services from overseas providers are subject to 6% service tax.
- Foreign digital service providers must register when exceeding RM500,000 threshold.
- DST taxable period is every 3 months.
- Local providers offering similar digital services may offset or claim refund.
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