BUDGET 2019 | Foreign online services will need to register with the Customs Department under the relevant service taxes if they wish to continue operating in Malaysia, the Finance Ministry’s National Budget Office director Johan Mahmood Merican said today.

“The government will basically engage with the larger online services, which will then need to register with Customs if they want to continue supplying those services to Malaysian consumers.

“So this is an announcement. We will work out the details and guidelines which we will then communicate to these companies,” Johan said at a press conference after a briefing on Budget 2019 and the 11th Malaysian Plan (RMK11) mid-term review at the Communications and Multimedia Ministry in Putrajaya.

This tax on imported online services, he said, is to ensure a level playing field between Malaysian companies and foreign companies.

“I don’t want to go into individual companies, but the principle on a whole is to make sure there is a level playing field.

“Further details will be announced later,” he said.

However, Johan added, it is likely that not all foreign online service companies will be affected by this new tax.

Similar to the sales and service tax (SST), he said, this new tax would have a threshold, so smaller companies may be exempted.

Meanwhile, Communications and Multimedia Deputy Minister Eddin Syazlee Shith also said they hoped to achieve 95 percent penetration of high-speed broadband in rural areas through the RM1 billion National Fibre Connectivity Plan (NFCP), which was also announced in the Budget 2019 presentation.

Last Friday, Finance Minister Lim Guan Eng tabled Budget 2019 and announced that foreign online services would be subject to a new tax starting from Jan 1, 2020.

However, Lim did not provide any further details about the proposed tax.