The way we consume and provide digital services has changed dramatically. Whether it’s streaming, cloud software, or online advertising, digital services are now central to business and daily life. In response, many governments; including Malaysia have introduced taxes specifically targeting these services. One such tax is the Digital Service Tax (DST).
Digital Service Tax is a consumption-based tax imposed on foreign digital service providers offering services to Malaysian consumers. Malaysia introduced DST on 1 January 2020 at a rate of 6%. However, this rate was increased to 8% starting 1 March 2024.
Who Is Subject to DST?
Foreign businesses that:
- Provide digital services (like software, ads, streaming, etc.)
- Exceed RM 500,000 in annual revenue from Malaysia
- Do not have a physical presence in Malaysia
These providers must register with the Royal Malaysian Customs Department (RMCD) and charge 8% DST on services sold to Malaysian customers.
What Counts as a “Digital Service”?
Under Malaysian tax law, digital services include:
- Streaming platforms (Netflix, Spotify, YouTube Premium)
- Online software subscriptions (Microsoft 365, Adobe Creative Cloud)
- Cloud services (AWS, Google Cloud)
- Online advertising platforms (Google Ads, Facebook Ads)
- E-learning platforms
- Online gaming and app purchases
- As of 1 March 2024, the DST rate was raised from 6% to 8%, increasing the cost of digital services. This affects:
- End users, who may see price hikes
- Advertisers, as platforms like Meta and Google now charge more
- Businesses, who rely on foreign SaaS tools and may need to re-budget