N2N CONNECT BHD

BUDGET 2019 aims to widen the scope of the sales and service tax (SST).

On top of the proposed digital tax on imported consumer services such as Spotify, Netflix and Steam, which will be implemented in 2020, there will also be a tax on digital services at the commercial level which will commence in January 2019.

This is to ensure that local service providers and its foreign competitors are on a level playing field.

Digital tax at the commercial level could potentially impact companies that rely on foreign digital services such as web hosting, cloud storage, payment gateway and customer-relationship management.

Amazon Web Services (AWS), Dropbox, Shopify and Zoho are a few of many foreign suppliers that provide digital services to local companies but do not have a physical presence in Malaysia.

Operationally, N2N does not rely on foreign web hosting services such as AWS to run its network. The company hosts its servers via third-party local service providers.

Instead, the concern may be on N2N’s market data subscription (for example, consensus estimate, price quotes and volume) from a foreign supplier which could be subjected to digital tax.

These data are featured on its TCPro Global trading platform.

However, there are still many unanswered questions with regards to the framework and implementation of the digital tax system.

For instance, foreign digital service providers may not be compelled to be registered under the local SST system, and there are also queries if the digital tax would be passed on to customers.

Due to the ambiguity of this matter, N2N is unable to quantify the impact until further clarification from the government in next month.