PIKOM seeks clarification on digital tax implementation

KUALA LUMPUR: The National ICT Association of Malaysia (PIKOM) is seeking clarification from the government on whether the industry will be subjected to digital tax, withholding tax or both on January 1, next year.

Chairman Ganesh Kumar Bangah said the industry particularly cloud services and online advertising would be affected if they are subjected to the implementation of digital tax, as the tax represents among the largest cost components to digital companies.

“However, it is unclear if these applications will also need to pay withholding taxes in addition to the digital tax.

“If these applications attract both taxes, then a total of 16 per cent of government tax will be levied on some of the largest cost components of our digital companies, making our local industry uncompetitive,” he told Bernama.

As of now, the industry according to him had tried to seek clarification about the impending tax but the uncertainty remained.

“When we talk to certain tax player, they said it is under withholding tax, while some said the services will fall under the digital tax, and some said both. Hence we need a clear cut guideline on it before it is implemented.”

“We need to solve this immediately by ensuring there will be no double taxation. This is to strengthen Malaysia’s position as a favourable business destination,” he said.

PIKOM said Ganesh will sit together with industry players and relevant ministries in the near future to discuss the uncertainty.

Under the withholding tax, companies are required to pay 10 per cent to the Inland Revenue Board for conducting business in the country.

Beginning January 1, 2020, the government announced it would implement a digital tax of six per cent.

Besides taxation, Ganesh also suggested for a specific ministry to deal with the ICT industry.

“One of the reasons our industry has had these issues is because that technology is now an enabler to all industries and not just an industry on its own.

“PIKOM as the association that represents the technology industry works with five different ministries which sometimes overlap with each other,” he said. — Bernama