Spotlight On: Malaysia Exempts Digital Payment Services from Service Tax

The Royal Malaysian Customs Department has issued Service Tax Policy 1/2022 regarding the exemption from service tax of digital payment services rendered by local non-bank service providers, with effect from 1 August 2022 until 31 July 2025.

The key points of the policy are summarized below:

• The Minister of Finance exempts the recipients of digital payment services provided by local non-bank service providers from paying service tax.
• Following the above exemption, the following local non-bank digital payment service providers are exempted from levying service tax on digital payment services:
  • local non-bank payment instrument issuers;
  • local non-bank merchant acquirers; and
  • local non-bank payment system operators.

Note, however, that the exemption only applies to local service providers and that the service tax on foreign service providers remains in place.

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