Apart from Google G Suite users, Google will also charge 6% Service Tax for all paid apps and in-app purchases in Malaysia. This is in line with the expansion of the Sales & Service Tax legislation in Malaysia which is now extended to cover foreign service providers that offer digital services.
According to its announcement to app developers, the tax laws are still applicable for Malaysian customers even if you’re not located in Malaysia. The collected 6% tax will be transferred to the relevant authorities and users are not required to take further action.
The 6% service tax will also be calculated for subscription-based products. App developers are urged to publish their new subscription fee or alternatively, make a revision to its existing pricing.
Below is the full notice:
Tax changes for Google Play purchases in Malaysia
Due to the expansion of the tax legislation in Malaysia, Google will be responsible for determining, charging, and remitting 6% Service Tax for Google Play Store paid apps and in-app purchases made in Malaysia, effective January 1, 2020.
Even if you’re not located in Malaysia, this change in tax laws will still apply for purchases made by Malaysia customers.
Google will send the applicable taxes for paid apps and in-app purchases made by customers in Malaysia to the appropriate authority, so you won’t need to calculate and remit service tax for Malaysia separately for these customers’ purchases. No other action is required on your part.
Apart from Malaysia, Google will also begin to charge GST for Singaporean users. Similar to Malaysia, digital services from overseas will be taxed but Singapore is charging a higher 7% rate.
The digital tax is aimed at creating a level playing field for local businesses and it is estimated that the Malaysian government will collect RM2.4 billion each year. Adobe, Google, AWS, Facebook, Sony and Netflix have made their respective 6% SST announcements for Malaysian users.