Hi guys. I am fairly new, just a year in and I'm from Malaysia. I just met with my tax agent yesterday and I am wondering if any Malaysian Shopify experts have any insights on the following :
*Note : pls correct me if anything I mention here is inaccurate, the tax agent have a hard time understanding the digital nature of the business and I had a hard time understanding the taxation laws as well.
1. Digital Service Tax - any foreign company charging in foreign currency making a profit in Malaysia are subjected to 6% tax once they make more than RM500,000 profit. Case in point - Shopify makes a profit from the subscription fees and transaction fees. We pay them in USD(foreign currency) and they do not have a local company/address in Malaysia, therefore subjecting them to pay this tax.
Unapplied cases - Quickbooks. They have a local company in Malaysia and we are billed in local currency(MYR). Most importantly, their invoice has a LOCAL address.
I just talked to the customer service in Live Chat and he has confirmed that Shopify are not paying DST. Which brings us to the next tax.
2. Imported Service Tax
If case in point, company are not paying DST, therefore the Malaysian customers purchasing these services are subjected to the 6% Imported Service Tax-which we have to pay.
Subtotal - 6% out of subscription + transaction fees paid to Shopify.
3. Withholding tax
reference - https://www.exabytes.digital/blog/withholding-tax-service-tax-on-imported-services-digital-advertisi...
Assuming you have a Shopify website, there are numerous foreign transactions that you will have to pay- subscription to Shopify, mailchimp/klaviyo etc, purchases of themes, stock images, facebook ads. Any transaction that we pay in foreign currency are subjected to withholding tax of 10%. Example if we pay USD 100 for Facebook ads for running campaign, within 30 days of the date of payment, we have to manually go to the local LHDN and pay the 10% withholding tax ON TOP of the amount, Ie - USD 10.
The pain in the ass is, LHDN are not offering any online payment system for this and it has to be manual, within 30 days. My tax agent could do it on my behalf but I have a measly amount of 2 foreign transaction every month. 5 if you want to include all my App Store and other digital subscription.
Customer service and tax agent said- go for annual billing. Customer service also confirmed annual billing will still result in monthly billed transaction fees. This is not improving anything.
Anyway, this will bring us to subtotal - 10% out of subscription + transaction fees paid to Shopify.
So total is - 16% paid on top of subscription + transaction fees paid to Shopify. Yes it's double taxed. Check the website for info. and this applies to ALL foreign transactions.
I am wondering if anyone have any experience with these issues and how they deal with them. Not many tax agents have experience with digital tax and hopefully we can get past this issue and continue enjoying flourishing our business in Shopify.