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Gaming Tax Malaysia

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Malaysia still has a vague law when it comes to online gambling and this is the loophole that allows many residents to play in casinos without technically breaking the law. The absence of any other forms of legal gambling in Malaysia is the reason why online gambling is becoming more popular among its residents. Before the 6% GST (that was implemented in 2015), Malaysia levied a Sales Tax and a Service Tax. Governed by the Sales Tax Act 2018 and the Service Tax Act 2018, the Sales Tax was a federal consumption tax imposed on a wide variety of goods while the Service Tax was levied on customers who consumed certain taxable services. Malaysia has recently introduced a GST Malaysia gambling tax – federal tax on goods and services. The scheme of charges is the following: C x (100/ (100 + C)). (A - B).

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Gaming Tax Act 1972

LAWS OF MALAYSIA

REPRINT

PUBLISHED BY

THE COMMISSIONER OF LAW REVISION, MALAYSIA

UNDER THE AUTHORITY OF THE REVISION OF LAWS ACT 1968IN COLLABORATION WITH MALAYAN LAW JOURNAL SDN BHD ANDPERCETAKAN NASIONALMALAYSIA BHD

2006

Act 65

GAMING TAX ACT 1972

Incorporating all amendments up to 1 January 2006065e.fm Page 1 Friday, March 31, 2006 4:04 PM

PREPARED FOR PUBLICATION BY

MALAYAN LAW JOURNAL SDN BHD

AND PRINTED BY

PERCETAKAN NASIONAL MALAYSIA BERHAD

KUALA LUMPUR BRANCH

2006

2

GAMING TAX ACT 1972

Date of Royal Assent ... ... ... ... 26 February 1972Date of publication in the Gazette ... ... 29 February 1972PREVIOUS REPRINTS

First Reprint ... ... ... ... ... 1993

Second Reprint ... ... ... ... 1999

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LAWS OF MALAYSIA

Gaming tax malaysia 2020

Act 65

ARRANGEMENT OF SECTIONS

GAMING TAX ACT 1972

Section

1. Short title and application

2. Gaming tax

3. Amendments to gaming lawsSCHEDULE

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LAWS OF MALAYSIA

Act 65

GAMING TAX ACT 1972

An Act to provide for the imposition of gaming tax and for othermatters connected therewith.

[1 March 1972]

BE IT ENACTED by the Seri Paduka Baginda Yang di-PertuanAgong with the advice and consent of the Dewan Negara andDewan Rakyatin Parliament assembled, and by the authority ofthe same, as follows:

Short title and application

1. This Act may be cited as the Gaming Tax Act 1972 and shallapply throughout Malaysia.

Gaming tax

2. (1) The Minister of Finance may by order published in theGazette impose a gaming tax in respect of the amount paid by anypersonas a bet or an investment in respect of any gamingauthorized under any law relating to gaming for the time being inforce.

(2) A gaming tax imposed under subsection (1) shall be paidby the person making the bet or the investment and shall becollectedby the promoter of the gaming so authorized and shallbe paid into the revenue of the Federation.

(3) The Minister of Finance may make regulations for thepurpose of carrying out or giving effect to the provisions of thissection.

(4) For the purpose of this Act--

(a) any person making any payment to the promoter forchips or other articles to be used for making a bet oran investment in respectof any gaming shall be

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Tax

6 Laws of Malaysia ACT 65

deemed to have made a bet or an investment and theamount so paid shall be deemed to be an amount paidas a bet or an investment;and

(b) the expression 'promoter' includes any agent oremployee of the promoter of the gaming.

Amendments to gaming laws

1972

3. The Betting and Sweepstake Duties Act 1948 [Act 201], the*Social and Welfare Services Lotteries Board Act 1950-62 [Act252],the Lotteries Act 1952 [Act 288], the Racing (TotalisatorBoard) Act 1961 [Act 494], the Pool Betting Act 1967 [Act 384],the Bettingand Sweepstake Duties Ordinance of Sabah [Cap. 13]and the Gambling Ordinance of Sarawak [Cap. 138] are herebyamended as respectivelyspecified in the Schedule hereto.SCHEDULE

[Section 3]

I. BETTING AND SWEEPSTAKE DUTIES ACT 1948

Amendment of section 2

1. Section 2 of the above Act is hereby amended--(a) by deleting the words 'such duty, being not more than twenty' appearinginsubsection (1) thereof and substituting therefor the words 'a duty whichshall be such'; and

(b) by deleting the words 'such duty, being not more than thirty' appearing insubsection (2) thereof and substituting thereforthe words 'a duty whichshall be such'.

II. SOCIAL AND WELFARE SERVICES LOTTERIES

BOARD ACT 1950-62

Repeal and replacement of section 20

1. Section 20 of the above Act is hereby repealed and the following new sectionsubstituted therefor--

*NOTE--The Social and Welfare Services Lotteries Board Act 1950­62 [Act 252] hasbeen repealed -- see section 3 of Act 470.

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Gaming Tax 7

'Duty

20. There shall be charged upon the total amount raised by each lottery promotedby the Board under the provisions of section 8 aduty of such per centum ofthe said total amount as the Minister of Finance may from time to time fix byorder published in theGazette; the said duty shall be payable by the Boardinto the Consolidated Fund of the Federation.'.

III. LOTTERIES ACT 1952

Amendment of section 8

1. Subsection 8(1) of the above Act is hereby amended--(a) by deleting the words 'of twenty per centum' appearing therein; and(b) by inserting immediately after the figure '7' appearing therein the commaand words ', which duty shall be such per centum ofthe said total amountas the Minister of Finance may from time to time fix by order published inthe Gazette.'.

IV. RACING (TOTALISATOR BOARD) ACT 1961

Amendment of subsection 17(1)

1. The proviso of subsection 17(1) of the above Act is hereby amended--(a) by substituting a full stop for the semi colon appearingat the end ofparagraph (ii) of the said proviso; and

(b) by repealing paragraph (iii) of the said proviso.V. POOL BETTING ACT 1967

Amendment of section 4

1. Section 4 of the above Act is hereby amended by deleting the words 'Yang di-Pertuan Agong' appearing in subsection (2) thereofand substituting therefor theword 'Minister'.

Amendment of section 28

2. Section 28 of the above Act is hereby amended by deleting the words 'Yang di-Pertuan Agong' appearing therein and substitutingtherefor the word 'Minister'.VI. BETTING AND SWEEPSTAKE DUTIES

ORDINANCE OF SABAH

Amendment of section 3

1. Section 3 of the above Ordinance is hereby amended--065e.fm Page 7 Friday, March 31, 2006 4:04 PM

8 Laws of Malaysia ACT 65

(a) by deleting the words 'two and a half per centum of the amount of the bet'appearing in subsection (1) thereof and substitutingtherefor the words'such per centum of the amount of the bet as the Minister may from timeto time fix by order published in theGazette'; and(b) by deleting the words 'seven and a half per centum of the amountcontributed towards such sweepstake' appearingin subsection (2) thereofand substituting therefor the words 'such per centum of the amountcontributed towards such sweepstakeas the Minister may from time totime fix by order published in the Gazette'.

Repeal of section 8A

2. Section 8A of the above Ordinance is hereby repealed.VII. GAMBLING ORDINANCE OF SARAWAK

Amendment of section 27

1. Section 27 of the above Ordinance is hereby amended--(a) by deleting the words 'Governor in Council' appearing in line one ofsubsection (1) thereof and substituting therefor the words 'Minister ofFinance';

(b) by substituting the word 'shall' for the word 'may' appearing in line oneof subsection (2) thereof;

(c) by deleting the comma and words ', not exceeding twenty per cent of'appearing in subsection (2) thereof and substituting thereforthe word'on';

(d) by inserting immediately after the word 'Government' appearing insubsection (2) thereof the following--

'of Malaysia, and that the said tax shall be such per centum of theamount of the said gross receipts as the Minister of Financemayfrom time to time fix by order published in the Gazette;';(e) by substituting a full stop for the colon appearing immediatelyafter thewords 'evasion of the payment thereof' in subsection (2) thereof;(f) by repealing the proviso to subsection (2) thereof;and(g) by repealing subsection (5) thereof.

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LAWS OF MALAYSIA

Act 65

GAMING TAX ACT 1972

LIST OF AMENDMENTS

Amending law Short title In force from

Act A272 Gaming Tax (Amendment) Act 1975 01-02-1975065e.fm Page 9 Friday, March 31, 2006 4:04 PM

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LAWS OF MALAYSIA

Act 65

GAMING TAX ACT 1972

LIST OF SECTIONS AMENDED

Section Amending authority In force from

2 Act A272 01-02-1975

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September 26, 2019
2019-6194

Malaysia releases service tax guide on digital services

Executive summary

Gaming Tax Malaysia 2020

Effective on or after 1 January 2020, a registered foreign service provider is required to charge a 6% service tax on digital services provided to consumers in Malaysia. Clarification on key aspects of the new law are set out in a Royal Malaysian Customs Department (Customs) Guide on Digital Services (the Guide) published on 20 August 2019.

This Alert summarizes several clarifications in the Guide.

Detailed discussion

The Service Tax (Amendment) Act 2019 (the Act) enacted on 9 July 20191 was broadly worded and left several questions unanswered on the precise implementation of the service tax on digital services effective as of 1 January 2020.

  • The scope of digital services covers any service that is delivered or subscribed over the internet or other electronic network, which cannot be obtained without the use of information technology and the delivery of the service is essentially automated. Specific examples are provided in the Guide. It also clarifies that digital services are services delivered through an information technology medium with minimal or no human intervention from the service provider.
  • A foreign service provider (FSP) may be subject to the new law. An FSP is any person who: (i) resides outside Malaysia; (ii) provides any digital service to a consumer; (iii) operates an online platform for buying and selling goods or providing services (whether such person provides any digital services); and (iv) makes transactions for provision of digital services on behalf of any person.
  • A consumer is any person, business or individual, who meets any two of the following conditions:
    1. Makes payments for digital services to an FSP using a credit or debit card provided by any financial institution or company in Malaysia
    2. Acquires digital services from an FSP using an internet protocol address registered in Malaysia or an international mobile phone country code assigned to Malaysia
    3. Resides in Malaysia
  • Registration is required if:
    • The person is an FSP, and the value of digital services provided by it to Malaysian consumers exceeds MYR500,000 (US$120,000) over a 12-month period.
    • The person is a platform operator treated as an FSP, and the value of both digital services it makes to Malaysian consumers and the value of digital services made by other FSPs through its platform to Malaysian consumers exceed MYR500,000 over a 12-month period.
  • Applications for registration can be submitted online beginning 1 October 2019. Registered FSPs should file service tax returns on a quarterly basis and settle their service tax liabilities no later than the last day of the month following the end of the corresponding quarterly taxable period.
  • Registered FSPs must issue invoices, receipts or similar documents (electronically or in paper) with the required details.
  • FSPs are not required to charge service tax on digital services if a payment is received before 1 January 2020. Digital services that include the 1 January 2020 implementation date will be subject to service tax on the proportion of digital services rendered on or after 1 January 2020, unless full payment is received before 1 January 2020.
  • The service tax on digital services is generally due when payment is received.
  • Businesses in Malaysia that have been charged service tax on digital services provided by a registered FSP are exempt from the reverse charge obligations (i.e., need not self-impose the 6% service tax on imported taxable services acquired from registered FSPs).

Implications

Given the relatively short lead time to implementation, FSPs should be immediately assessing if they will need to register and charge Malaysian service tax from 1 January 2020. As the regime is broader to capture the provision of digital services to businesses, many companies may fall within the scope of the service tax regime in Malaysia.

Endnote

1. See EY Indirect Tax Alert, Malaysia enacts law to impose service tax on digital services, dated 7 August 2019.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Tax Consultants Sdn Bhd, Kuala Lumpur
  • Amarjeet Singh amarjeet.singh@my.ey.com
  • Anil Kumar Puri anil-kumar.puri@my.ey.com
  • Asaithamby Perumal asaithamby.perumal@my.ey.com
  • Yeoh Cheng Guan cheng-guan.yeoh@my.ey.com
  • Aaron Bromley aaron.bromley@my.ey.com
  • Jalbir Singh Riar jalbir.singh-riar@my.ey.com
  • Shanmuganathan Govinda Konal shanmuganathan.govinda.konal@ey.com
Ernst & Young LLP (United States), Malaysia Tax Desk, New York
  • Andrew Loh andrew.loh1@ey.com
Ernst & Young LLP (United States), Asia Pacific Business Group, New York
  • Chris Finnerty chris.finnerty1@ey.com
  • Kaz Parsch kazuyo.parsch@ey.com
  • Bee Khun Yap bee-khun.yap@ey.com

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