7/31/2019 41sgatar My Pp Tp3
1/20
Taxation Challenges and Legal Issues
Inland Revenue Board ofMalaysia
Prepared by :Inland Revenue Board Malaysia
7/31/2019 41sgatar My Pp Tp3
2/20
E-commerce started in the mid-ninetiesTo facilitate e-commerce growth, governmentset up
Multimedia Super Corridor (MSC) in 1996Malaysian Communication and MultimediaCommission (MCMC) in 1998
7/31/2019 41sgatar My Pp Tp3
3/20
Domain names in Malaysia increases from80,786 (2008) to 130,505 (2010).
Most household turn to internet to seekinformation, < 50% involved in internet tradingMajor contribution of e-commerce:
Airlines (e.g. AirAsia, Malaysian Airlines System)Travel (e.g. Hotels booking)Financial sectors (e.g. internet banking)
7/31/2019 41sgatar My Pp Tp3
4/20
IRBM had established e-commerce division on1 Mac 2009.Main functions of division are:
to develop and maintain e-commerce databaseSelect e-commerce business for field audit from thedatabase
7/31/2019 41sgatar My Pp Tp3
5/20
E-commerce division not utilizing anyautomated tools for information gatheringUsing top search engines e.g. Yahoo or GoogleOfficers resort to posing as a buyer
7/31/2019 41sgatar My Pp Tp3
6/20
No specific provisions under MalaysianIncome Tax Act (ITA) 1967 for e-commerceGenerally under ITA 1967 income tax isimposed on income on any person accruing inor derived from MalaysiaE-commerce is treated under the same generalprovisions and interpretations of ITA 1967
7/31/2019 41sgatar My Pp Tp3
7/20
Regardless of the server location Determined business activities through the
business operation, e.g.: Sourcing of contents Procurements of goods Promotions Advertising Selling Updating and maintaining the website Uploading and downloading of contents
7/31/2019 41sgatar My Pp Tp3
8/20
Royalty under ITA 1967 is define: Includes the payment for use of or the right to use
copyrights, know-how or information concerning
technical, industrial, commercial or scientificknowledge, experience or skill to non-resident. Payment in nature of royalty to non-residents
is subject to withholding tax. Example:
Downloading of a digital product to a consumershard disk or similar media
Licensing arrangement to reproduced, modify andadapt.
7/31/2019 41sgatar My Pp Tp3
9/20
Tracking process anonymity of the internet,identity of a person has no relation to actualidentity
Easy to setup business online (without registeringwith local law) No physical presence such as having a virtual
office (place of business) Non-compliance and non-filers Borderless transaction (taxing rights, tax loss etc) Banking regulations in Malaysia
7/31/2019 41sgatar My Pp Tp3
10/20
Major e-commerce models in MalaysiaBusiness-to-Consumer (B2C)Business-to-Business (B2B)
Consumer-to-Consumer (C2C)Mobile commerce (M-commerce)
7/31/2019 41sgatar My Pp Tp3
11/20
Consumer exchange goods and services withother consumersOnline auction sites is have become morepopular for C2CTop C2C auction sites in Malaysia arelelong.com.my and mudah.my
7/31/2019 41sgatar My Pp Tp3
12/20
Auction sites revenue from membership feesand transactionsMembers also making money by charging fixedrate delivery cost or postage fees.
7/31/2019 41sgatar My Pp Tp3
13/20
Larger companies supplying merchandise tosmaller businesses who then sell to theircustomers.
Activities includes purchasing andprocurement, supplier management, inventorymanagement, channel management, salesactivity, payment management, and serviceand support
7/31/2019 41sgatar My Pp Tp3
14/20
Malaysian top B2B platform allowingcompanies (SMEs) to optimize their dailybusiness processes.
7/31/2019 41sgatar My Pp Tp3
15/20
Any website that has a product for sale, musicdownloads and etc.AirAsia is a top Malaysian B2C selling airlines
tickets, car rentals, holiday packages, hotelroom bookingsAirAsia maintains its presence and reachability through Facebook page, Twitter page,Flickr page, Youtube channel
7/31/2019 41sgatar My Pp Tp3
16/20
MyEG.com.my is a portal for various servicesfor consumers such as:
Buy various types of insurance
Payment for Police SummonsPayment for maid renewal fees to the ImmigrationDept.Road Tax renewal services
7/31/2019 41sgatar My Pp Tp3
17/20
Purchases of products and services that occuracross a mobile data platform (e.g. GPRS, SMS,3G )
Example M-Commerce in Malaysia:Purchase of Coke drinks from vending machinePurchase of ringtones ,games and screensaversPurchase of airline tickets, hotels rooms, car rentals
7/31/2019 41sgatar My Pp Tp3
18/20
Some of the related provisions of ITA 1967applicable for auditing e-commerce:
Section 78 : Power to call for returns and books
Section 79 : Power to call for statement of bankaccountsSection 80: Power to access to buildings anddocuments
Section 81: Power to call for information
7/31/2019 41sgatar My Pp Tp3
19/20
Section 80 of ITA 1967 applicable for auditinge-commerce:
Power to access to buildings and documents.
Shall have access to computerized data whetherstored in a computer or otherwise.Shall provided with necessary password, encryptioncode, decryption code, software or hardware
Shall provide any other means required to enablecomprehension of the computerized data
7/31/2019 41sgatar My Pp Tp3
20/20
Inland Revenue Board ofMalaysia