The world’s digital economy has been growing steadily over the past decade. Not to be left behind, the Malaysian government has recognized the opportunities as well as the challenges that the digital economy can bring to the growth of the Malaysian economy as well as an additional source of revenue.
To quote Bradley Walsh:- “The times change, and if you don’t change with them, you get left behind.”
In the report on e-Conomy SEA 2021: Roaring 20s – The SeA Digital Decade” by Google Inc., Temasek Holdings Ltd and Bain & Co estimate Malaysia’s digital economy to be at RM88.41 billion in gross merchandise value. It is also reported that Malaysia will have a fast digital market growth of 47% from US$14 billion to US$21 billion in 2021 while expecting growth to continue to US$19 billion by 2025. Such growth will help companies in other industries as the adoption of technology, i.e. Big Data, Internet of Things, artificial intelligence, etc. can improve the operational efficiencies of businesses and reduce costs.
The Malaysian government has also developed Malaysia Digital which is an initiative to accelerate the growth of the country’s digital economy via three key principles, i.e. flexibility, agility and relevance. The government hopes that this initiative will transform Malaysia’s digital economy ecosystem through the following three (3) strategic priorities:
In this article, we will look at the key tax threats and opportunities faced by the digital companies incorporated in Malaysia, whether locally or via foreign investments and foreign digital service providers.
This article was first published in the The Malaysian Accountant (November - December 2022) by MICPA.