What is Permanent Establishment

Governments across the world are looking at introducing the “digital tax,” which will be imposed on technology companies and digital business players. Digital giants like Google, Amazon, Facebook, Apple, and Microsoft are benefiting from the strong growth of digital business. The Malaysian government has announced in the national 2019 budget that a digital tax will be implemented effective January 1, 2020. The rationale of the tax is that both the international and local businesses in the digital sector must pay their fair share of tax. Malaysia has been taxing income from e-commerce, but it has no guidelines on the taxation of income from digital business. Global digital businesses often avoid paying taxes in Malaysia because they have no physical presence in the country. This chapter looks at how Malaysia is reforming its laws and policies to ensure its tax base fully reflects the scale of transactions and profits generated by the digital economy.