The Muamalat Newsletter Vol. 1 2024

FEM eNewsletter | June 2024 36 ◊ Voluntary Disclosure Program for Direct Taxes: Continued from June 6, 2023, until May 31, 2024, offering penalty remissions and audit exemptions. General Developments ◊ ·Withholding taxes: Digital companies that make payments to non- residents, such as for software usage, interest on loans, or service fees, may need to withhold tax on these payments. Payments subject to withholding tax include royalty payments to non-resident companies, such as subscription or license fees for software components used in the digital company’s final product. ◊ ·Income Tax on E-Commerce Transactions: Income derived from e-commerce transactions isdeemed to be from Malaysia if associated with activities within the country, regardless of receipt location. Non- resident digital advertisers are subject to withholding tax unless they have a permanent establishment or business presence in Malaysia. ◊ ·Guidelines on E-Commerce Transactions: Updated by the Inland Revenue to include definitions and scope of e-commerce transactions, digital currency, tokens, royalties, and expanded examples of e-commerce business models. ◊ ·Pre-budget Statement by the Finance Ministry: Discussions are being held with the OECD on a global tax rate of 15% on the digital economy. Suggestions for Future Research Despite the efforts to modernise the tax laws, there are obstacles in the way of these initiatives. A number of other issues have been brought up, including definitional clarity, the possibility of double taxation, implementation openness, the reporting of data on the digital economy, and audit case selection procedures (Said et al., 2022). These include differentiating business models and eliminating double taxation, which requires political agreements within the Inclusive Framework introduced by the Organisation for EconomicCo-operationand Development (OECD) (Granger et al., 2022). The metaphor of “tapping taxes” illustrates the potential for future digital disruptions to profoundly impact revenue management, enabling seamless integration into the digital footprints of businesses and individuals (Granger et al., 2022). In Malaysia, modernising the tax framework for thedigital economynecessitates resolving several critical issues. A comprehensive comparative analysis of digital economy taxation practices from various countries is essential. By understanding international best practices, Malaysia can identify effective strategies tailored to its specific needs, ensuring a robust and competitive tax system. A central challenge is formulating a cohesive proposal for incorporating digital economy taxation into Malaysian tax law. This includes defining the digital economy in a manner consistent with other Malaysian