Malaysian Taxation of Off-shore-originating Advertising Services

Roughly, the algorithm for [ offshore-originating advertising services ] :

LHDN (lembaga hasil dalam negara / income tax department / WITHHOLDING TAX) :

1. Payee has a [ permanent establishment ] in Malaysia? Yes: Payee pays income tax, payer pays no withholding tax. No :

2. Payee has a [ permanent establishment ] in a space where a [ double-taxation agreement with Malaysia ] applies? Yes: see (1. Yes); No :

2.No.A : Payee is selling access to an App, which allows payer to set up their own campaign? Yes: [ the withholding tax is on payee's ROYALTY INCOME ]; No:

2.No.B : Payee is providing services only? Yes: [ the withholding tax is on payee's INCOME].

JKDM (jabatan kastam diraja negara / SST / service tax department / DIGITAL TAX) : 

1. Payee's total sales to Malaysia-located customers exceeds RM500,000 per 12-month period? No: no tax. Yes :  6% 

2.Yes : Payee's invoice specifies the 6% service tax line item? Yes: payee is explicitly passing the 6% charge to the payer. No: payee is still liable to pay taxes. IT IS NOT YET CLEAR WHETHER THE PAYER IS LIABLE OR NOT. For example, if you go to the store and buy a loaf of bread, the STORE OWNER is liable to pay their SST, not you.

Reading up on Avoidance of Double-Taxation Agreements is fun.