More and more jurisdictions are looking into taxation of the digital economy ever since the publication of the OECD’s Base Erosion and Profit Shifting (BEPS) report in October 2015.
More and more jurisdictions are looking into taxation of the digital economy ever since the publication of the OECD’s Base Erosion and Profit Shifting (BEPS) report in October 2015. Action 1 of the BEPS report recommended the taxation of the digital economy in the form of consumption-based taxation rather than the traditional approach whereby taxation was predicated on the location of the service supplier. The popularity and continued growth of the digital, and sharing, economy has rendered the traditional approach obsolete.
KPMG executive director and head of tax risk management Soh Lian Seng explains, “More people, especially individuals, are getting exposed to opportunities to run businesses and earn income as sole proprietors. Examples are Uber and Grab drivers. Under these circumstances, there is bound to be more tax collected from this category of chargeable persons.”
But does this tax apply to a whole spectrum of drivers, some of whom drive at the most once a month or even yearly?
According to Soh, income tax will only be charged on the net income arising from Uber or GrabCar activities, as well as other income such as monthly remuneration received from employment, if any. However, he emphasized that eligibility to pay tax is still subject to RM30,000 annual chargeable income threshold, and the income tax rate ranges from 0% to 28%. This percentage depends on the bracket of chargeable income earned after taking into account all deductions allowable by the Income Tax Act 1967.