Business Groups Urge Government to Review Withholding Tax on Digital Advertising
KUALA LUMPUR — Several business and digital commerce organisations have urged the government to reassess the implementation of withholding tax (WHT) imposed on e-commerce traders using advertising services from foreign digital platforms such as Meta and TikTok.
Industry representatives said the current tax structure is placing additional pressure on local online businesses, particularly small and medium enterprises (SMEs), amid rising operating costs and intense market competition.
Local Traders Facing Higher Costs
Dewan Perniagaan Melayu Malaysia president Norsyahrin Hamidon said local e-commerce businesses are currently required to bear a 10 per cent withholding tax on digital advertising expenses, unlike some foreign competitors who do not face similar charges.
He explained that the additional tax burden directly affects business operating costs and reduces profit margins for online traders.
According to him, several entrepreneurs have raised concerns that the tax mechanism is becoming increasingly difficult to sustain, especially for smaller businesses relying heavily on digital marketing to reach customers.
“The situation is shrinking business margins, increasing financial risks and limiting the ability of traders to expand,” he said during a press conference on challenges facing the digital business ecosystem.
Combined Taxes Raise Burden to 18 Per Cent
Meanwhile, Pertubuhan Usahawan e-Dagang Malaysia president Syed Gaddafi Syed Saifuddin said the classification of digital advertisements as “royalty payments” has significantly increased tax obligations for businesses.
He said traders are effectively paying up to 18 per cent in combined taxes after including Sales and Service Tax (SST) together with withholding tax charges.
According to him, the overall taxation approach is less competitive compared with neighbouring countries such as Indonesia.
He pointed out that Indonesia regularly updates its financial regulations to protect and support its digital business ecosystem.
Comparison With Indonesia’s Approach
Syed Gaddafi said businesses in Indonesia are allowed to submit special tax documentation alongside residency certificates from companies such as Meta or Google to legally reduce withholding tax rates, in some cases even to zero per cent.
He questioned why Malaysian entrepreneurs are required to bear substantially higher taxes compared with regional competitors operating in neighbouring markets.
According to him, the policy should be updated to reflect the realities of the rapidly growing digital economy and regional competition.
Call for Roundtable Discussion
At the same press conference, Persatuan Pengguna Siber Malaysia president Siraj Jalil proposed a roundtable discussion involving relevant ministries and agencies to review the country’s digital taxation framework.
Among the agencies suggested were Kementerian Perdagangan Dalam Negeri dan Kos Sara Hidup, Kementerian Kewangan Malaysia, Lembaga Hasil Dalam Negeri Malaysia and Suruhanjaya Komunikasi dan Multimedia Malaysia.
Siraj said the objective is to ensure tax policies remain balanced and do not discourage entrepreneurship within Malaysia’s growing digital economy.
He added that excessive financial burdens could discourage individuals from venturing into business, especially smaller online enterprises.
-wilayah.com.my
