Airbnb collaboration with Malaysia previews taxes on Internet economy

Reproduced with permission from Daily Tax Report. International. 55 TMIN (March 21, 2018). Copyright 2018 by The Bureau of National Affairs, Inc. (800-372-1033)


  • Tourism tax to be followed by agreement on goods and services taxes
  • Malaysia's actions are part of a regional trend to close loopholes

By Lien Hoang

Airbnb Inc. has agreed to work with Malaysia on tax collection, with initial efforts to focus on a tourism levy as the government prepares to cast a wider net on the digital economy.

The San Francisco-based home-sharing company is moving to finalize a deal with tax authorities, which will apply a new tourism tax of 10 ringgit ($2.55) per night to Airbnb members who rent out five rooms or more. The tourism levy presages an agreement on goods and services taxes.

“We have been engaging the Malaysian authorities in meaningful and productive conversations,” Mich Goh, Airbnb's head of public policy for Southeast Asia, told Bloomberg Tax. “We want to help our hosts follow the rules, and we are actively keeping them informed of all regulatory updates,” she said.

The levies won't stop there, says EY partner for indirect tax Aaron Bromley. After speaking with tax officials, he expects Malaysia to widen the scope of GST to include Airbnb arrangements as early as this year. The country is one of Airbnb's fastest-growing markets in Asia, with rentals jumping 137 percent last year, the company said.

Malaysia's actions are part of a regional trend to close loopholes and find ways of taxing new digital businesses from Netflix Inc. to Uber Inc., Bromley said.

Internet-based companies are increasingly sophisticated at skirting tax laws, the OECD wrote in a report this week. It gave the example of flexible work contracts in the gig economy, which make it easier for tech companies to “minimize tax liabilities and reduce the tax base.” The OECD recommended tax collectors look at different kinds of levies, such as on property or consumption.

Australia is at the forefront, having online businesses register to pay GST, said Bromley, who is based in Kuala Lumpur but spoke to Bloomberg Tax from Sydney.

“Malaysia won't be far behind; they're talking about it,” he said, adding, “There is a great focus at the moment, like elsewhere, on digital services.”

GST Changes

Chan Wai Choong, executive director of PwC Malaysia, predicts the GST amendments will be issued with the next state budget, slated for October. He said officials are studying the tax model of registering overseas vendors.

“Now they're more advanced in their thinking on how to apply GST,” Chan said in an interview from Kuala Lumpur. “They plan to introduce legislation along those lines.”

The Malaysian tourism tax is one symptom of the tensions between traditional and newer business models. Hotels balked when they were first required to pay the levy in 2017 but home-sharing services were not.

“It would be fairer if all tourists are charged, whether they stay at higher-class hotels or Airbnb type of accommodation,” Malaysia Budget Hotel Association President PK Leong told Bloomberg Tax.

But Southeast Asia's third-biggest economy will start collecting tax from Airbnb hosts with at least five rooms, whether in one or multiple properties. Airbnb typically signs what it calls voluntary collection agreements with governments to transfer hotel and tourism tax payments from its members to the authorities. 

The decade-old company said it has transmitted half a billion dollars’ worth of such taxes to more than 340 jurisdictions globally.

Goh said Airbnb aims to work “hand-in-hand with the government to help them realize the revenue potential that home-sharing offers.”

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