Lecturer : Profesor Madya Dr.

Anna Azriati Binti Che Azmi

GROUP MEMBERS:

Chee Xin Hui CEA 140016

Chong Kai Chuan CIA 160028

Subhathaarani Krishnan CIA 160168

Tan Wen Sern CIA 160174

Tek Kar Lim CIA 160180

Wang Liew Ching CIA 160188

 Explain how Airbnb earns revenue from their
Part 01 digital services.
Introduction on Airbnb
SLIDE 3
Air – Bed and Breakfast Airbnb is a platform for individuals to rent out their primary residences
as lodgings for travelers for a cheaper mode of staying.
(Airbnb)
On one side, the platform enables people to list their available space and
earn extra income in the form of rent.
On the other, Airbnb enables travelers to book unique home stays from local
hosts, saving them money and giving them a chance to interact with locals.

Last known valuation of Airbnb is $30 billion. Airbnb is present in over 190
Airbnb valuation countries across the world Having 1.2 Million listings, the company has
served over 35 Million guests.
Sharing Economy
SLIDE 4
Airbnb Business Model SLIDE 5
How Airbnb earns their revenue ? SLIDE 6

Airbnb
RM 542
Booking fee
RM 473 (RM450)
Booking +
Cleaning fee
cleaning (RM488)
(RM38)
Hosts Service fee
Service fee
Guests
(RM15)
(RM54)

Hosts will be charged on flat rate Guests will be charged on 6 –

of 3% on the booking and cleaning 12% of the total booking
fee. amount.
Tax Issue SLIDE 7
Some users are subjected to VAT. For guests seeking accommodations
in the European Union, Switzerland, Norway, Iceland, and South Africa,
Airbnb charges a VAT in addition to its service fees. Due to different tax
laws, Airbnb does not charge a VAT to every guest across the board.

Value Added Tax (VAT)

Guests paying for bookings in a currency different than the one the host
has chosen are subject to varying exchange rates determined by
Airbnb. Likewise, hosts are also subject to a value added tax which is
deducted from income earned from booking reservations.
 Determine whether Airbnb is taxed under the
Malaysian Income Tax Act.
If they are taxable, explain how these services are
taxed in Malaysia;
if they are NOT, explain your reasons that they are
Part 02 not taxed in Malaysia.
Is Airbnb taxed under the Malaysian Income
Tax Act? SLIDE 9
WHY is Airbnb not taxed under the Malaysian
Income Tax Act? SLIDE 10
WHY is Airbnb not taxed under the Malaysian
Income Tax Act? SLIDE 11
 No substantial physical
presence in Malaysia
 Not subjected to tax
Permanent
Tax Establishme
Management Residency nt
& Control
 Exercised in
Malaysia
 Within basis
period
Part 03 Explain challenges faced in taxing Airbnb.
Explain challenges faced in taxing Airbnb
SLIDE 13
1. Lack of information on the taxpayers and service provider
• Airbnb is not required to register with IRB
• Their databases are all kept in their headquarter in U.S.
• IRB fails to track the host’s information and revenue derived from Malaysia
in the form of service fees
• Airbnb doesn’t have any physical existence in Malaysia
• IRB can only contact with Southeast Asia office stationed in Singapore
• Cooperation from Airbnb is on a voluntary basis
Explain challenges faced in taxing Airbnb
SLIDE 14
2. Loopholes in Legislation
• Airbnb only has digital footprint but not permanent
establishment in Malaysia
• Absence of digital tax
• Tax evasion practice
 Suggest ways in which Airbnb can be better taxed
Part 04 by the Malaysian tax authorities.
4. Ways in which Airbnb can be better taxed
by the Malaysian tax authorities : SLIDE 16
• Tourism Tax (Soon be subjected)
• Digital Tax
Tourism Tax SLIDE 17
• Managed by Royal Malaysian Custom Department
• Implementation of TTx is provided for under the following legislation:
a) Tourism Tax Act 2017;
b) Tourism Tax Regulations 2017;
c) Tourism Tax (Rate of Tax) Order 2017;
d) Tourism Tax (Exemption) Order 2017; and
e) Appointment of Date of Coming into Operation Order 2017
Tourism Industry Act 1992 - Section 2 SLIDE 18
• Definition of “Tourist”-Malaysian or non-Malaysian visiting any
place in Malaysia
• "Accommodation premises": any building, as offering lodging
or sleeping accommodation to tourists
• Operator - any person operating accommodation premises
• The operator is required to be registered if having 5
accommodation rooms or more.
Mechanism of Tourism Tax SLIDE 19
• Expected to follow the existing mechanism applied to hotels
• Foreigners that staying in Malaysia and booking their
accommodation on Airbnb subjected to pay
• Locals renting Airbnbs will probably be exempt from having to pay
the tax.
• A flat rate of RM 10/room/night
Example of Imposing Tourism Tax SLIDE 20
Latest update on Tourism Tax SLIDE 21
Latest update on Tourism Tax SLIDE 22
• To implement its Voluntary Collection Agreement (VCA) tool
to that effect.
• VCA - to collect and remit taxes on behalf of its host and guest
community
• Airbnb currently hosts 17,270 active listings in Malaysia
• Estimated revenue from Airbnb properties in Kuala Lumpur -
RM29 million
Suggestions on how should the tax authorities
impose Tourism Tax on Airbnb SLIDE 23
• Required the owner to be registered regardless the number of
rooms
• The common type of Airbnb properties :-
1. Condominium/ Apartment
2. Terraced house
3. Semi-detached house
4. Bungalow
• The rate can be vary based on the premise registered
• E.g Condominium – RM 10 per unit per night
• E.g Bungalow – RM 30 per unit per night
What is Digital Tax? SLIDE 24
• Imposing tax on Digital goods
• Digital goods are software programs, music, videos or other electronic files
that users download exclusively from the Internet (Wikipedia)
• Digital goods in the EU are defined in legislation as broadcasting,
telecommunications, and services that are electronically supplied
instead of shipped.
• Aimed level the playing field between international and local businesses in
the digital sector.
Does Malaysia want to introduce digital
tax? SLIDE 25
Digital Service Tax in Budget 2019 SLIDE 26
• MOF has announced the implementation of service tax on foreign
digital services – including software, music, video and digital
advertising – effective Jan 1, 2020.
• Example : Netflix (video), Spotify (Audio) and Steam (Gaming)
• Tax rate was not revealed
Suggestions on how should the tax
authorities impose Digital Tax on Airbnb SLIDE 27
• Have a threshold on the annual revenues, if that amount is exceeded for example
RM1,000,000 , then digital tax will be applicable.
• Have threshold on the number of users, if it exceeds for example 100,000 users
then tax should be imposed.
• Impose tax on the commission or fees received by the owner of the
house/apartment.
• Airbnb should be taxed if it makes money from digital advertising in a country or
user data.
• Impose digital tax that is paid by the consumer at the time of the purchase of the
product or service of Airbnb.
References
SLIDE 28
1. FMT Reporters. (2017, October 9). AirBnB guests will pay RM10 tourism tax, says customs. Free
Malaysia Today. Retrieved from
https://www.freemalaysiatoday.com/category/nation/2017/10/09/airbnb-guests-will-pay-rm10-
tourism-tax-says-customs/
2. Ganeshwaran, K. (2018, October 13). How to introduce an effective digital tax. The Star.
Retrieved from https://www.thestar.com.my/business/business-news/2018/10/13/how-to-
introduce-an-effective-digital-tax/
3. General Guide on Tourism Tax (2018, May 17). Royal Malaysian Customs Department. Retrieved
from https://www.myttx.customs.gov.my/CTTax/infopage/APPENDIX%20A%20-
%20General%20Guide.pdf
4. iPrice, G. (2018 October 17). MALAYSIA TO BE SECOND COUNTRY IN SEA TO INTRODUCE
DIGITAL TAX. Digital News Asia. Retrieved from
https://www.digitalnewsasia.com/insights/malaysia-be-second-country-sea-introduce-digital-tax
5. Inland Revenue Board Malaysia. (May 16,2011). Public Ruling 5/2011: Residence Status of
Companies and Bodies of Persons. (para 4.3). Retrieved from
http://lampiran1.hasil.gov.my/pdf/pdfam/PR5_20 11.pdf
References SLIDE 29
6. Laws of Malaysia. (October 1, 2017). Income Tax Act 1967. Retrieved from
http://www.agc.gov.my
/agcportal/uploads/files/Publications/LOM/EN/Pindaan%20Act%2053%20-
%2023%2011%202017.pdf

7. Robin,A. (2017, June 15). Tourism tax: What happens when more switch to Airbnb? Free
Malaysia Today. Retrieved from
https://www.freemalaysiatoday.com/category/nation/2017/06/15/tourism-tax-what-happens-when-
more-switch-to-airbnb/
8. Service tax to be levied on digital services: Budget 2019 (2018, November 2). The Star.
Retrieved from https://www.thestar.com.my/tech/tech-news/2018/11/02/service-tax-to-be-levied-
on-digital-services-budget-2019/#BtqQhg0I4UDgOU8l.99
9. Trevir Nath. (June 8, 2018). How Airbnb Makes Money. Retrieved from:
https://www.investopedia.com/articles/investing/112414/how-airbnb-makes-money.asp
10.Unicorn Economy. (November 20, 2016). AirBnB Business Model and How Does AirBnB make
Money. Retrieved from: https://unicornomy.com/airbnb-business-model-how-does-make-money-
work/
 That’s all.
Thank you very much!

Any Questions?