The Royal Malaysian Customs Department (RMCD) has stated that the Malaysian government would apply a 10% sales tax to all imported low-value goods (LVG) purchased online beginning 1 April 2023.
Malaysians will soon be required to pay an additional 10% tax on imported items costing less than RM500 that are ordered online and delivered from overseas to clients in Malaysia through air, sea, or road freight (including duty-free areas and free zones). Such commodities, with the exception of cigarettes, tobacco, and liquor, are now free from sales tax when carried in by air courier services via certain international airports.
Along with this statement, the RMCD stressed that the new tax would not be levied on delivery fees or insurance expenses for bringing products into Malaysia; it will simply apply to the basic price or the value of the goods. Furthermore, the 10% tax does not apply to alcohol, tobacco items (including smoking cigars and pipe vessels), and cigarettes (including e-cigs, vapes, and non-nicotine fluid or gel preparations).
For example, if you buy an imported item for RM300 from an e-commerce site (with a shipping fee of RM10) after April 2023, your sum will be RM340 (RM300 + RM30 + RM10). This is compared to the RM310 fee if you made your purchase before April 2023.
Take into account that this sales tax will be levied by the online shopping platform after purchase confirmation. This implies that if you place your imported LVG purchase before April 1, 2023, but the items arrive after that date, you will not be taxed the 10% LVG sales tax.
The orders clarify that:
- The total sale value of low-value goods for the purpose of registration of any seller under s 12(1) of the Sales Tax Act 2018 is capped at RM500,000
- Low-value goods shall be charged on all goods sold at a price not exceeding RM500 and are brought into Malaysia by land, sea, or air.
Meanwhile, traders who will be affected by the introduction of this new LVG tax can immediately begin registering to be licensed sellers with the RMCD because the tax legislation went into effect on January 1, 2023. All vendors (whether Malaysian or international) who match the following conditions must apply:
- Sell LVG imported into Malaysia by land, sea, or air transport.
- Have an LVG yearly sales value in Malaysia that surpasses RM500,000
The 10% LGV sales tax was initially proposed during the Budget 2022 impasse to even the playing field for domestic and foreign goods, as local producers are already subject to a 5% or 10% tax
The regulations clarify that:
- Any seller who sells low-value goods which is liable to be registered under s 12 of the Sales Tax Act 2018 shall apply to register, and a registration number will be given upon approval.
- Any seller of low-value goods shall immediately notify the senior officer of sales tax in writing if there are changes on the particulars of the registered seller.
- Every registered seller shall furnish a consignment note containing the registration number of the registered seller to the Director General (DG).
- Every registered seller who sells low-value goods shall clearly display the information of the consignment note by patching or affixing such information on the package of low-value goods.
- Every registered seller who issues an invoice or document in relation to the sales of low-value goods shall state the following particulars:
– The serial number of the invoice or document
– The date of the invoice or document issued
– The name and address of the registered seller
– The registration number of the registered seller
– A description sufficient to identify the low-value goods being sold, and
– The total amount payable, excluding sales tax, the rate of the sales tax, and total sales tax chargeable are shown as a separate amount.
- Every registered seller shall furnish a return for each taxable period as required under s 26 through electronic service or in the form and manner as the DG may determine.
- If any registered seller makes an error in any return furnished, the registered seller may correct the error in the manner as the DG may determine.
- Payment of sales tax or penalty payable shall be made to the DG through electronic banking or any manner as the DG may determine.
- Any registered seller may make an application for refund to the DG under s 39 if the registered seller:
– Has overpaid or erroneously paid the amount of sales tax, or
– Is entitled to the refund under s 41(3).
It was finally passed by Dewan Rakyat with a majority voice vote in August 2022. It was also planned that the tax would go into force on January 1, 2023; however, this was later pushed out to April 20, 2023.
If you have any questions about the new LVG tax, please contact us at yhtan through email.