Malaysia will start charging a 10 per cent sales tax on low value goods (LVG) sold online from Jan 1, 2024, announced the Royal Malaysian Customs Department.
Malaysia was supposed to impose the 10 per cent LVG tax on goods sold below RM500 online effective April 1, 2023, under Budget 2022, but it was postponed indefinitely by the Royal Malaysian Customs Department in March this year.
According to Statista, the e-commerce market value in Malaysia was estimated at RM38.2 billion in 2022. This was an increase by nearly ten billion Malaysian ringgit compared to 2021, when the e-commerce value was at around 28.5 billion Malaysian ringgit. However, there is no breakdown on items that fall under the RM500 chargeable bracket.
In the frequently asked questions on the LVG sales tax published on its website on Nov 6, 2023, the department said the imposition of sales tax on LVG will start on Jan 1, 2024, although the sales tax legislation on LVG has come into force from Jan 1, 2023.
The Royal Malaysian Customs Department defined LVG as all goods:
- excluding cigarettes, tobacco products, intoxicating liquors, electronic cigarettes, and preparation of a kind used for smoking
- which are sold at a price not exceeding RM500, and are brought into Malaysia by land, sea or air.
Those who sell LVG on an online platform or operate an online marketplace for the sale and purchase of LVG must register with the Customs if the total sale value of LVG brought into Malaysia exceeds RM500,000 in 12 months.
Separately, the Royal Malaysian Customs Department also published a set of guidelines on the implementation of LVG sales tax on its portal dated Nov 3, 2023.
Meanwhile, according to the Federal Government Gazette published by the Attorney General’s Chambers on Dec 8, 2023, Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim had signed the Sales Tax (Amendment) Act 2022: Appointment of Effective Date for Charging and Levying of Sales Tax On Low Value Goods (LVG) on Dec 4, 2023.
“In exercise of the powers conferred by subsection 1(3) of the Sales Tax (Amendment) Act 2022 [Act A1671], the minister appoints Jan 1, 2024, as the effective date for the charging and levying of sales tax on low value goods,” it read.
Following this announcement, according to The Rakyat Post on 18 December 2023, Minister of Communication Fahmi Fadzil clarified that the 10% sales tax for online purchases of low-value goods (LVG), which will come into effect on January 1, 2024, only applies to imported products valued below RM500.
