Ministry of Finance (MoF) clarified that the implementation of the sales tax on imported low value goods (LVG) is to address the tax treatment disparity between goods sold by retail businesses and online businesses.
In a statement today (Dec 18), the ministry said, in general, sales tax is applied on goods sold in Malaysia and are paid for by the relevant importer, wholesaler or retailer prior to sale to the consumer in Malaysia. However, there was a loophole in the sales tax. Globally, there is a common practice not to impose sales tax and import duty on imports below a De Minimis (minimal) value, which was set at RM500 for Malaysia, to facilitate ease of customs clearance for postal and courier shipments. With the proliferation in online retail, this created an unfair advantage for online businesses selling directly to Malaysian consumers compared to retail businesses in Malaysia.
Other neighbouring countries have already taken action to address this loophole, with taxes on LVG being applied in Singapore effective 1 January 2023 and in Indonesia effective 1 April 2023.
For Malaysia, the sales tax legislation on imported LVG was announced in Budget 2022 and was passed in Parliament on 4 August 2022.
It was initially intended to be enforced on 1 April 2023 but was postponed to allow the MADANI Government to engage with industry players and key stakeholders on implementation issues. This is to ensure that the implementation of the legislation would meet its objective to enable a level playing field for businesses in Malaysia, especially MSMEs.
The implementation of the sales tax on LVG would see goods valued at RM500 or less imported into Malaysia by land, sea, or air be charged with a sales tax of 10%. These goods do not include cigarettes, tobacco products, intoxicating liquors, and smoking pipes — all of which are already subjected to an import duty, excise duty and sales tax.
The charging and levying of sales tax on LVG will take effect on 1 January 2024.
Online local and foreign sellers with total sales value of LVG brought into Malaysia exceeding RM500,000 in 12 months may apply to be registered under the Sales Tax Act (Amendments) 2022 (LVG) at mylvg.customs.gov.my.
For more information on the sales tax on LVG, online sellers and consumers may refer to the Royal Malaysian Customs Department’s Frequently Asked Questions (FAQ) at mylvg.customs.gov.my.
