19/12/2023 (Kuala Lumpur, Malaysia) - The Malaysian Ministry of Finance (MoF) has announced that starting January 1, 2024, a sales tax will be applied to low-value goods (LVG) imported and sold online. This move aims to create fair competitive conditions for local businesses. Globally, it's common to exempt imported goods below a de minimis value from sales tax and import duties. In Malaysia, this exemption threshold is set at RM500 per item to streamline customs clearance and postal deliveries.
The rapid growth of online sales, increasingly preferred by consumers, has led to unequal tax treatments between online businesses importing goods and those operating physically within Malaysia. "This has created a tax treatment disparity between online businesses importing from abroad and physical businesses operating in Malaysia," the MoF stated.
Existing sales tax systems have loopholes that allow tax evasion practices among sellers. The MoF mentioned that the legislation for imposing sales tax on imported LVGs was announced in the 2022 Budget.
Originally scheduled for implementation on April 1, 2023, the introduction of the LVG sales tax was postponed to enable the MADANI government to engage in detailed discussions with industry stakeholders, addressing implementation issues. "This is to ensure that the implementation of this tax achieves its primary objective, especially addressing the tax treatment disparity on low-value goods between local physical businesses and online businesses," the ministry explained.
A 10% sales tax will be imposed on LVGs valued at RM500 or below, imported into Malaysia by land, sea, or air. This tax does not apply to cigarettes, tobacco products, alcoholic beverages, and pipe tobacco as these items are already subject to import duties, excise duties, and sales tax.
Online sellers, both local and foreign, dealing in imported LVGs valued over RM500,000 in a 12-month period are eligible to register under the Sales Tax (Amendment) Act 2022 at mylvg.customs.gov.my/.
Neighboring countries have already implemented similar taxes on LVGs, with Singapore starting from January 1, 2023, and Indonesia from April 1, 2023, the MoF noted.