Sales Tax Collection For Low Value Goods To Begin In April 2023

The Royal Malaysian Customs Department has announced that the sales tax on imported low value goods (LVG) is now officially in place after it was passed by the Parliament last August. Even though the official implementation date is 1 January 2023, it is going to be a few more months away before you may have to pay extra for the items you ordered from outside of Malaysia.

Imported LVG with a total value of less than RM500 per consignment had been exempted from sales tax up until this point. Under the new law, all goods from overseas will be subjected to a sales tax with a flat rate of 10% [pdf].

Even though the new law is already in place right now, the government will only begin to collect the tax starting from 1 April 2023. At the moment, Customs will be focusing on getting sellers registered on its MyLVG system.

This is applicable to both foreign sellers as well as local ones who imported LVG from overseas. All foreign and domestic sellers who import such products into Malaysia — whether by land, sea, or air — with a total sale value of over RM500,000 within 12 months will have to register with Customs in order to start collecting the new tax.

The LVG sales tax will only take into account the product’s price and it will not be imposed on the delivery charges or insurance. The only exemptions to this new levy are cigarettes, tobacco products, smoking pipes, electronic cigarettes, vapes, non-nicotine liquids for vaping, and intoxicating liquor.

If a seller fails to pay the due amount of sales tax, they will be subject to a penalty between 10% to 40%, depending on how late their payment is. While this levy won’t impose a tax on delivery fees, there is another service tax for delivery services meant to be enforced on 1 January, but this has since been put on hold by the Prime Minister with no new implementation date.

As mentioned earlier, sellers and businesses that meet the criteria can already start registering on the Customs department’s website. The justification behind this move is apparently to level the playing field between LVG sold locally and those sold from overseas as local products are currently subjected to 5% to 10% sales tax.

(Source: Customs [1][2], Federal Government Gazette)