Over the weekend, it came out that the Malaysian government will finally start imposing a 10% online sales tax on 1 January 2024. This was first brought about by a new legislation passed in parliament last year and while it technically came into force from 1 January of this year, the imposition of the tax was supposed to start in April before being postponed indefinitely.
Now, a new FAQ document published by the Royal Malaysian Customs department on 6 November 2023, coupled with info on its website, confirms that the sales tax on Low Value Goods (LVG) will be imposed starting from 1 January 2024. It will mean that goods imported from overseas valued at RM500 or under and sold online in Malaysia will be subject to a 10% online sales tax, but there are certain situations where it won’t apply.
First off, LVG covers all goods sold under RM500 and are brought into Malaysia by land, sea, or air through registered sellers. Registering as an LVG seller is a requirement for all online sellers bringing in imported goods with a total sale value exceeding RM500,000 in 12 months, regardless of whether they are in based in Malaysia or overseas. However, cigarettes, tobacco products, liquors, smoking pipes, and electronic cigarettes are exempted from this category.
The 10% rate will be charged on the sale value of the items you’re buying, which does not include tax, duty, fee, or other charges. Of course, while this new tax will be imposed, you won’t have to pay for import duties or sales tax as per the de minimis facility that currently exempts imported good under RM500.
That being said, the FAQ does outline a situation where you might have to pay both the 10% online sales tax and import duties. If your item is priced under RM500 but valued at over that threshold when taking into account insurance and freight, the de minimis facility won’t apply and you’ll be charged import duties and sales tax. That being said, the standard sales tax won’t be imposed if there is proof that the LVG tax was charged at the point of sale.
This situation also applies for LVG imported by road or sea as they are not covered by the de minimis facility, meaning that you’ll be charged both the online sales tax and import duties. How exactly will this tax be imposed by online marketplaces such as Shopee and Lazada is still unclear as neither platforms have updated their help centre regarding the LVG tax.
As for why exactly the government is implementing this move, Communications Minister Fahmi Fadzil said it was to enhance the competitiveness of local products as it will only affect imported goods. We will keep you updated when relevant e-commerce platforms publish guidelines on the new tax’s implementation.
