10% Tax On Low Value Goods Below RM500 From Overseas
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Starting from 1 January 2024, Malaysia will begin charging a 10 percent sales tax on low-value goods (LVG) sold online. This announcement was made by the Customs department.
Originally, Malaysia was supposed to impose this 10 percent LVG tax on goods sold below RM500 online on 1 April 2023. However, in March 2023, the Customs department announced that this tax would be postponed.
All about the low value goods (LVG) sales tax
According to this FAQ that was posted on the Customs department website on 6 November 2023, the sales tax legislation on LVG has come into force from in the first half of 2023 but the implementation date was only decided recently. Here is a summary of the FAQs on the implementation.
What will this tax on low value goods start?
1 January 2024
What is the tax rate on LVG?
The sales tax rate on LVG is 10%.
What items are included under low value goods?
All goods (excluding cigarettes; tobacco products; intoxicating liquors; smoking pipes) brought into Malaysia by land, sea or air. Additionally, all these goods which are sold at a price under RM500.
Examples: electronic cigarettes and similar personal electric vaporizing devices; and preparation of a kind used for smoking through electronic cigarette and electric vaporizing device, in forms of liquid of gel.
Who can charge this tax?
All registered sellers including online or operating via online marketplace/gateway, portal registered with the Royal Malaysian Customs Department (RMCD) under the Sales Tax Act 2018 (LVG).
What is the sales amount threshold that require LVG sellers to be registered under the Sales Tax Act 2018 (LVG)?
Sellers with total sale value of LVG brought into Malaysia that exceeds MYR500,000 in 12 months.
There are more requirements and steps related to returning items, credit notes, record keeping and customs clearance procedures which may be more relevant to affected registered sellers.
Customs clearance processes after implementation of LVG sales tax
The FAQs also provided common scenarios that may be useful to readers which we shared below:
This consignment exceeds the de minimis value (CIF MYR500). Therefore, this consignment will be subjected to Import Duties and Sales Tax on Imports (if applicable). However, since Sales Tax on LVG has been charged by the RS at the point of sale on both line items, Sales Tax on Imports will not be charged upon importation. Only Import Duties will be charged upon importation on both line items.
Upon importation, the customs value declared for this kitchenware will exceed MYR460. This will be greater than the de minimis value (MYR500) as the customs value consists of cost, insurance, and freight. The value might also be affected by the foreign exchange rate. This kitchenware will be subject to Import Duties and Sales Tax on Imports (if applicable) since the de minimis facility does not apply. Sales Tax on Imports will not be charged upon importation if it is proven that the Sales Tax on LVG has been charged by the RS at the point of sale. If it is proven at this juncture, only Import Duties will be imposed.
For more detailed information on the sale, purchasing, and implementation of the LVG sales tax, a separate document was also published on 3 November 2023 which can serve as a guideline.
