The Implementation of Sales Tax on Low Value Goods (LVG) in Malaysia
The Malaysian government has introduced sales tax on low value goods (LVG) starting January 1, 2024. This tax applies to goods worth MYR500 (about USD$110) or less that are imported into Malaysia. The tax rate is set at 10%.
Who is Impacted?
This new sales tax impacts overseas online sellers and marketplaces that sell goods to Malaysian consumers. Sellers and marketplaces that exceed MYR500,000 in LVG sales annually must register with the Royal Malaysian Customs Department (RMCD). Once registered, they are responsible for charging and remitting the 10% sales tax.
What Qualifies as LVG?
LVG refers to goods worth MYR500 or less excluding items like cigarettes, alcohol, tobacco products, etc. The threshold refers only to the value of the goods themselves, excluding additional costs like shipping, insurance or duties.
Import Process for LVG
Existing import regulations still apply to LVG. However, the registered seller will need to provide their RMCD registration number during the import declaration process. This number should be included on paperwork like Customs Form 1 or the consignment note.
If the LVG registration number is missing, the importer may be charged additional sales tax. Supporting documentation can be provided to prove LVG tax was already paid to avoid double taxation.
De Minimis Threshold
Malaysia’s de minimis import exemption for goods below MYR500 continues to apply to LVG. If LVG tax is charged at the point of sale, no additional import duties or sales tax will apply for shipments below this threshold imported via air courier. However, shipments entering Malaysia via land or sea freight do not qualify for de minimis.
Transition Period
While the legislation takes effect January 1, 2023, the government has allowed a 1-year transition period. Charging and collecting LVG sales tax will only become compulsory starting January 1, 2024. This gives overseas sellers time to register and integrate this tax into their systems.
The introduction of LVG sales tax brings Malaysia in line with other countries that have implemented similar taxes over the past few years. The tax aims to level the playing field for local Malaysian businesses competing with overseas e-commerce. Consumers can expect prices of imported goods from major online retailers to increase slightly.
FAQs
Here are 5 important FAQs about sales tax on low value goods (LVG) in Malaysia based on the document:
1. When will sales tax on LVG take effect in Malaysia?
The sales tax legislation on LVG took effect on January 1, 2023. However, the government has allowed a transition period, so charging and collecting the 10% sales tax will only become mandatory starting January 1, 2024.
2. What is the threshold for LVG seller registration?
Overseas sellers and marketplaces must register with the Royal Malaysian Customs Department (RMCD) if their total LVG sales exceeding MYR500,000 (about USD$110,000) within a 12-month period.
3. How can importers provide proof that LVG tax was paid?
Importers should provide the registered seller’s LVG registration number issued by RMCD during the import declaration process. Supporting documentation can also be presented to customs officers showing LVG sales tax was charged at the point of sale.
4. Does the de minimis threshold still apply to LVG imports?
Yes, Malaysia’s de minimis import exemption for goods below MYR500 continues to apply to LVG shipped via air courier. If LVG tax was paid at the point of sale, no additional taxes will apply for these low-value shipments meeting the de minimis threshold.
5. What goods qualify as LVG?
LVG refers to any goods worth MYR500 (about USD$110) or less, excluding specific excisable products like cigarettes, tobacco, alcohol, etc. The threshold refers only to the value of the goods themselves, not including additional shipping, insurance or other costs.
Conclusion
The imposition of Sales Tax on LVG has no impact to both consumers and sellers if they purchase from local businesses.
This is another government initiative to support local business by encouraging consumers to buy from local sellers while increase tax revenue of the country by imposing sale tax on oversea sellers
