Malaysia - Sales Tax now levied on low value goods

As from 1 January 2024, Malaysian Sales Tax at a rate of 10% is levied on low value goods (LVG).

The tax was originally proposed to commence from 1 January 2023 but the implementation date was postponed to 1 April 2023, and subsequently deferred indefinitely (for prior coverage, see the article in the July 2023 issue of Indirect Tax News). On 3 November 2023, the Royal Malaysian Customs Department announced that the Sales Tax on LVG would commence on 1 January 2024 and published guidelines and frequently asked questions on the implementation of the tax. The Sales Tax (Amendment) Act 2022: Appointment of Effective Date for Charging and Levying of Sales Tax on Low Value Goods, which confirms 1 January as the effective date, was gazetted on 8 December 2023.

The key features of Sales Tax on LVG are as follows:

Scope of LVG	All goods with a sales value of MYR 500 or less brought from outside Malaysia into Malaysia via land, sea or air. Exclusion: cigarettes; tobacco products; intoxicating liquors; smoking pipes (including pipe bowls); e-cigarettes and similar personal e-vaping devices; and preparations used for smoking through e-cigarette and e-vaping devices in liquid or gel form, whether or not containing nicotine.
Meaning of Seller	A person, within or outside Malaysia, who sells LVG on an online platform or operates an online marketplace for the sale and purchase of LVG.
Rate of Tax	10%
Sales Value of LVG Subject to Sales Tax	Tax is charged on the sales value of LVG not including any tax, duty, fee or other charges such as transportation, insurance or other costs.
Registration Threshold	Total sales value of LVG exceeding MYR 500,000 within a 12 month period.
Sales Tax Return	Sales Tax on LVG return (i.e., LVG-02 Form) must be submitted by registered sellers every three months.
Customs Importation Mechanism	During the importation of LVG, the LVG Registration Number information must be provided by the importer/customs agent in the import declaration (e.g. Customs Form No.1 (K1), electronic pre-alert system (e-PAM) or consignment note (CN22/CN23)). Any supporting documents must also be provided at the request of a customs officer. No Sales Tax will be levied on LVG if it is proven to the customs officer that tax on the LVG has been charged by the registered seller and paid.
Transitional Provisions	LVG purchased before 1 January 2024, whether delivered to Malaysia before or after the effective date, is not subject to Sales Tax. Otherwise, Sales Tax should be applicable to LVG.

David Lai
BDO in Malaysia