Indirect Tax News - December 2020

Budget 2021

The Minister of Finance tabled the 2021 Budget in the Parliament of Malaysia on 6 November 2020. The following proposals related to indirect taxes were included in the Budget:

  • Imposition of Sales Tax on the importation of cigarettes with drawback facilities for re-export.
    The shipment of cigarettes in transit in any ports/airports in Malaysia will be subject to Sales Tax and the imported items qualify for a refund or drawback facility only when they are subsequently exported. These provisions will be in effect beginning 1 January 2021.
  • Beginning 1 January 2021, on all types of electronic and non-electronic cigarette devices including vape, Excise Duty will be imposed as follows:
    • For all types of electronic and non-electronic cigarette devices including vape, an ad valorem rate of 10%; and
    • For liquid or gel used in electronic cigarettes including vape at a rate of RM 0.40 per millilitre.
  • Imposition of Sales Tax on cigarette and tobacco products sold on all duty-free islands and in any free zones beginning 1 January 2021.
  • Tourism Tax
    Tourism Tax is currently imposed at the flat rate of RM 10 per room/night. The tax is charged to tourists by the operator of accommodation premises. This tax is not applicable to Malaysian citizens and permanent residents, however. Due to the COVID-19 pandemic, the Tourism Tax has been temporarily suspended from 1 July 2020 until 30 June 2021.
    With effect from 1 July 2021, the government proposes extending the imposition of Tourism Tax to accommodations booked through online platforms.

Actions to be considered

Businesses affected by any of the above should review their current business structures and processes to take into account their impact and to ensure compliance and tax efficiency.

David Lai