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Malaysia: Imposition of sales tax on low value goods imported into Malaysia

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Following the passing of a suite of legislations, sales tax at the rate of 10% will be imposed on low value goods (i.e., all goods outside Malaysia which are sold at a price not exceeding RM 500 and brought into Malaysia via land, sea or air modes) (“LVG“) sold by a seller (i.e., a person who sells LVG on an online marketplace or operates an online marketplace for the sales and purchase of LVG) (“Seller“).

Note that the LVG sales tax obligations have extra-territorial application and extend to Sellers within and outside of Malaysia. For clarity, the LVG sales tax only applies to goods outside Malaysia sold via an online marketplace, which will be imported into Malaysia post-sale.

Key obligations in respect of the LVG sales tax are summarized as follows:

  • Registration – Local and foreign Sellers, with a total LVG sale value of RM 500,000 over a 12-month period, are required to register with the Royal Malaysian Customs Department (“RMCD“). A registered seller will be assigned with an LVG registration number and will be required to charge, collect and remit sales tax on LVG.
  • Display of information on package -Every registered seller is required to furnish a consignment note that contains its LVG registration number to the RMCD. The information of the consignment note must be patched or affixed on the LVG package.
  • Invoicing – The invoice or document in relation to the sale of the LVG must state the following particulars (among others): (i) the total amount payable excluding sales tax; (ii) the rate of the sales tax; and (iii) total sales tax chargeable is shown as a separate amount.

While the relevant legislations have entered into force on 1 January 2023, the actual imposition of sales tax on LVG will not be enforced by the Malaysian Government at the present stage. The enforcement date was initially scheduled for 1 April 2023 but this has been postponed indefinitely as the focus of the Malaysian Government at this juncture is to have the affected stakeholders complete their LVG sales tax registration and to iron out teething issues raised by the industry.

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Adeline Wong heads the Tax, Trade and Wealth Management Practice Group of Wong & Partners and the Tax and Trade Practice Group of Baker McKenzie member firms in the Joint Asian Offices. She has over 30 years of experience in the area of corporate tax planning, advisory, audit and investigation work. Adeline won the Euromoney Asia Women in Business Law Awards for the Tax category in 2013, 2018 and 2020. Her practice was named the Tax and Trusts Law Firm of the Year by the Asian Legal Business Malaysia Law Awards in both 2020 and 2021. She is ranked as a Band 1 practitioner by Chambers Asia Pacific for Tax and by the Chambers High Net Worth Guide for Private Wealth Law. Clients commend her as "a leading tax lawyer" and a "standout name in the private wealth market in Malaysia" in the Chambers guides. She is also listed as a Leading Individual by Legal 500 Asia Pacific and as an Elite Practitioner by Asialaw Profiles for Tax. The International Tax Review also ranks Adeline as a Highly Regarded practitioner among its Tax Controversy, Indirect Tax and Women in Tax Leaders Guides. She has presented in both domestic and international tax conferences, including conferences organised by the Tax Executive Institute in the US, Society of Trust and Estate Practitioners in Singapore and Bloomberg BNA's Global Transfer Pricing Conference in Shanghai. She is also a regular contributor to established publications on tax-related legislation and developments in Malaysia, such as Bloomberg BNA and the International Bureau of Fiscal Documentation.

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Hui Teng Yong is a Legal Assistant in Wong & Partners, Kuala Lumpur office.

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