Malaysia Implements 10% Sales Tax on Imported Goods (LVG)

The Royal Malaysian Customs has announced that the sales tax for imported low value goods (LVG) has officially taken effect since its parliamentary approval in August 2022. Although the official implementation date is January 1, 2023, it may take several months to start paying additional fees for goods ordered from outside Malaysia.

Prior to this, LVGs with a total value of less than RM500 were exempt from sales tax upon importation. However, under the new law, all goods imported from overseas will be subjected to a uniform tax rate of 10%.

Despite the new law being in place, the government will only begin to impose tax from April 1, 2023. Currently, customs will focus on getting sellers to register on their MyLVG system.

This applies to both foreign sellers and local sellers importing LVG from overseas. All domestic and foreign sellers (regardless of whether they use land, sea or air transportation) importing goods with a total sales value exceeding 500,000 Malaysian Ringgit within a 12-month period must register with customs in Malaysia in order to begin paying the new taxes.

The LVG sales tax will only be based on the product price and will not include any additional charges such as delivery fees or insurance. The only exemptions to this new tax will be for cigarettes, tobacco products, pipes, e-cigarettes, non-nicotine liquid for e-cigarettes, and alcohol.

If the seller fails to pay the sale tax due on time, they will be subject to a penalty of 10% to 40%, depending on how late their payment is. While this tax does not apply to delivery fees, there is another service tax on delivery services that was originally slated to be implemented on January 1st. However, the Prime Minister has since suspended this tax without announcing a new implementation date.

As previously mentioned, compliant sellers and businesses have begun registering on the customs website. The purpose behind this move is evidently to create a level playing field between locally-sold LVG products and those sold overseas, as local products currently face sales taxes of 5% to 10%.