KUALA LUMPUR (Dec 18): The Ministry of Finance (MoF) clarified on Monday that the 10% sales tax on imported low value goods sold online, which are those priced at no more than RM500 each, aims to rectify tax treatment disparities between retail and online businesses.
The new tax, which will be enforced starting January next year, would establish a level playing field for businesses in Malaysia, especially the micro, small and medium enterprises (MSMEs), the MOF said in a statement.
“There was a loophole in the sales tax. Globally, there is a common practice not to impose sales tax and import duty on imports below a De Minimis (minimal) value, which was set at RM500 for Malaysia, to facilitate ease of customs clearance for postal and courier shipments.
“With the proliferation in online retail, this created an unfair advantage for online businesses selling directly to Malaysian consumers compared to retail businesses in Malaysia,” the ministry explained.
According to the MOF, neighboring countries have already moved to address a similar loophole. Singapore implemented taxes on low-value goods from Jan 1, 2023, while Indonesia enacted such taxes from April 1, 2023.
In Malaysia, the tax was originally slated for enforcement on April 1 this year. However, it was deferred to allow the Madani government to engage with industry players and key stakeholders regarding implementation issues, according to the ministry.
It added that the objective is to ensure that the legislation's implementation aligns with the goal of addressing tax treatment disparities between goods sold by online and traditional retail businesses.
The sales tax legislation on imported low-value goods was announced in Budget 2022 and was passed in Parliament in August 2022.
The implementation of a 10% sales tax applies to goods valued at RM500 or less, imported into Malaysia through land, sea, or air. Notably, this taxation excludes specific items like cigarettes, tobacco products, intoxicating liquors, and smoking pipes, all of which are already subject to import duty, excise duty and sales tax.
Online local and foreign sellers with total sales value of low value goods brought into Malaysia exceeding RM500,000 in 12 months may apply to be registered under the Sales Tax Act (Amendments) 2022 (LVG) at mylvg.customs.gov.my, the MOF added.