Malaysia: Sales tax on low value goods effective 1 January 2024

A new guide on sales tax on low value goods

A new guide on sales tax on low value goods

The Royal Malaysian Customs Department (RMCD) announced on its website that the sales tax on low value goods, which had been deferred previously, will be effective from 1 January 2024.

The RMCD also issued a new guide on sales tax on low value goods (dated 3 November 2023), which sets out the key points on the mechanism of the low value goods. The low value goods guide is divided into two parts:

  • Part 1 – Scope and imposition on low value goods
  • Part 2 – Customs clearance procedures on the importation of low value goods

KPMG observation

It was understood that the deferment of the effective date announced earlier was to enable the tax authorities as well as businesses and taxpayers to identify and iron out the mechanics of sales tax on low value goods. With the new effective date of 1 January 2024 looming soon, some important points to consider include:

  • Sales tax at 10% will be applicable on all low value goods, regardless of the Harmonized System (HS) code of the product. This is in comparison to the same goods acquired from local manufacturers, for which the sales tax rate is determined by the specific HS code (which could be exempted, at 5% or at 10%).
  • Sellers of low value goods need to configure their systems to be able to identify goods which fall within the definition of low value goods upon sale and need to discuss and align with their importers/customs agents to confirm the correct documentations are used and accurate disclosure made during importation.
  • For online marketplaces, both the seller and online marketplace operator need to agree on whose responsibility it is to charge sales tax on low value goods. Local and overseas online marketplace operators are regarded as the sellers of low value goods if any of these conditions are met:
    • Authorised to charge the customer
    • Authorised to deliver the low value goods to the customer
    • Sets the terms and conditions under which the transaction of sales is made
    • Documentation issued to customer identifies the transaction of sales is made by the marketplace
    • The marketplace and merchant contractually agree that the marketplace is responsible for sales tax on low value goods obligations
  • There could be a surge in demand for low value goods prior to the effective date. Sellers need to be aware of the transitional rules to provide there is no under or over charging of sales tax, or confusion at the point of importation.

Read a November 2023 report prepared by the KPMG member firm in Malaysia


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