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Imposition of Tax on Low Value Goods Sales Tax (Amendment) Bill 2022

Updated: Aug 24, 2022


124.1 Sales Tax (Amendment) Bill 2022
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The Sales Tax (Amendment) Bill 2022 was passed with a majority voice vote by Dewan Rakyat (House of Representatives) on August 4, 2022.


A sales tax would be imposed on low-value goods (LVG) sold by registered sellers or sellers liable to be registered through online platforms and delivered to Malaysia under the terms of the Bill, which was presented for the first reading on Monday (1 August).


No amendments were made when the bill was debated in Parliament for the second and third readings.


Before the bill can be signed into law, it must first be approved by the Dewan Negara (Senate), Malaysia's upper parliament.


Currently, low-valued items with prices of RM500 or less are exempt from paying any tax in Malaysia when imported under the de minimis facility.


The new low-value goods tax is scheduled to go into effect on January 1, 2023, and it is anticipated that such products will be subject to a constant rate of 10% during the duration of the tax.


The Minister has the power to determine certain goods as low-value based on goods or class of goods, the price of the goods, and the method by which the goods are imported into Malaysia.


For your convenience, we have outlined the most important aspects of the bill below:


Effective Date

The bill does not specify when the LVG sales tax will become effective or when it will be implemented. Thus there is no clear answer to this question.


This will be gazetted by the Minister of Finance (MOF).


Initially proposed that it would become effective on January 1, 2023; however, the deputy finance minister indicated that the ministry had not finalised the effective date because all parties (namely the industry, customs, and the consumers) must be ready before the implementation.


Rate

The Ministry of Finance is responsible for determining and gazetting the tax rate.


However, in response to a question in Parliament, the Deputy Minister of Finance stated that a 10% flat tax would be imposed on LVGs imported into Malaysia.


Definition of "Low-Value Goods" (LVG)

It has been defined in the bill as:


any prescribed goods or class of goods outside Malaysia which are sold at a price not more than a prescribed amount and brought into Malaysia in the manner as prescribed."


While the bill was being debated in Parliament, the Deputy Minister of Finance revealed the following information:

  • The prescribed value would be RM500;

  • The prescribed manner of import would include the air, sea, and land modes of transportation.

Seller

A person, whether in or outside Malaysia, who sells LVG on an online marketplace or operates an online marketplace for the sales and purchase of LVG.


Taxable Person & Registration Threshold

A registered seller or a seller who is liable to be registered under section 12.


Suppose the total sale value of a seller's LVG transactions on an online marketplace for a period of 12 months is greater than the threshold for registration. In that case, both local and foreign sellers of LVG and the operators of online marketplaces are required to register for sales tax and charge sales tax on LVG transactions.


During the discussion of the bill in Parliament, the deputy finance minister responded by stating that the minimum required threshold for registration would be RM500,000.


Value of LVG subject to Sales Tax

To calculate sales tax, the sale value of LVG shall exclude any tax, fee or other charges imposed on LVG.


Sales Tax Due

At the time when the taxable person sells the LVG.


Taxable Period & Furnishing of Returns

A registered LVG seller has a taxable period of three months, and returns are due to customs on the last day of the month after the end of the taxable period.


Invoice

Invoices as well as any other documents that provide the required particulars (to be released)


Display of Information on Package

Every registered seller shall furnish to the Director General prescribed particulars which shall be displayed on the package of low-value goods in the manner as may be prescribed.”.


Customs Control

If the Sales Tax on LVG has either not been charged at all, has been assessed at a lesser rate, or has not been paid, the LVG cannot be released from the control of Customs until the Sales Tax has been paid in full.


Transitional Provisions

Goods acquired before the effective date but only delivered to Malaysia after the effective date are exempt from the Sales Tax.


Both sellers who use online marketplaces and those who run online marketplaces need to keep a close eye on any new information regarding this particular topic.


Please do not hesitate to get in touch with contact us if any of the preceding pertains to your company in any way or if you have any questions or require any clarification or assistance. We will be pleased to assist you.


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We can provide you with a wide variety of local and international tax services, regardless of whether you are an individual or a corporation.


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