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Sales Tax Act 2018: New Section 11E

Updated: Dec 9, 2023

"Section 11C - Territorial and Extra-Territorial Application" is read as follows:-

11C(1) This Part shall apply both within and outside Malaysia.

11C(2) Notwithstanding subsection (1), this Part shall apply to any person, whatever his nationality or citizenship, beyond the geographical limits of Malaysia and the territorial waters of Malaysia, if the person—

  1. is a seller; or

  2. is registered under section 13 as a registered seller.

"Section 11D - Display of Information on Package" is read as follows:-

11D 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.

Sections 11C and 11D of the Sales Tax Act 2018 define the territorial and extra-territorial application of the Act and establish requirements for registered sellers regarding displaying information on low-value goods' packaging.

Finance (No. 2) Bill 2023

The Finance (No. 2) Bill 2023 proposes a new section, 11E, which introduces a significant change related to the levy of sales tax on low-value goods imported into Malaysia.

This amendment addresses specific scenarios where registered sellers have already charged and paid sales tax on such goods.

"Section 11E - Sales tax on importation is not applicable on low-value goods" is read as follows:-

11E. Notwithstanding paragraph 8(1)(b), no sales tax shall be levied on the low-value goods if it is proven to the proper officer of sales tax that the sales tax has been charged by the registered seller and is being paid on the low-value goods.

Below, we delve into the details of these sections and the implications of the proposed new section.

Explanation of New Section 11E: Sales Tax Exemption on Importation of Low-Value Goods:

The newly proposed section 11E in the Finance (No. 2) Bill 2023 introduces a crucial exemption from the sales tax on low-value goods imported into Malaysia. This exemption applies if it can be substantiated to the proper sales tax officer that the sales tax has already been charged and paid by the registered seller for the respective low-value goods.

In essence, this section seeks to prevent double taxation on these goods, providing relief in cases where sales tax has been appropriately accounted for in prior transactions. It introduces a mechanism to demonstrate that the requisite tax has already been accounted for by registered sellers, ensuring fairness and avoiding redundancy in the taxation process.

Tax Impact:

The introduction of section 11E brings a practical dimension to the administration of sales tax on imported low-value goods.

By exempting these goods from sales tax when proof of prior payment is provided, the amendment aims to streamline the taxation process, preventing unwarranted financial burdens on businesses engaged in importing low-value goods.

This provision encourages transparency and accountability in tax reporting, aligning with efforts to facilitate smoother cross-border trade while ensuring that the appropriate taxes are duly collected fairly and efficiently.

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