The Malaysian government will implement a new 10% sales tax on small online purchases, starting 1 April 2023!
Here is what you need to know about the new sales tax on low value goods that are imported into Malaysia!
10% Sales Tax On Small Online Purchases Starting April 2023!
From 1 April 2023 onwards, the Royal Malaysia Customs Department (RMCD) will start collecting a new 10% sales tax on all low value goods (LVG) worth less than RM 500 that are sold online, and delivered from overseas to customers in Malaysia, except:
- duty-free islands like Labuan, Langkawi, Tioman and Pangkor
- designated duty-free zones in airports, etc.
The 10% sales tax will apply only on overseas low-value goods (worth less than RM 500) purchased online from 1 April 2023 onwards. It will not be imposed on delivery charges or insurance paid to import the item.
For example, if you purchase an item that costs RM 450 from an online shopping portal, with a delivery charge of RM 15.
Before 1 April 2023, you will pay only RM 465 (RM 450 for the item + RM 15 for the delivery costs).
From 1 April 2023 onwards, you will need to pay RM 510 (RM 450 for the item + RM 45 for the new 10% sales tax + RM 15 for the delivery costs).
The online shopping portal will add the new sales tax, so you are aware of the final price before purchasing the item from 1 April 2023 onwards.
Even though the sales tax does not apply to delivery charges or insurance fees, you should expect to pay close to 9%-10% extra for imported low-value goods purchased online.
It should also be noted that Malaysia implemented a 6% service tax on delivery services (except for food and beverages) in July 2022.
10% Sales Tax On Small Online Purchases : Frequently Asked Questions!
Here are the answers to frequently asked questions about the new 10% sales tax on low-value imported goods in Malaysia:
Question : When will the new 10% sales tax on imported low value goods begin?
The new 10% sales tax applies from 1 April 2023 onwards when you make payment, not on delivery of goods.
For example, if you purchase an item on 31 March 2023 and…:
- pay on purchase (31 March) : you won’t have to pay the 10% sales tax, even if you eventually receive the item on April 5, 2023
- pay on delivery : you will have to pay the 10% sales tax if the item is delivered on or after 1 April 2023.
Question : What goods are affected by the new 10% sales tax on imported low value goods?
The 10% sales tax applies to all low-value goods (worth less than RM500) purchased online, except:
- cigarettes and other tobacco products
- smoking pipes, including pipe bowls
- electronic cigarettes, and similar electric vapourising devices
- non-nicotine liquid or gel preparations used for vaping (e-cigarette smoking) devices
- intoxicating liquor, and other imported alcohol
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Question : If you are a LVG seller, must you register with the RMCD?
The Royal Malaysia Customs Department (RMCD) only requires such sellers to register with them:
- sell low value goods (worth less than RM500) online,
- that are delivered from overseas,
- with more than RM500,000 in total sale value of low-value goods brought into Malaysia in 12 months (defined as the immediate past 12 months before registration, or the current month and the next 11 months)
The RMCD structured it this way so that only large online shops or e-commerce platforms need to register with it, to help collect the new sales tax.
If you are selling your low-value goods through an e-commerce platform like Shopee or Lazada, they will handle the sales tax on your behalf.
Question : How does the sales tax system work for sellers?
Sellers who must register with the RMCD, should do so through the MyLVG online system, using the LVG-01 form. Registration is open from 1 January 2023 onwards.
The seller is required to declare the collected sales tax to the RMCD every three months through the MyLVG system using the LVG-02 form, and pay the collected tax to the RMCD by the last day of the next month.
For example, the ABC e-commerce platform collected RM 1 million in sales tax from April to June 2023.
It must submit its LVG-02 form and pay the collected RM 1 million by 31 July 2023.
If the seller makes a mistake and overpaid the collected tax, it can apply for a refund using the LVG-03 form.
The seller can also cancel its registration using the MyLVG system, if it no longer sells low-value goods, or if the total sales value of LVG in 12 months does not exceed RM 500,000.
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