E-commerce is going to face some headwinds with new taxes on certain online purchases and delivery services in Malaysia!
Here is what you need to know…
New Taxes On Some Online Purchases + Delivery Services!
There will be soon new taxes on low-value purchases from overseas, and delivery services in Malaysia!
These taxes were announced in Budget 2022, but you may not be aware of it.
6% Service Tax On Delivery Services
From 1 July 2022 onwards, delivery services are subject to 6% service tax, for delivering goods other than food and beverages, and logistics delivery services.
This 6% service tax applies to e-commerce platforms as well, so expect the cost to be passed to you – the customer.
10% Sales Tax On Low Value Imports
Currently, goods imported from overseas that are delivered via courier services through specific international airports in Malaysia are not subject to the 10% sales. tax, if the value of each consignment (parcel) does not exceed RM 500.
Budget 2022 removed that exemption, which means all imported goods will be taxed, regardless of value.
From 1 January 2023 onwards, online sellers of low value imported goods delivered by air courier worth less than RM 500 per consignment must charge their customers a 10% sales tax. Otherwise, the purchaser will be subject to an import tax.
This sales tax applies to both local and foreign merchants. But the government has yet to reveal the mechanism by which foreign merchants will register, process and forward the collected sales tax.
Why New Taxes On Online Purchases + Delivery Services?
Taxing low cost value goods purchased overseas is a way to level the playing field between local and foreign manufacturers.
Malaysian products are already subject to a 5% or 10% sales tax, which places them at a disadvantage when competing with low value imports that are currently tax-free.
That’s why many countries like Australia and New Zealand implement similar taxes, to align with local sales tax.
Even Singapore will be implementing a 7% GST on low value goods (LVG) from 1 January 2023 onwards, increasing it to 9% by 2025.
This sales tax on imported LVG will no doubt raise revenue for the government, but it is inline with what other countries are implementing to level the playing field, and encourage purchases of local products.
The 10% sales tax may seem high, but it does not apply to low value goods imported via sea or land.
This sales tax will not affect the RM1,000 exemption for travellers bringing in goods purchased overseas through the seven designated international airports in Malaysia.
The 6% service tax on delivery services is a new revenue stream for the government, although they have exempted food and beverage deliveries, as well as logistics deliveries.
Whatever the reasons are – expect to pay more for your online purchases!
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