Online Shopping Tax: Malaysia is a step closer to impose 10% tax on imported goods worth under RM500

[ UPDATE 18/12/2023 09:00 ] Malaysia to impose 10% Low Value Goods Tax for online shopping items shipped from overseas starting 1 January 2024.

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Your Taobao, Lazada and Shopee eCommerce orders that are shipped from overseas may soon be slapped with a new tax. This comes as the Dewan Rakyat (Lower House of Parliament) has passed the Sales Tax (Amendment) Bill 2022 with a majority voice vote.

With the amendment to the Sales Tax Act 2018, low value goods sold online that are priced under RM500 will be imposed a tax with a flat rate of 10%. This is applicable for goods imported from overseas regardless if the seller is inside or outside Malaysia.

Deputy Finance Minister Shahar Abdullah said the government is expected to collect RM200 million a year from this tax implementation and it will level the playing field between online sellers both inside and outside Malaysia, which will empower local businesses. The plan to impose a 10% sales tax on goods not exceeding RM500 sold online and imported through air courier service was revealed during the tabling of Budget 2022 back in October last year.

At the moment, imported goods with a total value of less than RM500 are exempted from sales tax when it is brought in using courier services through selected airports such as KLIA, Subang, Penang, Senai, Kuching and Kota Kinabalu. The exemption is in accordance with the de minimis facility. In case you’re wondering, this is a shortened Latin expression of “the law does not care about very small matters” as it is considered more efficient to waive very small amounts of duties and taxes rather than to collect them. The tax exemption for such imported goods puts local businesses and manufacturers at a disadvantage as they are subjected to 5% or 10% sales tax.

Shahar Abdullah shared that other countries such as Australia, New Zealand, the UK and Norway have also imposed either goods and services tax (GST) or value added tax (VAT) on low value goods imported from overseas. He added that Singapore has also implemented the same thing from 1st January 2023 where goods worth SGD 400 (about RM1,293) and below will be subjected to a GST rate of 7%.

Before the Sales Tax amendment comes into force, it will have to be approved by Dewan Negara (Upper House of Parliament) and the Yang di-Pertuan Agong.

[ SOURCE 2 ]

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