A Better Look at Sales Tax on Low Value Goods (LVG) in Malaysia

In recent years, the taxation landscape for low-value goods has undergone significant changes globally, and Malaysia is no exception. With the rise of e-commerce and cross-border trade, the Malaysian government has implemented measures to streamline the taxation process for low-value goods. In this article, we explore the impact on consumers, businesses, and the economy at large. From understanding the thresholds and exemptions to navigating compliance requirements, we uncover essential insights to help stakeholders navigate this evolving taxation framework efficiently. Let’s explore how sales tax on low value goods in Malaysia affects businesses and consumers alike. 

What does Sales Tax on Low Value Goods (LVG) in Malaysia entail? 

As of January 1, 2024, Malaysia has ushered in a significant taxation reform by implementing a new 10% sales tax on low-value goods sold online within the country. This measure, initially announced in the 2022 national budget, was subject to delays but has now come into full force. Notably, the tax targets imported goods valued at less than 500 Ringgit Malaysia, specifically those sold through online channels. 

However, certain items, such as electronic cigarettes, tobacco products, liquors, and cigarettes, remain exempt from being charged. It is important to note that the tax imposed encompasses goods imported via various modes of transportation, which include land, sea, and air, with the taxable base determined by the product price or freight on board, excluding additional fees such as shipping charges. This reform represents a significant shift in Malaysia’s taxation landscape, aimed at enhancing revenue collection and ensuring fair treatment across online and traditional retail platforms. 

Who will the Sales Tax on LVG in Malaysia have an impact on? 

The newly implemented sales tax on low goods in Malaysia has been designed to target overseas online sellers and marketplaces engaging in transactions with Malaysian consumers. Under this regulation, sellers and marketplaces that surpass an annual sales threshold of MYR500,000 in low value goods sales are required to register with the Royal Malaysian Customs Department (RMCD). 

Once registered, these entities assume the responsibility of applying and collecting a 10% sales tax on applicable transactions, which they must then remit to the RMCD. This measure aims to ensure fair taxation and regulatory compliance within the realm of e-commerce, fostering a level playing field for both domestic and international sellers operating within Malaysia’s market landscape. 

What qualifies for Sales Tax on Low Value Goods in Malaysia? 

To qualify for the aforementioned tax in Malaysia, a product must be sold online or imported from overseas with a total CIF charge under RM500, with exceptions for certain products and goods imported via air courier to selected airports. Additionally, sellers qualify for sales tax on low value goods in Malaysia if the total sale value brought into Malaysia exceeds RM500,000 in 12 months, regardless of their location. Goods not meeting these conditions are currently exempt from sales tax on low value goods in Malaysia. 

What are the conditions to register for Sales Tax on LVG in Malaysia?

Effective January 1, 2023, applications for registration using the LVG-01 form through the MyLVG portal are required. Sellers must register within one month of becoming liable, with the registration date set for the following month’s first day. Upon registration, sellers receive the LVG Registration Number, denoting their status as Registered Sellers (RS). 

What are the obligations for Sales Tax on Low Value Goods in Malaysia?

To sell products and be subject to the sales tax on low value goods in Malaysia, you must first register your business through the MyLVG portal of Malaysia’s Customs Department. Understand that the sales tax on low value goods in Malaysia applies solely to the sale value of the product, excluding insurance or freight costs.  

Factors such as discount codes can alter the sale value, potentially qualifying goods for sales tax on low value goods in Malaysia, whereas vouchers do not impact the actual sale value and therefore do not trigger eligibility. It is highly advised to take your time to familiarize yourself with these to navigate the sales tax on low value goods in Malaysia effectively. 

As a registered seller, you would be required to submit the LVG-02 Sales Tax return every three months through the MyLVG portal, following the taxable period. Additionally, you are required to maintain invoices related to sales tax on low value goods in Malaysia transactions for seven years from the last date connected to those records. Transactions should be conducted in Ringgit Malaysia. 

What is the penalty imposed for unpaid Sales Tax on LVG in Malaysia?

A penalty for late payment will be applied to any portion of the sales tax on low value goods in Malaysia remaining unpaid after the designated due date, as stated here. 

A 10% penalty will be imposed for payments made between 1 and 30 days after the initial deadline. For payments made between 31 and 60 days later, an additional 15% penalty will be incurred. Likewise, payments made between 61 and 90 days late will bring about an additional 15% penalty. 

Discover how Premia TNC can simplify your taxation needs

At Premia TNC, we pride ourselves on delivering comprehensive and tailored taxation services designed to meet the diverse needs of businesses and individuals in Malaysia. With our team of seasoned professionals, we offer a wide range of services to simplify your tax obligations. From assisting with tax file registration to accurately filing tax estimations (CP204) and meticulously preparing tax computations and income tax schedules, we ensure thoroughness and accuracy in every step of the process. 

Our expertise also extends to individual income tax computation services, providing personalized solutions to optimize your tax liabilities. Furthermore, we specialize in navigating the complexities of SST registration and deregistration, as well as the preparation and submission of SST reports bimonthly, ensuring full compliance with regulations. 

Let Premia TNC take the burden off your shoulders and streamline your taxation processes, allowing you to focus on your core business activities. Contact us today to discover how Premia TNC can be your trusted partner in navigating Malaysia’s tax landscape.