Global trend: The introduction of sales tax on low-value goods imported into Malaysia is in response to the growth in cross-border trade of goods.
THERE is no denying that online shopping in Malaysia grew exponentially in the last three years due to the pandemic.
The number of online shoppers in Malaysia grew 47% year-on-year with 14.43 million buying consumer goods online at the start of 2022, according to DataReportal.
Post-pandemic, shoppers continue to find online shopping more convenient and rewarding, with 37% of Malaysian consumers preferring to shop more online for clothing and footwear while 26% preferred to shop more online for consumer electronics between March and September 2021, according to PwC’s Global Consumer Insights pulse survey.
The introduction of sales tax on low-value goods (LVGs) imported into Malaysia is in response to the growth in cross-border trade of goods.
Broadly, it taxes the online purchase of LVGs by Malaysian consumers that currently enters the country. The tax regime creates parity between LVGs purchased from overseas and the same goods purchased locally.
So what does this mean for consumers when you purchase imported LVGs from sales tax registered local and overseas sellers? Here are some responses to frequently asked questions.
When I purchase LVGs after April 1, 2023, do I need to pay tax?
LVGs refers to goods situated outside Malaysia that are sold at a price of RM500 or less purchased through an online platform (for example, Lazada, Shopee, Amazon and Taobao). Beginning April 1, 2023, 10% sales tax will be charged on all LVGs purchased on an online platform.
Does that mean I have to pay more now?
Yes, when an LVG is purchased on an online platform, an additional tax of 10% will be added to the price of the goods but only if the seller is a registered seller.
If the seller is registered, the price displayed on the platform will show a 10% sales tax as applicable on the price of the goods.
Is it correct that this only applies to purchases from overseas sellers?
Sales tax on LVGs applies to goods that will be imported from outside Malaysia regardless of where the seller is situated.
You may have purchases from sellers based in Malaysia but the goods could be coming from overseas.
In this scenario, the local seller will be registered for sales tax if the threshold of RM500,000 is met.
However, if the goods are delivered from within Malaysia, it will not be subject to sales tax at 10% when purchased.
For example, if you make an online purchase from a local supermarket, the purchase will not be subject to this sales tax.
Does it mean I don’t have to pay tax if I buy from a seller who is not registered?
If the seller is not registered, the 10% sales tax will not be charged on the purchase. However, the Customs Department may impose sales tax on the goods when it enters Malaysia.
There is an exemption available for goods valued RM500 or less imported through seven international airports using air courier service. So, for such goods you will not incur a sales tax cost.
If I purchased LVGs on March 20, 2023 but they will only be delivered on April 15, 2023, will I be charged sales tax?
No. Sales tax will not be charged on LVGs delivered on/after April 1, 2023, provided the order confirmation is dated on or before April 1, 2023. However, you may need to pay sales tax on importation for goods imported via sea and land.
Additionally, sales tax may also need to be paid on goods imported via air by courier service if the value, inclusive of insurance and transportation costs, exceeds RM500.
As a consumer, you may be confused about the mention of parity or level playing field that is often associated with the introduction of the sales tax on LVGs because you do not see any sales tax on local retail purchase invoices.
What is not visible to the average consumer is that the sales tax costs have been embedded in the price of goods retailed locally.
Therefore, the introduction of sales tax on LVGs in Malaysia is a progressive step towards ensuring fair treatment between LVGs purchased from overseas or local sellers.
Other countries like Singapore, Australia, New Zealand, Switzerland and the United Kingdom have also started taxing LVGs in recent years.
Annie Thomas is director at PwC Taxation Services Malaysia. The views expressed here are the writer’s own.
