What is Import Duty in Malaysia
Import duty in Malaysia is a tax levied on imported goods. It is typically imposed on an ad valorem basis, meaning that the tax is calculated as a percentage of the value of the goods. The average applied tariff for industrial goods is 6.1%.
The Sales and Service Tax (SST) applies to imported goods. The SST is a broad-based consumption tax levied on various goods and services. The rate of SST is either 5% or 10%, depending on the category of goods.
In addition to import duty and SST, several other taxes may apply to imported goods, such as excise duty and import permit fees.
Here are some examples of import duty rates for different types of goods:
- Food items: 5% or 10% SST
- Electronics: 10% SST
- Motor vehicles: 10% SST, plus excise duty depending on engine capacity
- Batik sarong: 50% import duty
- Rice and padi: 60% import duty
For more information on import duties and taxes in Malaysia, please visit the Royal Malaysian Customs Department website.
What is The Import Duty Introduced in Malaysia in 2023
In Malaysia, two significant import duty changes were introduced in 2023:
Implementation of Sales Tax on Low-Value Goods (LVG): Effective January 1, 2023, all Low-Value Goods (LVG) not exceeding RM500 purchased online from overseas sellers and delivered to consumers in Malaysia are subject to Sales Tax (SST). The SST rate for LVG is 10%.
Imposition of Sales Tax on Registered Sellers of LVG: Effective April 1, 2023, all registered sellers of LVG must collect and remit SST on imported LVG. This applies to overseas and Malaysian sellers who import LVG for sale in the country.
These changes aim to ensure a level playing field for local and overseas businesses in Malaysia’s e-commerce sector. Additionally, they aim to generate additional revenue for the government to support various public programs.
How Do You Calculate Import Duty Tax
Calculating import duty tax involves determining the customs value of the imported goods and applying the appropriate duty rate. The customs value is typically based on the Cost, Insurance, and Freight (CIF) value of the goods, which includes the purchase price, insurance costs, and freight charges.
Here’s the general formula for calculating import duty tax:
Import Duty Tax = CIF Value × Duty Rate
For example, if the CIF value of an imported item is RM1000 and the duty rate is 10%, the import duty tax would be RM100 (RM1000 × 0.10).
In Malaysia, the duty rate for a particular product is determined by its Harmonized System (HS) code, an international standardized system for classifying goods. You can find the HS code for your product using the Customs Department’s HS Code Search tool.
Apart from import duty, other taxes may apply to imported goods, such as Sales and Service Tax (SST) and excise duty. Depending on the product category, the SST rate is either 5% or 10%. Excise duty is a tax levied on certain goods, such as alcohol, tobacco, and motor vehicles.
To get an accurate estimate of the total taxes applicable to your imported goods, it’s recommended to consult with a customs broker or freight forwarder. They can provide detailed information based on the specific product and HS code.
How is CIF Calculated in Malaysia
The Cost, Insurance, and Freight (CIF) value in Malaysia is calculated by adding the cost of the goods, the insurance cost, and the freight cost.
Here’s the formula for calculating CIF in Malaysia:
CIF value = Goods value + Insurance cost + Freight cost
- Goods value: The transaction value of the goods at the time of importation, including the cost of packaging and loading.
- Insurance cost: Insuring the goods against loss or damage during transit. The insurance rate is typically a percentage of the good’s value.
- Freight cost: Transporting the goods from the seller to the buyer. The freight rate is typically a percentage of the value of the good.
For example, if the cost of goods is RM1000, the insurance rate is 1%, and the freight rate is 2%, then the CIF value would be RM1030.
CIF value = RM1000 + (RM1000 * 1%) + (RM1000 * 2%) = RM1030
The CIF value is essential because it calculates the import duty and Sales and Service Tax (SST) payable on imported goods. Import duty is a tax levied on goods imported into a country, while SST is a tax imposed on selling goods and services in Malaysia.
The import duty rate and SST rate are applied to the CIF value of the goods. The specific rates will vary depending on the type of goods being imported.
What is Customs Import Duty
Customs import duty, or import tariff, is a tax on goods imported into a country. It is a form of indirect taxation, meaning that the consumer of the imported goods ultimately bears the tax. Import duty is typically calculated as a percentage of the value of the goods, known as the ad valorem rate. However, in some cases, import duty may be calculated as a specific tax, meaning that the tax is levied at a fixed rate per unit of quantity of the goods.
The purpose of import duty is to protect domestic industries from foreign competition, generate revenue for the government, and promote economic development. Import duties can also achieve social and environmental objectives, such as discouraging the importation of harmful or polluting products.
The level of import duty varies depending on the country, the type of goods, and the country of origin of the goods. Developing countries generally tend to have higher import duties than developed countries. Developing countries often try to protect their emerging industries and generate revenue for their governments.
Import duties can have a significant impact on the price of imported goods. For example, if the import duty on a particular type of shoe is 20%, the cost of imported shoes will be 20% higher than that of domestically produced shoes. This can make it difficult for foreign companies to compete in the domestic market.
Import duties can also be a source of trade disputes between countries. If a country believes that another country’s import duties are unfairly high, it may take action to protect its industries. This can lead to trade sanctions or other forms of economic retaliation.
There has been a trend towards reducing import duties in recent years as countries have become more integrated into the global economy. This has led to lower prices for consumers and increased competition between businesses. However, some countries maintain high import duties on certain products to protect their domestic industries.
Here are some examples of import duty rates in different countries:
- United States: The average import duty rate in the United States is 3.5%.
- China: The average import duty rate in China is 9.7%.
- European Union: The average import duty rate in the European Union is 3.1%.
As you can see, import duty rates can vary significantly from country to country. Knowing the import duty rates that apply to the goods you are importing is essential to avoid unexpected costs.
How Much is the Customs Clearance Fee in Malaysia
The customs clearance fee in Malaysia is RM33 (approximately USD 8) per Customs Declaration presented to customs authorities. This fee applies to all goods imported into Malaysia with a value above RM500.
In addition to the customs clearance fee, there may also be other fees and taxes applicable to imported goods, such as import duty, Sales and Service Tax (SST), excise duty, and import permit fees. The specific fees and taxes will vary depending on the imported goods.
Here’s a breakdown of the potential costs involved in importing goods into Malaysia:
- Customs clearance fee: RM33 per Customs Declaration
- Import duty: Varies depending on the type of goods, but the average applied tariff for industrial goods is 6.1%
- SST: Either 5% or 10%, depending on the category of goods
- Excise duty: Applicable to certain types of goods, such as alcohol, tobacco, and motor vehicles
- Import permit fees: Applicable to certain kinds of goods, such as controlled substances and firearms
It is important to note that these are just estimates, and the actual costs may be higher or lower depending on the specific circumstances of your import. It is always advisable to consult with a customs broker or freight forwarder to get a more accurate estimate of the costs involved.