In 2023, Malaysia introduced a new tax regime to regulate the importation and sale of Low-Value Goods (LVG). This move has been met with both anticipation and apprehension, as it significantly impacts e-commerce businesses, domestic and international.
To understand the implications of this tax, it’s essential to delve into what Low-Value Goods are, the Malaysian LVG tax regulations, why the government imposed them, and how it affects sellers and consumers.
What Are Malaysia’s Import Taxes?
Malaysia imposes various import taxes, which include customs duties, excise duties, and sales taxes. The Sales Tax on Low-Value Goods (LVG) is a specific addition to the country’s import tax system, focusing on a particular category of imported goods. Malaysia introduced a new tax in 2023 to regulate Low-Value Goods (LVG). This tax affects both e-commerce businesses and consumers.
What are Low-Value Goods (LVG)?
Low-value goods (LVG) in Malaysia are goods that cost RM500 or less and are imported by land, sea, or air. The RM500 refers to the item’s price, excluding shipping, insurance, taxes, or duties. For example, if you buy something for RM490 and pay RM20 for shipping, it’s considered LVG for Sales Tax.
Malaysian LVG Tax Regulations
The Malaysian government has implemented comprehensive LVG tax regulations to streamline the taxation process for low-value imports. The critical aspects of these regulations include:
A. Threshold Value
The LVG tax applies to goods with a customs value not exceeding RM500. This threshold aims to capture a substantial portion of low-value imports while exempting items of minimal significance.
B. Rate of Tax
Malaysia’s tax regulations regarding the Rate of Sales Tax on Luxury Valuable Goods (LVG) are as follows:
- Tax Rate: The tax rate for LVG is a flat 10%. It will go into effect on January 1, 2024.
- Excluded Charges: The sales value of LVG does not include certain charges, such as transportation and insurance costs for importing the goods and any other taxes or duties associated with the sale.
- Registration Requirement: Sellers need to be aware of registration rules. If the total sales value of LVG imported into Malaysia in 12 months exceeds RM500,000, registration is mandatory.
- Total Sales Value Calculation: You can calculate the total sales value using two methods – the Historical Method (looking at the past 12 months) or the Future Method (considering the upcoming 12 months).
C. Registration
To register for taxation in Malaysia, please complete the LVG-01 form through the MyLVG portal. To get started, follow these steps:
- First Time Registration
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- Visit the Official LVG Tax Portal: Go to the official website at https://lvg.customs.gov.my/.
- Initiate Your Application: On the website’s homepage, click on the “Applicant Registration” button to start the registration process.
- Complete the Registration Form: Fill out the form with accurate information. You’ll need to provide details like your business registration number, company name, address, trade name (if different), and more.
- Submit Your Application: Review your entries for accuracy, then click “Submit” to send your application. You’ll receive a confirmation email.
- Logging in as a Registered User
- Visit the LVG Tax Portal: Go to https://lvg.customs.gov.my/.
- Login with Credentials: Use the username and password provided in the confirmation email to log in. Click “Login.”
- Change Your Password: For security, you’ll be asked to change your password. Enter the new password and click “Update.”
- Re-Login: Log in again with the updated credentials.
- Access the Dashboard: After logging in, you’ll see your dashboard. This is where you can track the progress of your application.
- Add Authorised Personnel: To continue the registration, click the “+” button to provide information about individuals authorized by your company, such as directors or owners.
- Attach Supporting Documents: Upload the necessary supporting documents to support your application.
- Confirmation of Record Update: After attaching the documents, you’ll receive a confirmation message indicating that your LVG Tax registration is in progress. Your application status will change to “Submitted.”
D. Payment and Submission
To ensure the seamless payment and submission of Sales Tax on LVG, it is imperative to follow these guidelines:
- Submission Deadline: The payment and submission of Sales Tax on LVG should be made using the LVG-02 return via the MyLVG portal. It is crucial to adhere to the deadline by the last day of the month following the end of the taxable period.
- Currency Standardization: Record all amounts in Ringgit Malaysia (MYR) to keep things clear and consistent.
- Currency Conversion: If you charge customers in a different currency, convert the sales tax to MYR. You can do this in two ways:
- Daily Conversion: Use the daily conversion rate.
- Periodic Conversion: Choose either the rate at the end of each taxable period or the rate when you submit the LVG-02 form. Stick to your chosen method.
- Payment Methods: Pay your sales tax through either:
- Financial Process Exchange (FPX): Quick and easy, suitable for everyone. You’ll need a Malaysian bank account if you’re in or outside Malaysia.
- Telegraphic Transfer (TT): If you’re a registered seller outside Malaysia, use TT for secure international payments.
E. Penalty
Malaysia’s late payment penalty for the LVG tax is designed to encourage on-time payments while being fair and responsible with finances. Here’s how it works:
- First 30 days: 10% penalty for minor delays.
- Days 31-60: 15% penalty as a reminder.
- Days 61-90: Still 15% penalty.
- After 90 days: Max 40% penalty to encourage prompt payment and compliance.
Goods that Are Subject to Malaysian LVG
In Malaysia, all goods subject to taxation, whether produced locally or imported from abroad, must pay Sales Tax. However, an exception exists for Low-Value Goods (LVG) imported via air courier from overseas. These LVGs are not subject to Sales Tax due to a de minimis facility, which allows small tax amounts to be waived for efficiency.
This exemption has disadvantaged local manufacturers since their LVG products are still subjected to Sales Tax. This policy aligns with the practices of other countries like Australia, New Zealand, Singapore, and more, which have already implemented Goods and Services Tax (GST) or Value Added Tax (VAT) on imported LVG.
How Luwjistik Helps
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