The Essential Guide To Malaysia’s 2023 Sales Tax On Low-Value Goods

From 1 April 2023, the Royal Malaysian Customs Department will implement a 10% Sales Tax on imports of low value goods (LVG).

It was proposed in the 2022 Malaysian Budget to level the playing field between local and overseas sellers and encourage locals to buy local products.

This guide will take you through how the sales tax extension impacts overseas logistics providers and how you can better prepare for it.

You will learn the following:

• What are Low-Value Goods?
• Which Businesses are Affected by the New LVG Sales Tax?
• What Happens When Appropriate Vendors Fail to Pay the Sales Tax?
• Recommendations for Overseas Vendors Affected by the LVG Sales Tax
• How Luwjistik Helps?

What are Low-Value Goods?

The Royal Malaysian Customs Department defines LVG as any goods from outside Malaysia sold in the online marketplace at a price of not exceeding RM500 and brought into Malaysia via air, sea or land modes. LVG refers to all goods, excluding:

• Cigarettes;
• Tobacco products;
• Smoking pipes (including pipe bowls);
• Electronic cigarettes and similar personal electronic vaporising devices;
• Preparations of a kind used for smoking through electronic cigarettes and electric vaporising devices, in forms of liquid or gel, not containing nicotine; and
• Intoxicating liquors.

Which Businesses are Affected by the New LVG Sales Tax?

Section 8 of the Act imposes a sales tax on LVG sold by a taxable person, i.e. a registered seller.

Here, a Registered Seller (RS) refers to any person in or out of Malaysia who sells LVG on an online marketplace or operates an online marketplace for the sale and purchase of LVG.

The online marketplace does not include the payment processor/payment gateway or internet service providers.

A seller may apply for registration using the LVG-01 form via MyLVG.
## Which overseas vendors must register for the sales tax?
An overseas seller must register for the sales tax if they meet the mandatory sales tax registration threshold.

Any seller with a total value of LVG brought into Malaysia in 12 months exceeding RM500,000 is liable to be registered as a Registered Seller (RS).

This means the vendor must register as an RS if the total sales value for LVG for the past 12 months exceeds RM500,000 or is expected to exceed RM500,000 in the next 12 months.

What Happens When Appropriate Vendors Fail to Pay the Sales Tax?

The late payment penalty is imposed on part or all of the amount of sales tax that remains unpaid after the last day the tax is due and payable. The [penalty](https://globaltaxnews.ey.com/news/2023-5152-malaysia-to-impose-sales-tax-on-imports-of-low-value-goods-from-1-april-2023#:~:text=The%20implementation%20date%20(i.e.%2C%20registration,starts%20on%201%20April%202023.&text=LVG%20applies%20to%20all%20goods,sea%20or%20air%2C%20into%20Malaysia.) is charged as follows:

• For the first 30-day period, the rate is 10%
• For the second 30-day period, the rate is an additional 15%
• For the third 30-day period, the rate is an additional 15%

After 90 days, a maximum penalty rate of 40% is imposed.

You can find more information regarding penalties for not paying the sales tax.

Recommendations for Overseas Vendors Affected by the LVG Sales Tax

Crowe published an insightful list of recommendations for overseas vendors that we are reproducing here.

• Assessment

  • As a seller, you should assess your registration liability based on the abovementioned threshold.

• Registration

  • If liable to be registered, you can apply for Sales Tax registration through the RMCD portal.

• Modification

  • After registration, you can make necessary changes to your website, accounting system, and documents to ensure compliance with the sales tax requirements.

• Filing and payment

  • On a quarterly basis, you must file the LVG-02 return and pay the collected sales tax to the RMCD. More information can be found under Section 7 of the Act.

How Luwjistik Helps?

Luwjistik offers several valuable tools and services for logistics companies to navigate through local rules and regulations across Southeast Asia successfully and easily. To learn more about how Luwjistik can benefit your shipping needs and explore the platform’s offerings, you can contact our representative at commercial@luwjistik.com or visit our website at luwjistik.com.