Malaysian Government to levy sales tax on low value goods sold online and brought into Malaysia
05 August 2022
The Dewan Rakyat (House of Representatives) of the Malaysian Parliament passed the Sales Tax (Amendment) Bill 2022 (‘the Bill
’) on 4 August 2022 to amend the Sales Tax Act 2018 (‘the Act
The Bill will now be presented to the Dewan Negara (Senate) and if passed, to the Yang di-Pertuan Agong for Royal Assent, whereafter the law will be gazetted and come into operation on a date to be appointed by the Minister of Finance (‘the Minister
’) by notification in the Gazette
The Bill seeks, among other amendments, to introduce new provisions and modify certain existing provisions of the Act to enable the Malaysian Government to levy sales tax on low value goods. This arises from one of the initiatives announced during the 2022 Malaysian Budget Speech whereby the Minister proposed to ensure fair treatment between taxable goods manufactured in Malaysia and imported goods by imposing sales tax on goods not exceeding RM500 from abroad that are sold online and delivered to consumers in Malaysia via air courier service.1
This note sets out some of the key amendments to introduce sales tax on low value goods.
Determination of low value goods
The expression ‘low value goods
’ is defined as any prescribed goods or class of goods outside Malaysia which are sold at a price not more than a prescribed amount and brought into Malaysia in the manner as prescribed. For the aforesaid purposes, the amendments empower the Minister to determine by order published in the Gazette
, what are ‘low value goods’ based on the following criteria: (a) the goods or class of goods; (b) the price of the goods; and (c) the manner in which the goods are brought into Malaysia.
Imposition and scope of sales tax
Section 8 of the Act, as modified for the purposes of low value goods, imposes a sales tax on low value goods sold by a taxable person, i.e. a registered seller or a seller (‘taxable person
’). For the purposes of the Act, a ‘seller’ is a person, whether in or outside Malaysia, who sells low value goods on an online marketplace or
operates an online marketplace for the sale and purchase of low value goods.
It is clear from the definitions of ‘low value goods’ and ‘seller’ that the low value goods that come within the ambit of the new sales tax are goods from outside Malaysia that are sold on an online marketplace and brought into Malaysia.
Rate of sales tax
The rate at which sales tax is to be imposed on low value goods is to be determined by the Minister by order published in the Gazette
under the modified section 10. It has been reported that the rate of sales tax will be 10% but this has not been confirmed by the Government.2
For the purposes of sales tax, the sale value of low value goods shall be the price of such goods excluding any tax, fee or other charges imposed on the low value goods.
Requirement for registration
A seller of low value goods is required to be registered under the Act (‘registered seller
’) if at the end of any month:
- the total sale value of all his low value goods in that month and the 11 months immediately preceding that month has exceeded the total sale value prescribed by the Minister (‘prescribed sale threshold’); or
- there are reasonable grounds for the seller to believe that the total sale value of all his low value goods in that month and the 11 months immediately succeeding that month will exceed the prescribed sale threshold,
whichever is earlier.
The application for registration is to be submitted to the Director General of Customs and Excise (‘Director General’) no later than the last day of the month following the month in which the seller is liable to be registered.
Notwithstanding the foregoing, a seller who sells low value goods before the effective date for the charging and levying of sales tax on low value goods shall, on the coming into operation of the amendments under the Bill, apply to the Director General to be a registered seller if there are reasonable grounds for believing that the total sale value of his low value goods in the month the said amendments come into force and the 11 months immediately succeeding that month will exceed the prescribed sale threshold.
Accountability for sales tax and returns
Sales tax chargeable on low value goods shall be due at the time when the low value goods are sold by the taxable person and such tax is to be collected by the registered seller from the purchaser of the low value goods.
The taxable period for sales tax for low value goods is three months. A taxable person is required to submit a prescribed return and account to the Director General for sales tax due for the taxable period no later than the last day of the month following the end of a taxable period.
Any sales tax due and payable, including any surcharge, penalty, fee or other money payable under the Act may be recovered as a civil debt due to the Government.
A registered seller who sells low value goods is required to issue an invoice or any document containing prescribed particulars in the national language or English language to the purchaser. The prescribed particulars may, in lieu of a paper form invoice or document, be recorded in a computer and transmitted or made available by the registered seller to the purchaser by electronic means, or be produced on any material other than paper and delivered to the purchaser.
A taxable person is required under section 24 of the Act to keep the records of all transactions which affect or may affect his liability to sales tax for seven years from the latest date to which the record relates.
No delivery until sales tax paid
Where it appears to an officer of sales tax that the sales tax on any low value goods: (a) has not been charged; (b) has been charged at a rate lower than the prescribed rate; or (c) has not been paid, no person shall be entitled to obtain delivery of such goods until the amount of sales tax has been paid in full.
Evasion of sales tax
A person who, with intent to evade or to assist any other person to evade sales tax on low value goods commits an offence. Upon conviction, the person shall be liable:
- for the first offence, to a fine of not less than 10 times the amount of the sales tax or RM50,000, whichever is the higher amount, and of not more than 20 times the amount of the sales tax or RM500,000, whichever is the higher amount, or to imprisonment for a term not exceeding five years or to both; and
- for a second or any subsequent offence, to a fine of not less than 20 times the amount of the sales tax or RM100,000, whichever is the higher amount, and of not more than 40 times the amount of the sales tax or RM1 million, whichever is the higher amount, or to imprisonment for a term not exceeding seven years or to both.
Further, a person who, with intent to evade or to assist any other person to evade sales tax in any manner set out in section 86(1) of the Act, e.g. making any false statement in a return or maintaining false accounts, invoices or records, commits an offence. Upon conviction, the person shall be liable:
- for the first offence, to a fine of not less than 10 times and not more than 20 times the amount of the sales tax or to imprisonment for a term not exceeding five years or to both; and
- for a second or subsequent offence, to a fine of not less than 20 times and not more than 40 times the amount of the sales tax or to imprisonment for a term not exceeding seven years or to both.
If the amount of sales tax cannot be ascertained, the person will be liable to a fine of not less than RM50,000 and not more than RM500,000 or to imprisonment for a term not exceeding seven years or to both.
Submission of audit certificate
The Director General may require a registered seller to submit annually an audit certificate, signed by a public accountant not in the employment of the registered seller, in relation to the records required to be kept under section 24 of the Act in respect of the low value goods sold by the registered seller.
The provisions relating to low value goods have extraterritorial effect and apply within and outside Malaysia, to any seller or registered seller, regardless of his nationality or citizenship.
Exemption from registration
The Minister may by order published in the Gazette
, exempt any class of persons from registration as a seller of low value goods under the Act subject to such conditions as the Minister deems fit.
The framework for the imposition of sales tax on low value goods substantially follows the existing framework for the imposition of sales tax on taxable goods under the Act. Key details that remain to be announced by subsidiary legislation include the goods that will be deemed to be low value goods, the rate of sales tax to be imposed on such goods and whether goods that are identical to goods presently exempted from sales tax will be excluded from the prescription of low value goods.
The Covid-19 pandemic has resulted in an exponential growth in the popularity of e-commerce as a form of retail therapy among both tech-savvy and less tech-savvy Malaysians. The introduction of sales tax for online sales of low value goods will widen the tax base for the Malaysian Government, but will at the same time further reduce the purchasing power of consumers who are already beleaguered by rising costs due to higher inflation and the weakening domestic currency.
Alert by Kok Chee Kheong (Partner) and Vanessa Ho (Associate) of the Corporate Practice of Skrine
This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact email@example.com.
See paragraph 247 and Appendix 37 of the 2022 Malaysian Budget Speech. According to Appendix 37, the exemption under Item 24, Schedule A of the Sales Tax (Persons Exempted From Payment of Tax) Order 2018 [P.U.(A) 210/2018], which exempts goods with a total value not exceeding RM500 per consignment imported into Malaysia using air courier service, will be revoked.
2 Online shopping tax soon, The Star
, 2 August 2022.