Low Value Goods Tax Implemented on 1 January 2024

The Royal Malaysian Customs Department has announced plans to introduce the Low Value Goods Tax (LVGT) on goods purchased overseas with a value below RM500. Initially scheduled for implementation on 1 April 2024, the initiative has been further postponed to 1 January 2024.

International Precedents: The concept of LVGT is not new globally. Singapore successfully implemented LVGT on 1 January 2023, targeting low value goods (LVG) valued at SGD400 or below imported to the country. Similarly, Australia took a proactive step by introducing LVGT on 1 July 2018 for LVG valued at AUD1,000 or less imported into the country.

We have prepare a detail guide of LVGT in Malaysia for your reference and preparation.

What is Low Value Goods
"Low Value Goods (LVG)" refers to all goods which are sold at a price not exceeding RM500 and are brought into Malaysia by land, sea or air excluding:

1. Cigarettes;
2. Tobacco products;
3. Intoxicating liquors;
4. Smoking pipes (including pipe bowl);
5. Electronic cigarettes and similar personal electric vaporizing devices; and
6. Preparation of a kind used for smoking through electronic cigarette and electric vaporizing device, in forms of liquid of gel, whether or not containing nicotine.

Sales tax on LVG shall be charged and levied at the rate of 10%.

De Minimis Rule
LVG are goods imported using air courier service (including postal service) through airports with Cost, Insurance and Freight (CIF) value of the goods does not exceed RM500 per consignment, are exempted from import duty and sales tax on imports. This facility is known as De Minimis.

Goods under De Minimis facility are eligible to get immediate customs clearance subject to condition stated under Item 94, Part I of the Schedule, Customs Duties (Exemption) Order 2017 and Item 24, Schedule A, Sales Tax (Persons Exempted From Payment of Tax) Order 2018.

Sales Tax Rate
The sales tax in charged on the sale value of LVG not including any tax, duty, fee or other charges such as transportation, insurance or other costs.

Sales tax on LVG will be charged based on the sale value per piece/unit after discount.

Liability to be Registered

Any seller with the total sale value of LVG brought into Malaysia by land, sea or air mode in 12 months exceeds RM500,000 is liable to be registered as registered seller (RS).

Seller consist of:

1. Local and Overseas seller
Sells LVG on an online platform directly to consumers (example: via own website).

2. Local and Overseas online marketplace operators
Regarded as the seller of the LVG if any of these conditions are met:
(a) authorized to charge the customer;
(b) authorized to deliver the LVG to the customer;
(c) sets the terms and conditons under which the transaction of sales is made;
(d) documentation issued to customer identifies the transaction of sales is made by the marketplace; or
(e) the marketplace and merchant contractually agree that the marketplace is responsible for sales tax on LVG obligations.

Duty to Keep Records
The records or books of accounts must be maintained in the national language (Bahasa Melayu) or English language for a period of seven (7) years from the latest date to which the record relates.

If the record is in an electronically readable form, the record should be kept in such manner and can be readily accessed and convertible into written form.

Accounting for Tax
The sales tax on LVG shall be due and payable at the time when the LVG are sold by RS.

Section 21 Sales Tax Act 2018 (LVG) required RS to issue an invoice or any document containing prescribed particulars to the consumer with regard to the tranctions.

The invoice or any document shall state the following particulars in the national language (Bahasa Melayu) or English language:

1. Serial number of invoice or document;
2. Date of invoice or document;
3. Name and address of the RS;
4. RS registration number (LVG registration number);
5. Sufficient description to identify the sale of LVG; and
6. The total amount payable excluding sales tax, the rate of the sales tax and total sales tax chargeable shown as a separate amount.

Credit Note and Debit Note
RS who sells LVG shall issue a credit note or debit note, if there is a deduction or addition to the amount of sales tax payable on LVG, after the sales tax return for the taxable period has been furnished to the Director General in the following situations:

1. Any changes on sales tax rate on LVG in force under section 10 of the Sales Tax Act 2018; or
2. FInancial adjustments made in the course of a business transaction.

A credit note or debit note must contain the following particulars:

1. The words "credit note' or "debit note" clearly stated;
2. The serial number;
3. The date of issuance;
4. The name, address and registration number of the RS;
5. The name and address of the person to whom the LVG is sold;
6. The reason for the issuance;
7. The description, quantity and amount of LVG for which the credit note or debit note is given;
8. The total amount excluding sales tax;
9. The rate and amount of sales tax; and
10. The number and date of the issuance of the original invoice.

Manner of Furnishing LVG-02 Return
RS shall account sales tax due and payable in LVG-02form and submit the return. The return shall be furnished not later than the last day of the month following the end of taxable period.

For the purpose of converting the value of LVG sold in foreign currency to RM, RS is allowed to use the prevailing acceptable exchange rate at the following time consistently:

1. Daily basis;
2. The end of the taxable period; or
3. The time of filing the LVG-02 return.

The LVG-02 return shall be furnished according to the taxable period whether or not there is any sales tax to be paid.

Payment of Sales Tax Due and Payable
RS is required to pay the amount of sales tax due and payable not later than the last day of the month following after the end of taxable period.

For the purposes of receiving returns and payments of sales tax or penalty payable through electronic banking, the ordinary hours shall be from 7.30AM to 11.30PM Malaysia standard time (UTC/GMT +8 hours) on any day of the week.

Penalty for Late Payment of Sales Tax
The penalty under subsection 26(8), Sales Tax Act 2018 (LVG) is imposed on part or all the amount of sales tax that remains unpaid after the last day the tax is due and payable. The penalty rate as follows:

1. 1 to 30 days from the first day after the payment deadline - 10%
2. 31 to 60 days from the first day after the payment deadline - Additional 15%
3. 61 to 90 days from the first day after the payment deadline - Additional 15%

Transitional Provision
If any LVG are purchased before the effective date for charging and levying sales tax, such goods shall not be subjected to sales tax even though the delivery of such goods is made after the effective date.

In accordance with Guideline for The Implementation of Low Value Goods Tax (LVG) issued by The Royal Malaysian Customs Department at 3 November 2023.

Please do not hesitate to contact us for more information:

Ten Jia Sheng
014-911 1880
jsten@jsc-corp.com