Sales tax to be imposed on imported products bought online with passing of Bill

KUALA LUMPUR: Malaysians will soon have to pay a sales tax – possibly of about 10% – on all imported low-value goods (LVG) that they purchase online.

This comes after proposed amendments to the Sales Tax Act 2018 to tax LVG sales through the Sales Tax (Amendment) Bill 2022.

The Bill was tabled by Deputy Finance Minister II Yamani Hafez Musa for its first reading and is expected to be passed by Dewan Rakyat this current meeting which ends on Aug 4.

Under the Bill, a new Section 11A will be created which will define LVG as "any prescribed goods or class of goods outside Malaysia which are sold and brought into Malaysia".

The new law will cover both sellers, both in or outside Malaysia, who sell LVG on the "online marketplace or operate an online marketplace" for the sale and purchase of LVG.

LVG sellers will have to register with the Finance Ministry.

Sellers will also have to display their particulars on the packages of their LVG under Section 11D.

The determination of LVG will be done by the Finance Minister based on three main criteria under Section 8.

These criteria are the goods or class of goods, the price of the goods and the manner in which the goods are brought into the country.

The sale value of LVG on which tax becomes payable shall be the price of the LVG not including any other taxes, fees or other charges imposed on the LVG.

The date of the commencement of the new LVG tax will be determined by the Finance Minister.

Last year, when tabling the Budget, Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said the LVG would be taxed.

The aim of the tax is to provide a level playing field for locally manufactured goods.

The LVG will ensure equal tax treatment for locally manufactured and imported goods.

Local manufacturers are currently taxed a 5% or 10% sales tax.

The new LVG tax is targeted for implementation this coming Jan 1 and is expected to impose a flat rate of 10% to both resident and foreign sellers offering such products.

A mechanism will be put in place to allow registered sellers to collect the tax when customers make their purchases online.