Tax Update: Sales Tax on Low Value Goods (LVG)

Recently, the Malaysian government has introduced a unique sales tax on Low Value Goods (LVG) at a rate of 10% starting 1 April 2023. It has been postponed from 1 Jan 2023 to 1 April 2023.
LVG are imported goods sold through e-commerce that have a sale value of less than RM500 per unit. Any business that has made RM500k supply of LVG over the past 12 months or are expecting to exceed that threshold in the following 12 months must register with MyLVG within 1 month of exceeding the RM500k threshold.
That may have been a lot of information, so in this blog, we will break down the background of this legislative change, along with its implications on us consumers and the businesses that sell us those goods (the registered seller).

Background
For those who are unfamiliar with how sales tax operates, let’s do a quick overview:

A sales tax is a consumption tax that is levied when manufacturers sell their goods. Imported goods get taxed when they enter Malaysia. The general tax rate is 10%.
There are exceptions under specific provisions that allow the importer to be sales tax exempt but this has been reviewed and amended now.

Consumers
Let’s discuss the effects this legislation will have on us as consumers. The 1st most immediate outcome is that the price of goods will hike by 10%, which is a lot for most folks. We could mitigate the effects of the price hike by buying more local goods instead of relying on imported ones.

Next, let’s look at the implication for businesses that import LVG. Online businesses that sell imported goods will have to charge the 10% rate on all their imported goods’ sales now, assuming they become registered.

For a seller to become registered, you must 1st check the value of your transactions for the current month & the previous 11 months. If they exceeded RM500k, then the seller must become registered within 1 month of exceeding the threshold. If not, you should do a forecast and see if the current month & the future 11 months will exceed RM500k. If it does, then you also must register within 1 month. Registered sellers will have to submit LVG-02 form every 3 months.

Now, most of you are probably not running your own online platform but instead using an online marketplace to sell goods which may or may not be imported. Do be aware that this does not change your potential liability to the tax.