Malaysia Import Tax and Duties

Everything You Need to Know 

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Understanding Malaysia’s Import Tax and Duties Structure

When importing goods into Malaysia, understanding the complexity of the tax system is crucial. Three main taxes are applied to imported goods: Import Duty, Sales Tax, and Excise Duty.

Import Duty

Import Duty, also known as Customs Duty, is a crucial tax applied to goods entering Malaysia from overseas. It regulates international trade, protects domestic industries, and generates revenue for the government. This tax is calculated based on either an ad valorem basis (percentage of goods’ value) or a specific basis (fixed sum per unit). Import duty rates range from 0% to 60% ad valorem and vary for specific goods, determined by the Harmonized Systems Code (HS Code) identifying the goods’ type.

Sales Tax

Sales Tax is the second key tax, implemented under the Sales and Service Tax (SST) system. It encompasses two categories: Sales Tax on Taxable Goods and Sales Tax on Low-Value Goods (LVG). The former applies to imported and domestically manufactured goods sold, used, or disposed of within Malaysia, with rates ranging from 5% to 10% or specific rates based on the HS code. The latter imposes a fixed 10% rate on online goods valued under RM500, delivered from overseas to Malaysia, effective from 1st January 2024.

Excise Duty

As the last of the three taxes, Excise Duty serves as a regulatory measure targeting specific products. Its rates vary depending on the HS code and goods’ attributes, ensuring proper control and regulation of certain goods entering the country.

Special Categories and Rates

Malaysia imposes special rates and categories for certain goods based on their nature and local production levels. For goods like alcohol, wine, poultry, and pork, specific duties are charged, resulting in considerably higher effective tariff rates. Additionally, duties for tariff lines with significant local production tend to be higher to protect domestic industries.

The Sales and Services Tax (SST) system also has special provisions. The SST is chargeable on the manufacture of taxable goods in Malaysia and their importation at rates of 5% or 10%, or specific rates depending on the product category. Certain goods listed in the Sales Tax (Goods Exempted from Sales Tax) Order 2022 and individuals/goods outlined in the Sales Tax (Persons Exempted from Payment of Tax) Order 2018 are eligible for exemptions.

Furthermore, the Excise Duties (Exemption) Order 2013 outlines exemptions from Excise Duty for eligible individuals and goods, providing relief and facilitating a more favorable import process.

Steps to Determine Your Import Duty

To determine the import duty on goods entering Malaysia, I will follow these steps:

1. Identify the Harmonized System (HS) Code: The HS code classifies the type of product and determines its corresponding import duty rate. I can find the HS code by searching online or contacting the Royal Malaysian Customs Department.
2. Calculate the CIF Value: This is the total cost of the goods, including the purchase price, insurance costs, and freight charges.
3. Determine the Import Duty Rate: Using the HS code, I can find the applicable ad valorem or specific import duty rate for the goods.
4. Calculate Import Duty: To calculate the import duty amount, I will multiply the CIF value by the import duty rate percentage.Import Duty = CIF Value x Import Duty Rate
5. Calculate Sales and Service Tax (SST): In addition to import duty, I need to calculate the SST, which is either 10% for most goods over RM500, 5% for essential goods, or specific rates for certain products.SST = CIF Value x SST Rate
6. Total Customs Duty: The total customs duty is the sum of the import duty and SST.Total Customs Duty = Import Duty + SST
7. Special Case for Low-Value Goods (LVG): For LVG exceeding RM500 imported from April 1, 2023, only SST at a flat 10% rate applies. For LVG with invoices issued before April 1, 2023, no SST is applicable regardless of the delivery date.

By following these steps, I can accurately determine the import duty and applicable taxes for goods imported into Malaysia.

Conclusion

Understanding Malaysia’s import tax and duties is essential for businesses aiming to navigate the complexities of the system. By identifying applicable taxes, calculating import duty, sales tax, and excise duty, businesses can ensure compliance and streamline import operations. Mastering the nuances of taxation in Malaysia is crucial for leveraging the market’s strategic location and growing opportunities.

While the process may seem daunting, leveraging the right tools and resources can simplify the journey. Consider exploring FreightAmigo, a comprehensive platform designed to streamline international shipping and customs clearance, making the import process more efficient and cost-effective for businesses of all sizes.

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