Malaysia’s New LVG Tax Will Not Include Vaping Products

The Malaysian Small and Medium Enterprises Association (Samenta) welcomed the government's decision to impose a 10% tax on low-value goods (LVG) purchased from foreign market platforms today (December 18).

Association President Datuk William Ng described this tax as a competitive equalizer and believes it will promote the development of local businesses.

He said, "We were one of the early supporters of this balancing tax, and we thank the government for taking firm action to implement it, despite strong resistance from online markets."

"For years, our local retailers and online sellers, especially SMEs, have been competing unfairly with foreign sellers."

"While local retailers must pay taxes at various points in the supply chain, including when importing components or raw materials and finished products into Malaysia, we are undermined by foreign sellers and local distributors who mostly evade paying product taxes to the Malaysian government," he stated in a press release.

The 10% LVG tax will take effect from January 1, 2024, after the Anwar government indicated it would give businesses more time to prepare.

This tax was originally set to be implemented in April this year and applies to all goods purchased from abroad priced below 500 ringgit.

The Customs Department defines LVG as all goods—except cigarettes, tobacco products, alcoholic beverages, e-cigarettes, and preparations for smoking—that are priced at no more than 500 ringgit and brought into Malaysia by land, sea, or air.

This tax will also apply to local businesses selling LVG on online platforms or marketplaces with annual revenues exceeding 500,000 ringgit.

This means that sellers who previously did not need to register with customs must now do so.

Non-compliance may result in fines.

Samenta stated that online markets should help facilitate the taxation of local and foreign sellers who meet the revenue threshold and prevent businesses from passing on additional costs to local sellers.

Ng said, "Given the extensive regulatory conveniences, promotional support, and financial assistance these markets have received from various government agencies over the years, they have a social responsibility to help support Malaysian sellers and Malaysian-made products."

Samenta hopes this tax will encourage more people to purchase local products.

Ng added, "We encourage Malaysians to buy from local retailers and sellers—not only to support our economy but also to better protect ourselves and our families from fraud, fire, safety, and health risks."