On 29 October 2021, the Ministry of Finance (MOF) unveiled its Budget 2022. Please find highlighted the proposed amendments that relate to customs and international trade.
1. Special Voluntary Disclosure Program (SDVP)
Following the 2022 Pre-Budget Statement, MOF announced that the implementation of the SVDP will be introduced in phases, with penalty remissions on over/under declaration of customs duties and taxes.
- First phase: remission on penalties of 100%
- Second phase: remission on penalties of 50%
The effective date is yet to be determined. Details on application and conditions have not been published, but we have provided more details in the August-September edition of Trade Intelligence.
2. Imposition of sales tax on low value goods
The MOF has proposed for sales tax to be imposed on low value goods (LVG) that are sold online and imported using air courier services into Malaysia, from 1 January 2023. LVG refers to goods with a value less than RM500.
The Budget Speech further indicated that local and foreign sellers of such LVG to Malaysian customers are required to register and impose sales tax on the sale. This is to ensure equal tax treatment for locally manufactured and imported LVG.
Importers of LVG are currently exempted from sales tax payment on importation, provided the imported goods do not exceed RM500 per consignment; the goods are imported using air courier service through a prescribed international airport; and the imported goods are not cigarettes, tobacco or intoxicating liquor.
The imposition of sales tax on LVG will be implemented under a new provision of the Sales Tax Act 2018 while the exemption provided under Item 24, Schedule A, Sales Tax (Persons Exempted From Payment of Tax) Order 2018 will be revoked.
3. Extension for sales tax exemption on passenger motor vehicles
The sales tax exemption for passenger motor vehicles (including SUV and MPV) is proposed to be further extended for another six months to 30 June 2022. Currently, the sales tax exemption covers the period of 15 June 2020 to 31 December 2021, and applies to the following:
- 100% exemption in relation to the sale of locally assembled Completely Knocked Down (CKD) passenger motor vehicles; and
- 50% exemption in relation to imported passenger Completely Built Up (CBU) motor vehicles.
4. Import duty, excise duty and sales tax exemption on imported and locally manufactured EVs
With effect from 1 January 2022, it is proposed that full import duty, excise duty and sales tax exemption will be granted for locally manufactured and imported Electric Vehicles (EVs) (including SUV and MPV). The proposal is intended to support the development of the local EV industry and encourage domestic demand in line with the Low Carbon Mobility Blueprint (LCMB), EV Roadmap and National Automotive Policy (NAP) 2020.
The table below summarises the proposed exemptions.
|Coverage Period||Tax Incentive|
|1 January 2022 to 31 December 2025||100% excise duty and sales tax exemption on locally manufactured (CKD) EVs|
|1 January 2022 to 31 December 2025||100% import duty exemption on components for locally assembled EVs|
|1 January 2022 to 31 December 2023||100% import duty and excise duty exemption on imported (CBU) EVs|
Currently, imported CBU EVs are subject to import duty, excise duty and sales tax. For locally manufactured EVs, the CKD components are exempted from import duty, while the locally assembled vehicles (CKD) are given partial excise duty exemption and sales tax exemption.
5. Excise duty to pre-mixed preparations
It is proposed that the excise duty on sweetened beverages will be expanded to cover pre-mixed preparations of chocolate or cocoa-based, malt, coffee and tea. This would capture beverages such as 2-in-1 or 3-in-1 pre-mixed beverages. Excise duty will be levied based on the tariff heading and sugar content at the rate of RM0.47 per 100g as follows:
|Tariff heading||Product description||Sugar content threshold|
|18.06||Mixed chocolate or cocoa preparations||>33.3g/100g|
|19.01||Mixed malt preparations||>33.3g/100g|
|21.01||Pre-mixed coffee and mixed tea preparations||>33.3g/100g|
This amendment is proposed to take effect from 1 April 2022.
6. Excise duty on liquid or gel products used in electronic cigarettes and vape devices
Apart from the current imposition of excise duty on nicotine-free liquid or gels used in electronic cigarettes and vape devices, the Government also plans to impose excise duty on liquid or
gel products containing nicotine that are used for electronic cigarettes and vape devices, with effect from 1 January 2022.
The rate of excise duty will be as follows:
|Nicotine-free liquid or gels used in electronic cigarettes and vape devices||Increased from RM0.40 per milliliter to RM 1.20 per milliliter|
|Liquid or gel products containing nicotine that are used for electronic cigarettes and vape devices||Levied at RM1.20 per milliliter|
Amendments to customs offices and ports
On 11 October 2021, the MOF issued an amendment to the Customs Regulations 2019, with effect from 15 October 2021. The amendment pertains to the latest working hours of certain customs offices such as Desaru Coast Ferry Terminal in Johor (southern region of Peninsular Malaysia) and ICQS Lubok Antu in Sarawak (West Malaysia). In addition, there are also some changes to the customs ports and legal landing places.
With effect from 9 October 2021 to 8 October 2026, the cold-rolled coils of alloy and non-alloy steel with the thickness between 0.20 millimeters to 2.60 millimeters and width between 700 millimeters to 1,300 millimeters exported from China, Korea and Vietnam into Malaysia, are subject to the following anti-dumping duties.
|Tariff codes||Country of export||Anti-dumping duties|
|35.89% or 42.08%|
11.55% or 21.64%
7.42% or 33.70%
For more information please find the Trade Intelligence Asia Pacific published by PwC here.
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