1. Rates of duties
Import duties are levied on goods that are subject to import duties and imported into the country. Import duties are generally levied on an ad valorem basis but may also be imposed on a specific basis. The ad valorem rates of import duties defined in terms of a fixed percentage of value ranging from 0% to 60%. Raw materials, machinery, essential foodstuffs and pharmaceutical products are generally non-dutiable or subject to duties at lower rates.
2. Tariff rate quota
Effective 1 April 2008, Malaysia implemented tariff rate quota (TRQ) on selected agricultural products, such as chicken, milk and cream, hen eggs, cabbages. Under TRQ, the tariff charged depends on the volume of imports. Imports within quota (volume) attract duties at a lower tariff rate while a higher tariff rate applies on goods in excess of the quota volume “out-quota tariff rate”. The quota applicable is determined by the relevant agency, e.g. Department of Veterinary Services.
3. Value of goods
The value of goods for the purpose of computing import duties is determined largely in accordance with the World Trade Organisation principles of customs valuation.
There is a range of duty exemptions on specific goods that prescribed persons are eligible to claim, subject to prescribed conditions under an Order made by the Minister. In addition, manufacturers are eligible to apply for merit-based duty exemptions on:
Approval is subject to Confirmation of “Local Non-Availability” and “Directly Used in Manufacturing” rules.
Manufacturers are required to apply to the relevant authorities for exemption. For example, Malaysian Investment Development Authority (MIDA) and Royal Malaysian Customs Department (RMCD).
5. Prohibition of imports
Import restrictions are imposed on a range of products for protection of local industries or for reasons of security and public safety. An import licence has to be obtained for the importation of prohibited goods.
Categories of goods requiring an import licence / permit from relevant authorities into Malaysia include, but are not limited to:
6. Prohibition of exports
Export restrictions are seldom imposed except on a limited range of products for reasons of security and public safety. An export licence has to be obtained for the exportation of prohibited goods.
Categories of goods requiring an export licence include, but are not limited to:
Import and export licence applications may be submitted electronically via DagangNet (e-Permit) or manually to the relevant licence / permit processing authority.
Export duties are generally imposed on the country’s main commodities such as crude petroleum and palm oil for revenue purposes.
1. Basis of taxation
Excise duties are imposed on a selected range of goods manufactured in Malaysia or imported into Malaysia. Goods which are subject to excise duty include beer / stout, cider and perry, rice wine, mead, indentured ethyl alcohol, brandy, whisky, rum and tafia, gin, cigarettes containing tobacco, motor vehicles, motorcycles, playing cards and mah-jong tiles.
2. Rates of duties
The rates of excise duties vary from a composite rate of 10 cents per litre and 15% for certain types of spirituous beverages, to as much as 105% for motorcars (depending on engine capacity).
In addition, it is proposed that from 1 April 2019 that an excise duty rate of RM0.40 per litre be charged on specified sugar-sweetened beverages.
3. Excise licensing
Unless exempted from licensing, a manufacturer of tobacco, intoxicating liquor or goods subject to excise duties must have a licence to manufacture such goods.
A warehouse licence is required for storage of goods subject to excise duty.
However, a licence to manufacture tobacco, intoxicating liquor or goods subject to excise duty also permits the holder to store such goods.
4. Payment of duty
As a general rule, duty is payable at the time the goods leave the place of manufacture. However, excise duty on a predefined list of motor vehicles for transport of persons is not payable until the vehicles are registered with the Road Transport Department, provided that a security is provided (up to maximum of 4 years from the date of removal from the place of manufacture).
No excise duty is payable on dutiable goods that are exported.
Manufacturers who export 80% or more of their finished products can apply for LMW status. Raw materials, components and machinery used in the manufacturing process are generally exempted from import duties and sales tax.
With effect from 1 September 2018, GST has been abolished and replaced by the Sales Tax and Services Tax.
A free zone is deemed to be a place outside Malaysia for customs purposes. Subject to certain exclusions, goods and services can be brought into, produced or provided in a free zone without payment of customs duty or excise duty.
Free Zone is an area that is considered outside Malaysia as provided under Section 2 of the Customs Act 1967, Section 2 of the Excise Act 1976. There are two types of Free Zones in Malaysia: (a) Free Industrial Zone (FIZ) and (b) Free Commercial Zone (FCZ). Manufacturing activities are allowed to be conducted in FIZ while trade activities are allowed to be conducted in FCZ.
Malaysia has concluded several regional and bilateral free trade agreements and several more are still under negotiation. One of the key features of free trade agreements is the preferential tariff treatment accorded to member countries. Currently, the following free trade agreements are in force:
The preferential tariff treatment and the rules of origin may vary from one free trade agreement to another.
General enquiries, PwC Malaysia
Tel: +60 (3) 2173 1188