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.
Malaysia applies 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 (by 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 or Federal Agriculture Marketing Authority.
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:
raw materials and components used directly for the manufacture of goods for export and domestic markets.
dutiable machinery and equipment which are used directly in the manufacturing process.
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:
Certain food products (such as rice), medical devices, cooking appliances, pharmaceuticals and cosmetics
Certain electrical operated machinery
Motor vehicles for the transport of persons, goods or materials
Motor cycles, auto-cycles and cycles fitted with an auxiliary motor
Used televisions including video or visual display with TV tuner, used air conditioners, used personal computers and used mobile phones
Billets of iron or steel
Alloy steel and high carbon steel
Stranded wire, cables, cordage, ropes, plaited bands and the like of aluminium wire
Natural or synthetic rubber insulated or plastics insulated electric wire, cable, bars and strip and the like, whether or not fitted with connectors
Polymers of ethylene and propylene in primary forms
Rags, plastics, papers or filters contaminated with scheduled wastes
Chlorofluorocarbons (CFCs) and Hydrofluorocarbons (HFCs)
Tobacco products, alcoholic beverages
Radioactive / nuclear materials / prescribed substances
Imitation arms, toy gun, hand grenades, toy grenades
Arms and ammunition
Bullet proof vests, steel helmets and other articles of clothing intended as protection against attack or explosives
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:
Military clothing and equipment
Slags, dross, scaling and similar waste of iron and steel, zinc, nickel, copper, lead, aluminium
Tin slag and hardhead of tin
Zinc dust and sludge form
Import and export licence applications may be submitted electronically via DagangNet (e-Permit) or manually to the relevant licence / permit processing authority.
Effective 1 January 2021, the following control measures have been implemented:
Export duties are generally imposed on the country’s main commodities such as crude petroleum and palm oil for revenue purposes.
It is proposed that the export duty exemptions will be given to petroleum products produced under Late-Life Assets (LLA)* projects, for LLA Production Sharing Contracts awarded from 1 January 2020 to 31 December 2029.
*LLA is a project carried out in an oil field (brownfield) that has a remaining economic life span not exceeding 10 years starting from the year of contract award.
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 ranging from RM 1.10 per litre and 15% for certain types of spirituous beverages, to as much as 105% for motorcars (depending on engine capacity).
Specified sugar-sweetened beverages are subject to an excise duty rate of RM 0.40 per litre.
It is proposed to expand the imposition of excise duty of sugar-sweetened beverages to pre-mixed preparations of chocolate or cocoa-based, malt, coffee and tea such as 2-in-1 or 3-in-1 pre-mixed beverages. Excise duty will be levied on the pre-mixed preparation products categorized under tariff headings of 18.06, 19.01 and 21.01 at the rate of RM 0.47 per 100g that contain a total sugar content exceeding 33.3 grams per 100 grams. (w.e.f 1 April 2022)
Effective from 1 January 2021, a 10% ad-valorem excise duty has been imposed on all types of electronic and non-electronic smoking devices including vape. In addition, an excise duty at RM 0.40 per millilitre has been imposed on liquid or gel for vape or other smoking devices.
It is proposed to extend the imposition of excise duty to liquid or gel products containing nicotine which are used in electronic cigarettes and vape. Excise duty will be levied at RM1.20 per milliliter. Excise duty for nicotine-free liquids or gels used in electronic cigarettes and vape will also be increased from RM0.40 per milliliter to RM1.20 per milliliter. (w.e.f 1 January 2022)
It is also proposed that 100% import duty be exempted on imported Completely Knocked Down (CKD) Electric Vehicle (EV) components, and full excise duty and sales tax exemption on the locally manufactured EVs from 1 January 2022 to 31 December 2025. 100% import duty and excise duty exemption will also be given to imported CBU EVs from 1 January 2022 to 31 December 2023.
Unless exempted from licensing, a manufacturer of tobacco, intoxicating liquor, sweetened beverages 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, sweetened beverages or goods subject to excise duty also permits the holder to store such goods.
3. 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 the transport of persons is not payable until the vehicles are registered with the Road Transport Department, provided that a security is provided (up to a 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.
A free zone is deemed to be a place outside a principal customs area, and the provisions of Section 31 and Parts IVA, V, VI and VII of Customs (Amendment) Act 2019 shall apply to a free zone 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 any area in Malaysia which has been declared by the Minister under the Free Zones Act 1990. 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.
At present, approval for the value-added activities and additional activities to be carried out at the Free Industrial Zone (FIZ) and Licensed Manufacturing Warehouse (LMW) is subject to the condition that the sales value of the value-added and additional activities shall not exceed 10% of the company's annual sales value.
Effective from 7 November 2020, the Government has further increased the annual sales value threshold from 10% to 40%, with an aim to increase the competitiveness of the company as well as to fulfil the dynamics of global trade.
Currently, the AEO status is given to eligible manufacturers, operators and traders. An AEO is a person who is involved in import and export activities and, having been “certified” to be compliant in its customs related operations, is entitled to enjoy benefits provided in the AEO program.
Effective from 2 March 2021, the Government has broadened the AEO facility to include the approved logistics service providers and warehouse operators. In addition, the RMCD will integrate 43 permit issuing agencies and trading licenses into the AEO platform.
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.
Windfall Profit Levy is levied on Crude Palm Oil (CPO) producers. Currently, the rates of the levy and the CPO price threshold values are as follows:
i. For Peninsular Malaysia - 3% levy rate for the CPO threshold value of RM2,500 per metric tonne
ii. For Sabah and Sarawak - 1.5% levy rate for the CPO threshold value of RM3,000 per metric tonne
It is proposed that the rates of the levy and the CPO price threshold value for Sabah and Sarawak and Peninsular Malaysia to be adjusted as follows:
i. For Peninsular Malaysia - 3% levy rate for the CPO threshold value of RM3,000 per metric tonne
ii. For Sabah and Sarawak - 3% levy rate for the CPO threshold value of RM3,500 per metric tonne
The effective date of implementation will be 1 January 2022.
This publication is a quick reference guide outlining Malaysian tax information which is based on taxation laws and current practices. This booklet also incorporates in coloured italics the 2022 Malaysian Budget proposals based on the Budget 2022 announcement on 29 October 2021 and the Finance Bill 2021. These proposals will not become law until their enactment and may be amended in the course of their passage through Parliament.
This booklet is intended to provide a general guide to the subject matter and should not be regarded as a basis for ascertaining the liability to tax in specific circumstances. No responsibility for loss to any person acting or refraining from acting as a result of any material in this publication can be accepted by PricewaterhouseCoopers. Readers should not act on the basis of this publication without seeking professional advice.
PricewaterhouseCoopers Taxation Services Sdn Bhd (464731-M)
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P.O. Box 10192, 50706 Kuala Lumpur, Malaysia
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