In the year 2024, there are several types of new taxes are being introduced to broaden the tax system in Malaysia. These include the imposition of sales tax on low-value goods (LVG), the introduction of capital gains tax (CGT), the proposed high-value goods tax (HVGT), and an increase in the service tax rate for certain taxable services. It is anticipated that the imposition of these additional
taxes would increase the country's tax revenue and promote economic growth. When the law comes into effect, companies should be aware of the nature of these new taxes to ensure compliance. Let’s explore this article and find below the summary of the most recent tax changes, along with the corresponding tax rates.
1. Low-value goods (LVG) tax
According to the
previous tax legislation, no sales tax is imposed on the import of LVG (priced below RM500) due to the “De minimis” facility, allowing online businesses to sell LVG products at potentially lower prices. In response to these tax treatment disparities between LVG sold by local businesses and online businesses, the government has reassessed its tax policies by introducing the LVG tax - registered sellers will be subject to a 10% sales tax on LVG that are sold online and brought into Malaysia by
land, sea or air, effective from 1 January 2024.
2. Capital gain tax (CGT)
Effective from 1 January 2024, company, limited liability partnership, trust body and co-operative society which receives gains or profits from the disposal of capital asset consisting of:
i. share of a
company incorporated in Malaysia not listed on the stock exchange; or
ii. share of a controlled company incorporated outside Malaysia which owns real property situated in Malaysia or shares of another controlled company or both, are subjected to capital gains tax under the Income Tax Act 1967.
In the case of the disposal of capital assets that are being acquired before 1 March 2024,
taxpayers may choose to pay CGT at either 10% of the chargeable income or 2% of the gross disposal price. Conversely, for assets acquired from 1 March 2024 onwards, a fixed rate of 10% on the chargeable income from the disposal of shares applies. Furthermore, the government has also proposed CGT exemptions for the disposal of shares in connection with internal restructuring, initial public offering (IPO), and venture capital companies. Additionally, it has been recently announced that unit
trusts will be exempt from tax on CGT.
3. Increase in the service tax rate
Starting from March 1, 2024, the service tax rate will be increased from the existing 6% to 8% for all prescribed taxable services, except for parking, food and beverages, telecommunication, and logistics services. Undoubtedly, this will indirectly have a significant impact on businesses at
various levels. Entrepreneurs may need to raise prices to transfer the additional service tax to consumers, shifting the burden onto them. Moreover, they must allocate extra resources to restructure selling prices, costs and profits in response to the new tax rate.
4. High-value goods tax (HVGT)
As announced in the Budget 2024, the
government intends to implement a high-value goods tax, which is expected to start in May 2024. The proposed rates will vary from 5% to 10% and will apply to specific items, including but not limited to jewellery, watches, luxury cars, yachts, etc., based on their threshold values. While the implementation date has not been specified, once enforced, it is expected to have impacts on businesses. For example, businesses in the jewellery sector may be concerned that this tax will affect sales,
potentially leading to a reduction in profits.
