Financial Planning

The 10% Sales Tax Kicks In From Jan 1. Here’s How You Can Prepare for It

Updated December 29, 2023 ______________________________________________________________________________________________________________________________ Updated December 29, 2023 ______________________________________________________________________________________________________________________________ Updated December 29, 2023 ______________________________________________________________________________________________________________________________ Updated December 29, 2023 ______________________________________________________________________________________________________________________________ If you’re a frequent online shopper, then be prepared that from January 1, 2024, you will have to pay an additional 10% sales tax on all imported goods bought online that are under RM500. This also means that items purchased before then will be exempted from this tax. The tax is imposed on low-value goods (LVG) which are sold online and delivered to customers in Malaysia. It affects all imported goods such as clothes, food and household appliances, with the only exception to the rule being alcohol and cigarettes as these products fall under a different tax scheme. Also, the tax only applies to the actual price of the items and does not include additional costs such as delivery, shipping charges and insurance. If you’re a frequent online shopper, then be prepared that from January 1, 2024, you will have to pay an additional 10% sales tax on all imported goods bought online that are under RM500. This also means that items purchased before then will be exempted from this tax. The tax is imposed on low-value goods (LVG) which are sold online and delivered to customers in Malaysia. It affects all imported goods such as clothes, food and household appliances, with the only exception to the rule being alcohol and cigarettes as these products fall under a different tax scheme. Also, the tax only applies to the actual price of the items and does not include additional costs such as delivery, shipping charges and insurance. If you’re a frequent online shopper, then be prepared that from January 1, 2024, you will have to pay an additional 10% sales tax on all imported goods bought online that are under RM500. This also means that items purchased before then will be exempted from this tax. The tax is imposed on low-value goods (LVG) which are sold online and delivered to customers in Malaysia. It affects all imported goods such as clothes, food and household appliances, with the only exception to the rule being alcohol and cigarettes as these products fall under a different tax scheme. Also, the tax only applies to the actual price of the items and does not include additional costs such as delivery, shipping charges and insurance. If you’re a frequent online shopper, then be prepared that from January 1, 2024, you will have to pay an additional 10% sales tax on all imported goods bought online that are under RM500. This also means that items purchased before then will be exempted from this tax. The tax is imposed on low-value goods (LVG) which are sold online and delivered to customers in Malaysia. It affects all imported goods such as clothes, food and household appliances, with the only exception to the rule being alcohol and cigarettes as these products fall under a different tax scheme. Also, the tax only applies to the actual price of the items and does not include additional costs such as delivery, shipping charges and insurance. Currently, imported goods that cost less than RM500 per consignment are exempted from sales tax when they are brought in using air courier services. Come January, the government will be removing this exemption. According to former Finance Minister, Tengku Datuk Seri Zafrul Tengku Abdul Aziz, the introduction of the sales tax on LVGs was to level the playing field between local manufacturers and online sellers. To elaborate, local manufacturers are currently charged a 5% or 10% sales tax. This puts them at a disadvantage as the tax, which is passed on to the buyer, makes goods more expensive. Hence, buyers looking for cheaper alternatives may turn to overseas sellers. Currently, imported goods that cost less than RM500 per consignment are exempted from sales tax when they are brought in using air courier services. Come January, the government will be removing this exemption. According to former Finance Minister, Tengku Datuk Seri Zafrul Tengku Abdul Aziz, the introduction of the sales tax on LVGs was to level the playing field between local manufacturers and online sellers. To elaborate, local manufacturers are currently charged a 5% or 10% sales tax. This puts them at a disadvantage as the tax, which is passed on to the buyer, makes goods more expensive. Hence, buyers looking for cheaper alternatives may turn to overseas sellers. Currently, imported goods that cost less than RM500 per consignment are exempted from sales tax when they are brought in using air courier services. Come January, the government will be removing this exemption. According to former Finance Minister, Tengku Datuk Seri Zafrul Tengku Abdul Aziz, the introduction of the sales tax on LVGs was to level the playing field between local manufacturers and online sellers. To elaborate, local manufacturers are currently charged a 5% or 10% sales tax. This puts them at a disadvantage as the tax, which is passed on to the buyer, makes goods more expensive. Hence, buyers looking for cheaper alternatives may turn to overseas sellers. Currently, imported goods that cost less than RM500 per consignment are exempted from sales tax when they are brought in using air courier services. Come January, the government will be removing this exemption. According to former Finance Minister, Tengku Datuk Seri Zafrul Tengku Abdul Aziz, the introduction of the sales tax on LVGs was to level the playing field between local manufacturers and online sellers. To elaborate, local manufacturers are currently charged a 5% or 10% sales tax. This puts them at a disadvantage as the tax, which is passed on to the buyer, makes goods more expensive. Hence, buyers looking for cheaper alternatives may turn to overseas sellers. How will this affect you? If you are someone who does a lot of your shopping online, this new tax will affect your overall budget. For instance, if you purchase something that cost RM490 and has a RM10 delivery charge, you will no longer be paying RM500, but RM549. That’s RM49 more for the same item. Of course, if you purchase multiple items, the tax will be higher.   Calculations: RM490 (cost of item) + RM49 (sales tax) + RM10 (delivery charges) = RM549 You might feel like ‘maximising‘ your savings by rushing to buy whatever you need or want before the new tax kicks in. But while this will save you money temporarily, you will eventually make online purchases after the sales tax is implemented. How will this affect you? If you are someone who does a lot of your shopping online, this new tax will affect your overall budget. For instance, if you purchase something that cost RM490 and has a RM10 delivery charge, you will no longer be paying RM500, but RM549. That’s RM49 more for the same item. Of course, if you purchase multiple items, the tax will be higher.   Calculations: RM490 (cost of item) + RM49 (sales tax) + RM10 (delivery charges) = RM549 You might feel like ‘maximising‘ your savings by rushing to buy whatever you need or want before the new tax kicks in. But while this will save you money temporarily, you will eventually make online purchases after the sales tax is implemented. How will this affect you? If you are someone who does a lot of your shopping online, this new tax will affect your overall budget. For instance, if you purchase something that cost RM490 and has a RM10 delivery charge, you will no longer be paying RM500, but RM549. That’s RM49 more for the same item. Of course, if you purchase multiple items, the tax will be higher.   Calculations: RM490 (cost of item) + RM49 (sales tax) + RM10 (delivery charges) = RM549 You might feel like ‘maximising‘ your savings by rushing to buy whatever you need or want before the new tax kicks in. But while this will save you money temporarily, you will eventually make online purchases after the sales tax is implemented. How will this affect you? If you are someone who does a lot of your shopping online, this new tax will affect your overall budget. For instance, if you purchase something that cost RM490 and has a RM10 delivery charge, you will no longer be paying RM500, but RM549. That’s RM49 more for the same item. Of course, if you purchase multiple items, the tax will be higher.   Calculations: RM490 (cost of item) + RM49 (sales tax) + RM10 (delivery charges) = RM549 You might feel like ‘maximising‘ your savings by rushing to buy whatever you need or want before the new tax kicks in. But while this will save you money temporarily, you will eventually make online purchases after the sales tax is implemented. How to prepare for it? A more sustainable approach is to review your budget. List down the recurring items you typically buy online then calculate how much you normally spend on these. Then, factor in the extra 10% to see how much more you would need to pay with the new tax. This will give you an idea on how much your new monthly budget will be moving forward. As is the case with increased spending, one way to stay afloat is to trim the fat and cut back on unnecessary expenses. Making lifestyle changes such as reducing the number of times we dine out or taking more public transport can help our budget tremendously in the long run. Buying during sales periods and shopping at second-hand outlets are other ways we can bring down spending. Also, as the tax only applies to imported goods bought online, you can avoid having to pay for it by buying locally-made products or shopping at physical stores. Above all, you should start making adjustments now, so you are not caught off-guard once the new sales tax kicks in. How to prepare for it? A more sustainable approach is to review your budget. List down the recurring items you typically buy online then calculate how much you normally spend on these. Then, factor in the extra 10% to see how much more you would need to pay with the new tax. This will give you an idea on how much your new monthly budget will be moving forward. As is the case with increased spending, one way to stay afloat is to trim the fat and cut back on unnecessary expenses. Making lifestyle changes such as reducing the number of times we dine out or taking more public transport can help our budget tremendously in the long run. Buying during sales periods and shopping at second-hand outlets are other ways we can bring down spending. Also, as the tax only applies to imported goods bought online, you can avoid having to pay for it by buying locally-made products or shopping at physical stores. Above all, you should start making adjustments now, so you are not caught off-guard once the new sales tax kicks in. How to prepare for it? A more sustainable approach is to review your budget. List down the recurring items you typically buy online then calculate how much you normally spend on these. Then, factor in the extra 10% to see how much more you would need to pay with the new tax. This will give you an idea on how much your new monthly budget will be moving forward. As is the case with increased spending, one way to stay afloat is to trim the fat and cut back on unnecessary expenses. Making lifestyle changes such as reducing the number of times we dine out or taking more public transport can help our budget tremendously in the long run. Buying during sales periods and shopping at second-hand outlets are other ways we can bring down spending. Also, as the tax only applies to imported goods bought online, you can avoid having to pay for it by buying locally-made products or shopping at physical stores. Above all, you should start making adjustments now, so you are not caught off-guard once the new sales tax kicks in. How to prepare for it? A more sustainable approach is to review your budget. List down the recurring items you typically buy online then calculate how much you normally spend on these. Then, factor in the extra 10% to see how much more you would need to pay with the new tax. This will give you an idea on how much your new monthly budget will be moving forward. As is the case with increased spending, one way to stay afloat is to trim the fat and cut back on unnecessary expenses. Making lifestyle changes such as reducing the number of times we dine out or taking more public transport can help our budget tremendously in the long run. Buying during sales periods and shopping at second-hand outlets are other ways we can bring down spending. Also, as the tax only applies to imported goods bought online, you can avoid having to pay for it by buying locally-made products or shopping at physical stores. Above all, you should start making adjustments now, so you are not caught off-guard once the new sales tax kicks in.