The import sector in Malaysia is a major contributor to the country’s economy and plays a vital role in the growth of the nation. Malaysia has a well-developed import system, which is based on the principles of free trade and an open market. The import sector is regulated by the Ministry of International Trade and Industry (MITI) and the Customs Department.
Import duties are imposed on goods imported into the country to protect local industries and generate revenue for the government. These duties are charged based on the type of goods imported and the country of origin. The rates of import duties vary from 0% to 30%, depending on the nature of the goods. In addition, the state has also implemented several incentives and tariff exemptions for certain types of imports. Let’s take a look at taxes, rates, laws, and exemptions below.
Import taxes
In Malaysia, taxes are imposed on goods imported into the country. The types of taxes in the nation include customs duty, excise duty, sales tariff, and service tariff.
Custom duty
Customs duty is a tax imposed on imported goods based on their value, weight, or volume. In Malaysia, custom duties are typically imposed at a rate of 5-30%.
Excise duty
Excise duty is a tariff imposed on certain goods such as alcohol, tobacco, and petroleum products. Excise duty is imposed at a rate of 10-50% in the country.
Sales tax
Sales tax is a tariff imposed on the sale of bought goods and services. These taxes are imposed at the rate of 6%.
Services tax
Service tax is a tariff imposed on services such as banking, insurance, and telecommunications. Typically, services tax is also imposed at the rate of 6%.
Import tax rates
Malaysia imposes different tax rates for different items. The country sets a 30% tariff on new and used cars. The additional excise levied on foreign-made cars has made them unaffordable for consumers. These taxes cause a luxury vehicle to cost nearly three times the initial cost or 200% more.
Further, the country has applied tax on items such as electronics (29.4%), petroleum (9.3%), chemicals (9.5%), and machines (8.7%).
Exemptions on duties
The following items are exempt from import tax:
Schedule A items
Schedule A applies to specific industries or individuals, such as goods imported momentarily, ship replacement parts, minor price relief for personal possessions, and duty-free objects.
Schedule B items
Schedule B is given to makers of certain items such as price-controlled commodities, health supplements, fermented dairy products, and exempt items.
Schedule C items
Schedule C is normally used by registered producers or agents to obtain sales tax-free goods that they will utilize to construct taxable goods.
Food products like canola and olive oil, devices like tablets and smartphones, and products for basic grooming may also be excluded from Malaysian custom duty taxes or revenue-generating levies. Countries frequently cut additional fees for products that benefit the economy and satisfy the most fundamental needs of the nation.
Free trade agreements and import taxes
It is useful to be aware of the various nations that participate in trade liberalization with Malaysia before bringing the commodities. Seven unilateral free trade agreements (FTAs) and seven local FTAs, such as the ASEAN Free Trading Area, include Malaysia as a participant.
The seven bilateral FTAs Malaysia has signed include ones with Australia, Chile, India, Japan, New Zealand, Pakistan, and Turkey. Seven continental free trade agreements (FTAs) across the Asia Pacific include Malaysia. Australia, China, India, Japan, and Korea are among these nations.
These FTAs enable enterprises in Malaysia that want to import or export products with lower or no customs tariffs. In addition to giving these businesses a stronger competitive edge, these agreements help Malaysia’s economy remain stable.
