How to Calculate Duties and Taxes on Imports to Malaysia requires a clear understanding of the country's customs valuation method, product classification, and tax structure. Import duties and taxes are determined by the product's classification under the Harmonised System (HS) Code, its customs value, and its country of origin. The Royal Malaysian Customs Department (JKDM) sets the duty de minimis threshold at RM500 (CIF value) for import duty exemption. However, a special 10% Sales Tax on Low-Value Goods (LVG) applies to most online imports valued at RM500 or less, effectively removing the tax de minimis for these shipments.
Import duties in Malaysia are levied on an ad valorem basis, meaning the duty is calculated as a percentage of the customs value of the imported goods. The duty rate, which can range from 0% to 60%, is strictly determined by the product's classification under the Malaysian Customs Tariff, which is based on the 8-digit ASEAN Harmonised Tariff Nomenclature (AHTN) code. Correct classification is the first and most critical step in the calculation process, as it dictates the applicable Import Duty and Sales Tax rates. Importers must also consider the product's country of origin, as goods from countries with which Malaysia has a Free Trade Agreement (FTA) may qualify for preferential (lower or zero) duty rates, provided a valid Certificate of Origin is presented.
To accurately calculate import tax in Malaysia and estimate the total landed cost, importers must first establish the Customs Value. Malaysia uses the Cost, Insurance, and Freight (CIF) valuation basis for calculating Import Duty and standard Sales Tax. This means the dutiable value includes the cost of the goods, the cost of freight (transportation), and the cost of insurance to bring the goods to the port or place of importation in Malaysia. The formula for calculating the dutiable value is: Customs Value = Cost of Goods + International Freight + Insurance.
Once the Customs Value is determined, the calculation of duties and taxes follows a specific order. The main import taxes are Import Duty, Sales Tax (SST), and Excise Duty (for controlled goods like alcohol and tobacco). The Sales and Service Tax (SST) system is the primary consumption tax on imports, typically applied at a rate of 5% or 10% depending on the product's HS Code classification.
For shipments with a Customs Value above RM500, the Import Duty is calculated on the CIF value. The Sales Tax is then calculated on the total of the CIF value plus the Import Duty. This is how import duty is calculated in Malaysia for commercial shipments. For low-value shipments (RM500 or less), the special LVG rules apply, which must be factored into any import tax calculator Malaysia tool. The official customs declaration is processed through the uCustoms system.
Determine the Customs Value (Dutiable Value) using the CIF method: Cost of Goods + International Freight + Insurance.
Identify the correct 8-digit AHTN/HS Code for the goods to find the applicable Import Duty rate and Sales Tax rate.
Check the Duty De Minimis Threshold (RM500): If the CIF value is RM500 or less, the Import Duty is typically zero. If above RM500, calculate Import Duty: Customs Value x Import Duty Rate.
Calculate the Sales Tax: For goods above RM500, Sales Tax is calculated on the total of (Customs Value + Import Duty + Excise Duty, if applicable). For Low-Value Goods (LVG) RM500 or less, a flat 10% Sales Tax is generally collected by the seller at the point of sale, not by Customs upon import.
Scenario 1: High-Value Commercial Shipment (CIF Value RM1,000): Since the value is above the RM500 duty de minimis, both Import Duty and Sales Tax apply. The Import Duty is calculated on the RM1,000 CIF value. The Sales Tax (e.g., 10%) is then calculated on the RM1,000 plus the calculated Import Duty.
Scenario 2: Low-Value Online Purchase (Sales Value RM300): The shipment is subject to the Low-Value Goods (LVG) regime. The registered non-resident seller must charge and collect a 10% Sales Tax (RM30) at the point of sale. The shipment is exempt from Import Duty due to the RM500 duty de minimis threshold.
Misclassifying the goods with an incorrect 8-digit HS Code, which can lead to incorrect duty rates, penalties, and shipment delays.
Failing to include all costs (Freight and Insurance) when determining the Customs Value (CIF) for commercial shipments above RM500.
Ignoring the Sales Tax on Low-Value Goods (LVG) rule, which means a 10% tax is due on most online imports of RM500 or less, even though they are duty-free.
The most significant special rule is the Sales Tax on Low-Value Goods (LVG), which mandates a 10% Sales Tax on imported goods valued at RM500 or less, typically collected by the seller for online transactions. This is a key distinction from the Import Duty de minimis of RM500. Additionally, Malaysia offers extensive duty and tax exemptions for specific sectors, including raw materials and machinery for manufacturing, medical devices, and goods imported into designated Free Trade Zones (FTZs) or Licensed Manufacturing Warehouses (LMWs).
The de minimis threshold for Import Duty in Malaysia is RM500 (CIF value). Shipments valued at RM500 or below are generally exempt from Import Duty.
Malaysia replaced the Goods and Services Tax (GST) with the Sales and Service Tax (SST) in 2018. The Sales Tax component (5% or 10%) is the primary consumption tax levied on imported goods.
The dutiable value for calculating Import Duty and standard Sales Tax is based on the Cost, Insurance, and Freight (CIF) value. This includes the cost of the goods, the cost of international shipping, and the cost of insurance.
The LVG rule imposes a 10% Sales Tax on imported goods valued at RM500 or less, which is collected by the registered seller at the point of sale for online purchases. This tax applies even though the goods are exempt from Import Duty.