THE Ministry of Finance (MoF) has outlined the mechanisms and collections of Sales and Service Tax (SST) on cross-border online transactions, alongside measures to protect domestic businesses from unfair competition by foreign e-commerce operators.
The announcement followed a parliamentary query from Tan Hong Pin (Bakri) regarding taxation and exemptions for goods purchased from international sellers.
Finance Minister II Datuk Seri Amir Hamzah Azizan told the Dewan Rakyat today that the introduction of the Low Value Goods (LVG) Sales Tax and Service Tax on Overseas Digital Services (SToDS) forms a key part of the government’s strategy to strengthen tax compliance in a rapidly evolving digital economy.
“These mechanisms address revenue leakages that previously occurred when many digital and cross-border transactions were not subject to domestic taxation,” he said.
The LVG tax, which applies to lower-value imported goods bought online, ensures that all items, whether produced locally or imported, are subject to comparable taxation, creating a level playing field for local businesses.
Prior to its enforcement, goods valued under RM500 could enter Malaysia untaxed, while local sellers were obliged to pay standard taxes and operational costs, distorting competition.
Amir explained: “SToDS extends to all foreign digital service providers offering services to Malaysian consumers, including international platforms such as Netflix, Apple, Microsoft, and Google.
“Providers are required to register with the Royal Malaysian Customs Department and remit service tax, ensuring that foreign operators bear equivalent tax responsibilities to local firms.
“This ensures a fair market environment within the digital ecosystem.”
Revenue from digital transactions under LVG and SToDS reached RM802 million in 2021, RM999 million in 2022, RM1.15 billion in 2023, and RM2.01 billion in 2024, Amir said, adding, figures for 2025 are still being compiled.
No exemptions are granted for goods imported via foreign platforms, except for items specifically listed under the Sales Tax (Goods Exempted) Order 2025.
Beyond taxation, the government has rolled out support measures for local enterprises, particularly SMEs and microbusinesses, including lower corporate tax rates, incentives for automation and digitalisation, employee training deductions, and digitalisation grants.
Agencies such as SME Corp, MDEC, and MATRADE provide financial aid, technical assistance, and logistical support to help domestic businesses adapt to the digital economy.
“These measures guarantee that local traders compete fairly based on quality, value, and service, rather than relying solely on price advantages derived from untaxed imports,” he said, emphasising the government’s commitment to protecting and empowering Malaysia’s domestic commerce amid expanding international e-commerce activity. - November 25, 2025
