The Comprehensive Guide to Malaysia’s Import & Export Taxes (2026 Edition)

Introduction: The Digital Trade Maturity

For online merchants, 2026 is a milestone year as Malaysia’s “Digital First” tax strategy reaches full maturity. The government has transitioned from traditional border controls toward real-time digital enforcement. With the 10% Low-Value Goods (LVG) Tax now integrated into global platforms and the Service Tax on Digital Services (SToDS) at 8%, cross-border selling is no longer just about logistics. Today, success is driven by data compliance and smooth payment experiences.

Key Takeaways

• 10% LVG Tax: A flat tax on imported physical goods under RM500 sold via online portals. 
• 8% Digital Service Tax: The standard rate for imported software, streaming, and cloud services.
• 2026 E-Invoicing Grace Period: SMEs with revenue up to RM5 million began mandatory implementation on Jan 1, 2026, with a penalty-free “soft-landing” until Dec 31, 2026. 
• Carbon Tax 2026: New levies on iron, steel, and energy imports to support Malaysia’s green transition.
• Strategic Growth: Using tools like Razorpay Curlec to automate compliance and handle multi-currency checkouts.

What are Malaysia’s Custom, Excise, and Export Duties?

The Malaysian trade framework is built on three legal pillars: the Customs Act 1967, the Excise Act 1976, and the Sales Tax Act 2018.

• Customs Duty: Taxes levied on goods entering or leaving the country. Most e-commerce items like electronics or fashion often carry a 0% rate, but “luxury” or protected goods can exceed 30%.
• Excise Duty: Targeted at specific categories like motor vehicles, alcohol, and tobacco. In late 2025, excise on alcohol saw a 10% across-the-board hike.
• Sales Tax (SST): A single-stage tax (5% or 10%) applied at the point of import or manufacture.

Online Sales Tax: How Much Will Your Customers Pay?

Transparent pricing at checkout is critical for reducing cart abandonment. In 2026, the way these taxes are calculated depends on the value of the item.

The Compounding Tax Formula for Physical Goods

For items valued over RM500, taxes are calculated sequentially. This “compounding” effect means each tax is added to the value before the next one is applied:

1. Import Duty: (CIF Value) × Duty Rate
2. Sales Tax (SST): (CIF + Import Duty) × 10%
3. Total Landed Cost: The sum of CIF + Duty + SST.

The “Flat 10” Rule for Low-Value Goods (LVG)

Goods valued at RM500 or less (excluding tobacco and alcohol) are subject to a flat 10% LVG Sales Tax. If your business sells more than RM500,000 worth of these items annually to Malaysian customers, you must register for a Low-Value Goods Registration Number (LRN) and collect the tax at the point of sale.

2026 Regulatory Shifts: Carbon Tax & Digital Enforcement

2026 has introduced new layers of digital reporting that every merchant must understand.

Mandatory e-Invoicing for Cross-Border Merchants

The national e-invoicing rollout reached Phase 4 on January 1, 2026, for businesses with turnover between RM1 million and RM5 million.

• Self-Billed e-Invoices: When you pay a foreign supplier (e.g., for Google Ads or Shopify fees), you must issue a self-billed e-invoice to LHDN to claim that expense as a tax deduction.
• The 12-Month Grace Period: For most SMEs, LHDN has extended a soft-landing period through December 31, 2026. During this time, you can use consolidated monthly e-invoices while you refine your digital systems.

Strategic Exemptions: How to Lower Your Tax Bill

You can legally reduce your tax liability by leveraging Malaysia’s trade partnerships and industrial zones:

• Free Trade Agreements (FTAs): Use the RCEP or CPTPP to get 0% duty on goods originating from member countries.
• LMW & FIZ: Businesses in Licensed Manufacturing Warehouses or Free Industrial Zones can defer or exempt import duties on raw materials intended for export.

The Cross-Border Challenge: High Friction & Compliance Risks

Managing taxes is one thing; managing the payment friction is another.

1. Reporting Burden: Manually tracking LRN collections and SST-02 filings every quarter.
2. Data Gaps: Missing mandatory fields (like customer TIN or NRIC) needed for validated e-invoices.
3. Conversion Loss: Losing customers when they see unexpected tax additions at the final step.

Empowering Online Growth with Razorpay Curlec

Modern merchants require a payment gateway that acts as a compliance partner. Razorpay Curlec (curlec.com) is built for the 2026 Malaysian landscape.

• International Payments: Accept 100+ currencies through a seamless PayPal integration, allowing you to settle in MYR.
• e-Invoicing Ready: Our dashboard is designed to capture the mandatory data fields required for LHDN’s MyInvois system, simplifying your self-billing process.
• Higher Conversion: Support for local favorites (TNG, GrabPay, FPX) ensures that your checkout remains fast, even with tax calculations.

Conclusion

The 2026 tax landscape rewards merchants who automate their compliance. Whether you are charging the 10% LVG tax or issuing self-billed e-invoices for digital services, the key is to eliminate manual work. By partnering with Razorpay Curlec, you can scale your international business while staying firmly on the right side of Malaysia’s digital tax laws.

Frequently Asked Questions (FAQ)

1. Does my online business need to register for the 10% LVG Tax?

If your annual sales of imported goods under RM500 to Malaysian consumers exceed RM500,000, registration for an LRN is mandatory.

2. When does the Malaysia Carbon Tax start?

The Carbon Tax is active as of 2026, specifically targeting the iron, steel, and energy sectors.

3. Are e-invoices mandatory for international sales in 2026?

Yes, Malaysian exporters must issue e-invoices, and importers must issue self-billed e-invoices for foreign purchases, though a grace period exists through Dec 2026.

4. Is there a tax on software-as-a-service (SaaS) in 2026?

Most imported digital services, including SaaS, are subject to an 8% Service Tax.

5. How does Razorpay Curlec help with SST and e-invoicing?

Our platform collects the necessary tax metadata during checkout, providing you with the structured data required for monthly SST-02 and e-Invoicing filings.