Overseas Digital Services Tax & LVGT: 2026 Status

Introduction

Two indirect tax regimes administered by the Royal Malaysian Customs Department (JKDM/Customs) are often confused:

(A) Service Tax on digital services by Foreign Registered Persons (FRP) — "Service Tax on Digital Services (SToDS)";
(B) Sales Tax on Low Value Goods (LVG/LVGT).

Both are separate regimes. This article explains the official 2026 status, rates, scope, registration thresholds, and the official MOF/Customs sources for each.

(A) SToDS — digital services from foreign providers

Service tax is imposed on any digital service provided by a Foreign Registered Person (FRP) to any consumer in Malaysia. FRP = a foreign service provider registered under s.56C of the Service Tax Act 2018 (STA).

Who is a "consumer"? — a person who meets two of three criteria:

Makes payment using the credit/debit facilities of a financial institution/ company in Malaysia;
Acquires digital services using an IP address registered in Malaysia or a Malaysian international mobile country code;
Is resident in Malaysia.

Rates and dates:

The regime has been in force since 1 January 2020;
The rate is now 8% from 1 March 2024 (previously 6%) — increased following the Finance Minister's announcement in Budget 2024 (13 Oct 2023); the new rate was set by order under s.10 STA;
FRP registration threshold: value of digital services to consumers in Malaysia within 12 months exceeding RM500,000 (s.56B STA);
Tax is due when payment is received (s.11(1) STA), subject to the Director General's approval for invoice-based accounting.

Source: Customs — MySToDS; Guide on Transitional Rules (R1, R2).

(B) LVGT — low-value goods from abroad

Sales tax on Low Value Goods (LVG) is imposed on goods that:

Are sold at a price of not more than RM500 (excluding delivery costs, insurance or tax);
Are brought into Malaysia by land, sea or air.

Rates and dates:

The legislation came into force on 1 January 2023;
Imposition of the tax in force from 1 January 2024;
Flat rate of 10%.

Exemptions: cigarettes; tobacco products; alcoholic beverages; smoking pipes including bowls; e-cigarettes and similar personal vaping devices; and preparations for smoking via e-cigarettes/vaping devices in liquid/gel form (whether containing nicotine or not).

Seller registration: sellers (in or outside Malaysia) who sell LVG via online platforms must register with Customs if the total value of LVG sales to Malaysia exceeds RM500,000 within 12 months. Registration opened on 1 January 2023; returns are filed every 3 months using form LVG-02.

Source: Customs — MyLVG (R3).

2026 status

Both regimes are in force as at the review date (2026-11-08). No rate/ threshold changes were detected on official sources as of that date.

Important note — Budget 2027 proposal: during the winding-up of Budget 2027 (Minister's statement 29 Oct 2026), it was proposed to require foreign e-commerce platforms to adopt e-Invois and establish a local office. This is a PROPOSAL, not law — do not treat it as an existing rule.

Source: MOF; media statements (R4, R5 + media notes — not primary sources).

this item still awaits official confirmation from HASiL — check again with HASiL before deciding. notes from research

Simple examples

Example 1 (SToDS): Puan Aisyah in Kuala Lumpur subscribes to software from a foreign provider (FRP) with a monthly payment of RM200. The provider is registered under s.56C (value of sales to Malaysia exceeds RM500,000/12 months). 8% service tax is imposed on that payment when it is received.

Example 2 (LVGT): Encik Tan buys goods online worth RM300 from a foreign seller (excluding delivery/insurance costs). The goods are brought into Malaysia — LVGT of 10% is imposed. If the goods are cigarettes or e-cigarettes, they are exempt from LVGT.

(These examples are for illustration only — rates and thresholds follow the official sources below.)

Frequently Asked Questions (FAQ)

Q. Does the 8% digital service tax apply to all online services? A. SToDS applies to digital services provided by Foreign Registered Persons (FRP) to consumers in Malaysia. The 8% rate has been in force since 1 March 2024.

Q. I bought goods worth RM400 from abroad. Am I taxed? A. Yes — if the goods are sold at a price of not more than RM500 (excluding delivery/insurance/tax costs) and are brought into Malaysia, LVGT of 10% is imposed (except exempt goods such as cigarettes, tobacco, alcoholic beverages and e-cigarettes/vapes).

Q. Is LVGT not yet in force? A. No — the imposition of LVGT has been in force since 1 January 2024 (legislation since 1 January 2023). Old statements about a 2023 deferral must be contextualised; the 2026 status is in force.

Q. I am a small trader selling online. Do I need to register? A. Sellers (in/outside Malaysia) who sell LVG via online platforms must register with Customs if the value of LVG sales to Malaysia exceeds RM500,000 within 12 months. Verify the threshold and procedure with Customs.

Q. Is the foreign-platform e-Invois proposal already in force? A. No — it is a proposal in Budget 2027, not law as at the review date (2026-11-08).

Glossary

FRP — Foreign Registered Person.
SToDS — Service Tax on Digital Services.
LVG/LVGT — Low Value Goods / Sales Tax on Low Value Goods.
STA 2018 — Service Tax Act 2018.
MOF — Ministry of Finance.
P.U.(A) — gazetted Rules/Orders.