Import Procedures

All goods to be imported whether or not subject to import duties must be declared in writing on Customs Form No. 1. All declarations should indicate a full and true account of the number and description of goods and packages, value, weight, measurement or quantity, and the country of origin or the final destination. Declarations must be submitted to the Customs station at the place where the goods are to be imported. All duties/custom taxes imposed on imported goods will need to be paid in advance before the goods can be released (import tax and goods and services tax). Documents required by Malaysian Customs include: Custom Form No.1, bill of lading/airway bill; commercial invoice or Pro-forma invoice; packing list; any relevant permits, licenses or certificates.

For more information, please visit the website of the Malaysian Customs.

Specific Import Procedures

The following products require specific authorisations: meat, eggs, milk, wine, plants, cosmetics, pharmaceuticals, firearms, explosives, medicines and dangerous products. Meat, processed meat products, poultry, eggs and egg products must have a Halal certificate issued by the Department of Islamic Development of Malaysia (JAKIM).
For a full list of restricted/prohibited items, refer to the dedicated page on the website of the Malaysian Customs.

Distribution channels

Malaysia has a large and growing food retail market supplied by local and imported products. The Malaysia food retail sector was estimated at USD 18 billion in 2020, and is projected to grow 30% to USD 23 billion by 2025 (USDA). According to Statista, revenue in the food market amounted to USD 46.78 billion in 2022. Malaysia’s supermarket sales saw a 10% decrease to USD 1.5 billion in 2021, due to the pandemic and associated lockdowns (USDA).

The Malaysia food retail industry is comprised of a range of large supermarkets/hypermarkets, convenience stores, “mom and pop” traditional stores, and specialty retailers. Large food retail stores such as supermarkets, hypermarkets and department stores that also operate supermarkets within the premises are generally located in the major cities, urban centres and larger towns in Malaysia, where most middle to high income consumers reside. Major food retailers usually operate chain stores strategically located to capture target consumers. Convenience stores and petrol station stores are mainly found in the cities, larger towns and along the North-South highway. The majority of these stores are franchise operations with support from their franchisers in the form of advertising support, staff training, financing, bulk purchasing and distribution facilities.

Traditional stores continue to make up the largest number of food retailers in Malaysia today. They are commonly found in all the cities, towns and villages in Malaysia. They are made up of open-fronted grocery stores in shop houses or in the dry markets. This sub-sector is dominated by small family-run businesses and target the price sensitive consumers as well as those who seek convenience for a small number of grocery items and other daily essentials. These retail stores generally carry local traditional and Asian products and some branded products with a small number of the more popular imported ones. In 2019, the Consumer Economic Shop Initiative (i-KeeP) was launched by the government in order to sell essential items at a reasonable price, in cooperation with large retail players such as Tunas Manja Group (TMG), KK Supermart & Superstore Sdn Bhd (KK Super Mart) and Big Supermart Sdn Bhd (BIG Supermart).

With a Muslim population of more than 60%, the demand for halal foods by Malaysian consumers has increased over the years. Foreign meat (except pork) and poultry plants intending to export to Malaysia must be accredited by the Malaysian Department of Veterinary Services (DVS) and the Department of Islamic Development for halal purposes. In addition to poultry and meat products, eggs and dairy products are now required to be halal certified, as well as all food products and ingredients. Malaysian halal standards are perceived as stricter than those of other Islamic countries, and products with halal certificates are perceived to have added marketing value in Malaysia.
A growing e-commerce marketplace has resulted in major supermarkets offering online services as a convenience to their customers. Moreover, many Malaysian supermarkets are now offering in-store dining facilities.

Distribution market players

In urban and suburban areas of Malaysia, consumers do most of their food and drink shopping in traditional grocery retailers outlets located within their immediate neighbourhood. The supermarket retail sector in Malaysia is dominated by five key players:

• Dairy Farm Group, the largest food retailer in Malaysia in terms of sales as well as number of retail outlets. It operates hypermarkets and supermarkets nationwide under the Giant, Cold Storage and Jason's brands. The Giant supermarkets and hypermarkets are known as a home-grown trusted brand. Giant is well-known to local shoppers as the store that offers the best value-for-money products. Giant targets the mass market and is the largest supermarket chain in Malaysia. Cold Storage and Jason's target the upper middle to high income shoppers as well as high income expatriates residing in Malaysia. It carries a wide variety of local products as well as imported products;
• Mydin Mohamed Holdings, which operates Mydin supermarkets;
• Trendcell Sdn Bhd, the fastest growing premium food retailer in Malaysia. It operates under the brand Jaya Grocer supermarkets;
• Village Grocer Holdings, which operates under the brands Village Grocer and Ben's Independent Grocer supermarkets;
• AEON Malaysia, which operates under several formats: AEON, AEON Big, and AEON MaxValu supermarkets/hypermarkets. AEON bought Carrefour Malaysia in 2012 and renamed it to AEON Big;

7-Eleven is the largest convenience store chain operating 24-hour stores. 7-Eleven stores are treated like car race pit stops by children, teenagers and young adults who usually shop for magazines, newspapers, candies, crisps and other snacks, ice cream or other single-serve food and beverages consumed "on-the-go".

Retail Sector Organisations

Malaysia Retailers Association
Ministry of International Trade and Industry

Consumption Taxes

Nature of the Tax

• Sales Tax
• Services Tax

Tax Rate

Sales Tax: 10% or 5%
Services Tax: 8% (from 1 March 2024, was 6% before)

Reduced Tax Rate

A reduced rate of 5% applies to non-essential foodstuff and building materials.
Oil and petroleum are subject to quantity-based rates.

As of March 1, 2024, the standard service tax rate rose from 6% to 8%. However, specific services such as food and beverage, telecommunication, parking, and logistics services remain subject to the 6% rate.

Other Consumption Taxes

Excise duties are levied on several items, including un-denatured ethyl alcohol, brandy, whisky, rum and tafia, gin, rice wine, beer/stout, cider and perry, cigarettes containing tobacco, motor vehicles, motorcycles, playing cards, and mahjong tiles.
Effective 1 January 2024, a 10% sales tax is imposed on imported low-value goods (LVGs) worth MYR 500 or less, excluding cigarettes, tobacco products, intoxicating liquors, and smoking pipes, as these items are already subject to import duty, excise duty, and sales tax. This aims to create a fairer business environment and enhance the competitiveness of local businesses facing online competition. Online sellers, both local and foreign, with cumulative sales of LVGs exceeding MYR 500,000 within a 12-month period must register and report local sales tax.
Taxes on motor vehicles can go up to 105% of the value of motorcars, depending on engine capacity.

Corporate Taxes

Company Tax

24%

Tax Rate For Foreign Companies

A company is deemed to be tax resident in Malaysia in a financial year if, at any time during the basis year, the management and control of its affairs are exercised in Malaysia (may be in the case that one meeting of the Board of Directors is held in Malaysia).

Capital Gains Taxation

Gains from the disposal of real property in Malaysia may be subject to real property gains tax (RPGT). However, from January 1, 2024, an exemption from RPGT applies if the gains are subject to capital gains tax (CGT). For Malaysian companies, RPGT rates are 30% for disposals within three years of acquisition, 20% in the fourth year, 15% in the fifth year, and 10% thereafter. Foreign companies face 30% RPGT for disposals within five years and 10% thereafter. Starting January 1, 2024, share disposals in real property companies are exempt from RPGT, as they will be subject to CGT, except for Labuan entities, which remain subject to RPGT on such disposals.

The government introduces CGT on disposals of capital assets by companies effective January 1, 2024. CGT rates vary based on acquisition dates and asset locations. For Malaysian assets acquired before January 1, 2024, the rate is 10% on chargeable income from disposal or 2% on the gross price. For assets acquired on or after that date, the rate is 10% on chargeable income. Capital assets outside Malaysia are taxed at the prevailing income tax rate (currently 24% for companies) on chargeable income brought into Malaysia.

Main Allowable Deductions and Tax Credits

Deductions are allowed for any revenue expenditure incurred wholly and exclusively in the production of income, including interest, royalty payments and certain taxes.
Interest expense is allowed as a deduction if the expense was incurred on any money borrowed and employed in the production of gross income or laid out on assets used or held for the production of gross income. Where borrowing is partly used to finance non-business operations, the proportion of interest expense will be allowed against the non-business income.
A deduction is allowed for cash donations to approved institutions, capped at 10% of the aggregate income of the company for a year of assessment.
Incorporation and recruitment expenses are deductible, the same as bad debts (which however need to be identified and reasonably estimated to be irrecoverable).
Unutilised losses in a year of assessment can only be carried forward for a maximum period of ten consecutive years of assessment while unabsorbed capital allowance can be carried forward indefinitely (except in the case of a significant change in the ownership structure of a dormant company). The carryback of losses is not permitted.
Companies can deduct royalties, management service fees, and interest charges paid to foreign affiliates, provided these payments are made at arm's length and any applicable withholding taxes have been deducted and remitted to the Malaysian tax authorities.

A wide range of incentives is available for specific industries, including manufacturing, hotels, healthcare services, information technology, biotechnology, Islamic finance, venture capital, tourism, energy conservation, and environmental protection. These incentives include tax holidays of up to 10 years (pioneer status); investment tax allowances ranging from 60% to 100% on capital investments for up to 10 years; accelerated capital allowances; double deductions; and reinvestment allowances at 60% on qualifying project investments. Additionally, incentives such as accelerated capital allowances and automation equipment allowances are available to promote the adoption of "Industry 4.0" technologies, including big data analytics, autonomous robots, and the industrial internet of things within the manufacturing sector and related services. For further information, click here.

Other Corporate Taxes

Employers and employees alike must contribute to the Malaysian Social Security Organisation (SOCSO), with the employer's contributions generally at 1.75% of salaries. Employer contributions to the Employees' Provident Fund (EPF) range from 12% to 13% (for monthly remunerations up to MYR 5,000) of the salary. Employers and employees contribute 0.2% of the employee's salary (capped at MYR 4,000 per month) to the Employment Insurance Scheme (EIS).

Employers engaged in the manufacturing and services sectors that employ more than a specified number of employees must contribute to the Human Resource Development Fund (HRDF), at the rate of 1% of the monthly wage.

Gains from disposals of real property are subject to a real property gains tax (RPGT). The RPGT rate is tiered based on the timing of the property disposal. Disposals within three years of acquisition are subject to a 30% rate, while disposals in the fourth and fifth years are taxed at 20% and 15%, respectively. For disposals made in the sixth year and beyond, the rate is 10%. Companies incorporated outside of Malaysia are subject to a 30% rate for disposals made within five years and a 10% rate thereafter.

Petroleum income tax in Malaysia is levied at 38% on income from petroleum operations, while an effective rate of 25% applies to income from petroleum operations in marginal fields. No other taxes are imposed on income from petroleum operations.

A levy is imposed on crude palm oil and crude palm kernel oil when the price exceeds MYR 3,000 per ton in Peninsula Malaysia and MYR 3,500 per ton in Sabah and Sarawak. Additionally, the Construction Industry Development Board imposes a 0.125% levy on contract works with a contract sum above MYR 500,000 for every registered contractor.
Local companies are subject to an incorporation fee of MYR 1,000, while foreign companies pay a higher fee (from MYR 5,000 to MYR 70,000).

Stamp duty is levied at rates ranging from 1% to 4% of the value of property transfers, and at 0.3% on share transaction documents.

Other Domestic Resources

Inland Revenue Board

Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed

See the list of the double taxation avoidance agreements on the website of the Inland Revenue Board of Malaysia.

Withholding Taxes

Dividends: 0%; Interest: 0% (paid to a non-resident by a bank operating in Malaysia) /15% (non-resident); Royalties: 10%