Malaysia Drops High-Value Goods Tax, Expands Sales Tax Revenue

The Malaysian government has decided to scrap the proposed High Value Goods Tax (HVGT), which was expected to generate up to RM700 million annually from luxury items such as high-priced vehicles, watches, and jewelry. Instead, the principles of the HVGT have been integrated into the revised Sales and Service Tax (SST) framework, with luxury and discretionary goods now taxed at rates of 5% or 10%. The expansion of the SST scope, effective July 1, 2025, is anticipated to raise national revenue by RM5 billion in 2025 and double to RM10 billion in 2026. Additional fiscal reforms include the Low Value Goods tax, which has generated around RM500 million since January 2024, and the Capital Gains Tax on unlisted shares, estimated to bring in RM800 million annually. The government also continues to collect revenue from the Service Tax on Digital Services, which has contributed RM1.6 billion in 2024, while diesel subsidy rationalization is saving about RM600 million monthly. Authorities emphasize that no separate digital goods tax will be introduced, as digital services are already covered under the existing tax framework.