Malaysia Cancels High-Value Goods Tax, Boosts Luxury Sales Tax Under Revised SST Framework

Malaysia has officially cancelled its High-Value Goods Tax (HVGT), a move announced by the government on July 30, 2025. The tax, intended to target luxury items such as high-end watches, jewellery, and designer goods, sparked concerns among business leaders and consumers. Instead of a stand-alone HVGT, the government has chosen a broader strategy—folding luxury goods into a revised sales tax framework.

Here’s what you need to know:

• The HVGT, initially planned for introduction in May 2024, is no longer on the table.
• As of July 1, 2025, the government expanded its sales tax regime. Luxury and discretionary items now attract sales tax rates of either 5% or 10%, depending on the category.
• The government projects this move will collect RM5 billion in additional revenue for 2025, and up to RM10 billion for 2026.
• Additional reforms rolled out in the past year include a capital gains tax on unlisted shares, a low-value goods tax for imports under RM500, and a broader service tax applied to digital and professional services.
• The capital gains tax contributions are estimated at RM800 million annually. The low-value goods tax yielded about RM500 million in 2024.

Why did the government scrap the HVGT? Industry pushback played a role. Stakeholders argued that the HVGT, aimed specifically at luxury shoppers, might discourage spending and deter tourists. Many called for a return to GST or a fairer form of consumption tax.

The expanded Sales and Service Tax (SST) system offers the government a more flexible way to raise revenue, broadening the tax base to include more goods and services while avoiding the complexities and market distortions that a luxury-only tax could introduce. Under the new system:

• Essential goods remain exempt or at lower rates.
• Most discretionary or luxury purchases—such as fine jewellery, designer apparel, high-end electronics, and imported specialty foods—now fall under the higher 10% rate.
• Services integral to the luxury sector, like boutique leasing or premium logistics, also face higher service tax rates.

For shoppers and businesses, this means higher prices on non-essential, high-value items, regardless of whether they are imported or locally sourced. For households, the changes translate to a need for careful budgeting. For companies, especially those catering to affluent consumers, managing price increases and adapting to new reporting requirements are immediate challenges.

Government leaders have stated that these reforms are about ensuring fiscal sustainability and plugging revenue gaps while protecting economic growth. The expanded SST, along with ongoing digital, capital gains, and low-value goods taxes, reflect Malaysia’s pragmatic turn towards a wider, more efficient tax base rather than narrow, high-profile levies.

In short: while the high-value goods tax is off the table, higher taxation on luxury spending is here—just in a wider, more indirect form. Businesses and consumers alike will need to adjust to a new reality that prizes fiscal discipline and broader compliance in support of Malaysia’s public finances.

WF News