Digital Services and Low-Value Goods Taxes Drive Strong Revenue Growth
Malaysia has collected close to RM2.1 billion from Digital Services & Low-Value Goods Trade, thus showing strong gains from taxes aimed at the fast-growing online economy.
RM1.62 billion came from the Service Tax on Digital Services (STODS), while RM476 million was raised through the Low Value Goods (LVG) tax in 2024. This growth proves the government’s tax measures are reducing revenue leakage and improving compliance, especially from cross-border digital businesses.
Ensuring Fair Competition Between Local and Foreign Digital Businesses
The taxes form part of a wider plan to ensure fairness between local and foreign companies operating in Malaysia. Under the current system, overseas digital platforms such as Netflix, Apple, Microsoft and Google must register with the Royal Malaysian Customs Department, charge service tax to Malaysian users, and pay it to the government. This places foreign providers under similar obligations as local firms.
STODS revenue has risen steadily over recent years, increasing from RM802 million in 2021 to RM1.62 billion in 2024. This reflects the rapid expansion of the digital economy and stronger enforcement.
The LVG tax applies a 10 per cent levy on imported goods bought online and priced below RM500. Items such as phone accessories, clothing and household products now face the same tax treatment as locally sold goods. Before this policy, such imports entered Malaysia tax-free, putting local traders at a disadvantage.
Building a More Balanced and Sustainable Digital Economy
Addressing concerns that the LVG tax affects lower- and middle-income households, Amir Hamzah said the existing SST system already covers selected luxury and non-essential items. He stressed that the aim is not to burden daily needs, but to restore balance in Digital Services & Low-Value Goods Trade between domestic sellers and overseas platforms.
As of now, 493 foreign sellers are registered under the tax regime, mainly from the United States, Singapore and the United Kingdom. Singapore-based firms contributed the largest share of STODS revenue, followed by companies from Ireland and the US.
Overall, the government views these measures as key to building a fairer and more sustainable digital market, even as online trade continues to grow.
