Indirect Tax Alert: Introduction of the Approved Major Exporter Scheme

Indirect Tax Alert: Introduction of the Approved Major Exporter Scheme

With effect from 1 July 2020, a sales tax exemption facility known as the Approved Major Exporter Scheme (“AMES”) is introduced under Section 61A of the Sales Tax Act 2018. This exemption facility is available exclusively to approved traders and manufacturers in Malaysia who are export-oriented (i.e., major exporters). On 30 June 2020, the Sales Tax (Amendment) Regulations 2020, which prescribe the relevant conditions and application procedures for AMES, was published on the Official Federal Gazette website.

Key amendments to the above-mentioned Regulations have surfaced:

  • In order to be eligible to apply for AMES, several conditions are required to be met by a trader and/or a manufacturer, as detailed in the table below:
TraderManufacturer
Operating in Malaysia for at least a year;The annual sales value of taxable goods exceeds RM10 million at the time of application; andAt least 80% of the annual sales value of taxable goods are exported sales or transported to Designated Areas or Special Areas.Operating in Malaysia for at least a year;The annual sales value of manufactured goods exempted from sales tax exceeds RM10 million at the time of application; andAt least 80% of the annual sales value of manufactured goods exempted from sales tax are exported sales or transported to Designated Areas or Special Areas.

►    Eligible companies shall apply for AMES via a prescribed application form and thereafter, submit the completed application form and relevant supporting documents to the Royal Malaysian Customs Department (“RMCD”).

►    The approval for the AMES facility is valid for a period of two (2) years or a period as determined by the Director General of RMCD.

►    In addition, please note that under this AMES facility, any approved person is allowed to be exempted from the payment of sales tax on the taxable goods imported; or transported from a Designated Area or Special Area; or purchased from a registered manufacturer, subject to the following conditions:

Where the approved person is a traderThe taxable goods are directly imported or transported from a Designated Area or Special Area, or purchased from a registered manufacturer by the trader;The taxable goods must not be used or must not have undergone any value-added process;The taxable goods are subsequently exported or transported to a Designated Area or Special Area by the trader; andThe taxable goods shall not be disposed of other than by way of destruction as approved by the Director General, not be sold locally or not be accounted for, unless the sales tax exempted for such taxable goods is paid to the Director General.
Where the approved person is a manufacturerRaw materials, components, packing and packaging materials must be directly imported or transported from a Designated Area or Special Area, or purchased by the manufacturer from a registered manufacturer;Raw materials, components, packing and packaging materials shall be used directly and solely in the manufacturing of goods exempted from sales tax;The manufactured goods exempted from sales tax must be exported or transported to a Designated Area or Special Area by the manufacturer;Raw materials, components, packing and packaging materials shall not be disposed of other than by way of destruction as approved by the Director General, not be used other than for the purpose of the manufacture of goods exempted from sales tax, or not be sold locally or not be accounted for, unless the sales tax exempted on such goods is paid to the Director General; andThe manufactured goods exempted from sales tax shall not be disposed of other than by way of destruction as approved by the Director General, not be sold locally, or not be accounted for, unless sales tax exempted for raw materials, components, packing and packaging materials used in the manufacturing of the goods exempted from sales tax is paid to the Director General.

Note: If the approved person is both a trader and a manufacturer, the approved person is required to make two (2) separate applications (based on the AMES guidelines) and must comply with the above-mentioned prescribed conditions as an approved trader and as an approved manufacturer.

The full and complete version of the above-mentioned Regulations can be found on the Federal Gazette website. Further, RMCD has also released the application form and relevant guidelines on AMES through the MySST Portal.