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October 24, 2022
2022-6018

Malaysia imposes excise duty on premix preparations

  • The Malaysian Government issued Excise Duties Orders related to the imposition of excise duty on premix preparations.

  • The imposition of excise duty on premix preparations was first announced on 29 October 2021 during Malaysia’s Budget 2022 and is an expansion of the excise duty on ready-to-drink sugar sweetened beverages, which came into force on 1 July 2019.

  • Based on a notice issued by the Royal Malaysian Customs Department, the imposition of excise duty on premix preparations has been postponed to 1 January 2023. The key features of the excise duty are summarized in this Alert.

Executive summary

On 9 September 2022, the Malaysian Government gazetted the following Excise Duties Orders:

  • Excise Duties (Amendment) Order 2022 [P.U.(A) 287/2022]

  • Excise Duties (Exemption) (Amendment) (No.2) Order 2022 [P.U.(A) 288/2022]

  • Excise Duties (Exemption from Licensing) (Amendment) Order 2022 [P.U.(A) 289/2022]

  • Excise Duties (Premix Preparation) (Payment) Order 2022 [P.U.(A) 290/2022]

The abovementioned Excise Duties Orders relate to the imposition of excise duty on premix preparations.

Detailed discussion

Background and objective

The imposition of excise duty on premix preparations was first announced on 29 October 2021 during Malaysia’s Budget 2022 and is an expansion of the excise duty on ready-to-drink sugar sweetened beverages, which came into force on 1 July 2019.

The objective of this measure is to promote a healthier lifestyle for Malaysians. This also aligns with the strategies outlined by the National Plan of Action for Nutrition of Malaysia III (2016- 2025) in addressing the issue of obesity, diabetes and other noncommunicable diseases associated with nutrition.

Initially, the Government intended to introduce the measure on 1 April 2022 but on 31 March 2022, the Royal Malaysian Customs Department (RMCD) issued a notice to temporarily postpone the implementation of this measure to 1 November 2022. Thereafter, RMCD announced a postponement for the imposition of excise duty on premix preparations from 1 November 2022 to 1 January 2023.

Key features

The key features vis-à-vis the imposition of excise duty on premix preparations are as follows:

 Details

 Description

 Effective date

 1 January 2023

Impacted premix preparations

The following premix preparations under tariff headers of 18.06, 19.01, 21.01 and 21.06, with total sugar content above 33.3 gram per 100 gram (33.3g/100g) are liable to excise duty:

  1. Chocolate (e.g., chocolate-flavored malted powder)

  1. Malted drinks

  1. Soy-based preparations

  1. Coffee (e.g., premix coffee)

  1. Tea or mate (e.g., premix tea)

  1. Other non-alcoholic food preparations (e.g., ginseng-based products)

  

Details

 Description

 Excise duty rate

 RM047 per 100 gram

Exemption from licensing

Manufacturers who manufacture premix preparations with a total sugar content of 33.3g/100g or less.

Premix preparation exempted from excise duty

The following premix preparations acquired by a manufacturer or importer:

  1. Premix preparation with total sugar content of 33.3g/100g or less

  1. Infant formula milk specially prepared for newborn persons up to 12 months of age as stated in the Food Regulations 1985 under the tariff headers of 18.06, 19.01 and 21.06

  1. Formulated milk powder specially prepared for children from the age of 12 months to 9 years as stated in the Food Regulations 1985 under the tariff headers of 18.06, 19.01 and 21.06

Premix preparation acquired by a licensed manufacturer, solely for packaging for retail sale in the licensed manufacturer’s premise, without changing the nature of goods.

Note: the above are subject to meeting the conditions under the Excise Duties (Exemption) (Amendment) (No.2) Order 2022.

Liability to pay excise duty

Payable by a licensed manufacturer or a licensed warehouse licensee, upon removal of the premix preparation from a licensed place or a licensed warehouse, for consumption in Malaysia, not later than the last day of the following month

Actions for business

Companies who manufacture or trade in premix preparations may be impacted by the implementation of excise duty on premix preparations.

Given the effective date of 1 January 2023, companies should take prompt action, among others:

  • Review existing the premixed preparations within the supply chain to determine which products (based on total sugar content) and activities, are liable to excise duty

  • For companies who are required to be registered for excise duty, ensure that information and documents are in place to support excise duty compliance and reporting

  • Evaluate existing pricing structure arising from the impact of the excise duty

_________________________________________

For additional information with respect to this Alert, please contact the following:

Ernst & Young Tax Consultants Sdn Bhd, Kuala Lumpur

 
 

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