EXPORT-ORIENTED registered manufacturers, especially those reliant on international markets, are under pressure from many angles.
Rising oil and gas prices have driven up production, logistics and freight costs, while shortages of petroleum-based raw materials have strained supply chains. These factors are squeezing margins for manufacturers.
Global trade disruptions and changes in various import policies in different parts of the world such as the United States, Europe and the Middle East have added uncertainty. Manufacturers now face higher risks of delays, rejections and rerouted shipments, making planning and competition harder. As a result, goods bound for overseas markets fail to reach their destinations and are returned to Malaysia.
When these goods come back, they are likely treated as new imports by the Royal Malaysian Customs Department (RMCD) under current customs rules, often incurring sales tax and customs duties. This creates an added burden for exporters, who have already paid for shipping both ways.
Sadly, the law penalises local businesses for circumstances beyond their control and this is where the government needs to step in and support manufacturers to stay competitive.
A welcome response by RMCD and Ministry of Finance (MOF)
The RMCD and the MOF have introduced Sales Tax Policy No. 2/2026 in a timely manner, offering relief to exporters by easing the financial burden on goods that had to be reimported due to Middle East disruptions.
More importantly, this policy removes the unfair tax liability and helps manufacturers keep their businesses running during very challenging global conditions. The measure comes with strict conditions to ensure proper use and prevent misuse.
What are the reliefs and conditions?
The policy waives import duty and sales tax on Malaysian-made goods that were exported but had to be reimported due to disruptions from the Middle East conflict, subject to conditions. The same manufacturer who originally exported the goods must handle the reimportation with clear proof such as documented evidence linking it to the Middle East conflict, security factors, port closures or inaccessibility, shipping reroutes or delays or cancellation by buyers as well as relevant documentation including verification from the shipping companies, agents or buyers.
Goods must be identical without substitution or replacement, match the quantity originally exported, and remain under the manufacturer’s ownership and control until its subsequent export from Malaysia. The goods exempted must be re-exported within six months and this period is extendable, subject to additional approval, or else duties and taxes will be levied if the goods are not re-exported within the stipulated time or if the goods are sold locally. Finally, a complete set of documents must be readily available for the RMCD’s review and audit.
It must be noted that the current relief is only provided for registered manufacturers and does not include or mention export-oriented trading companies which buy from Malaysian manufacturers for the purpose of export.
Further, companies that typically do not obtain advice tend to make various mistakes on such reimportation to Malaysia, disqualifying the exemption and are required to pay the taxes and duties.
Moving forward
This temporary measure, expiring on Dec 31, 2026, was introduced in response to current geopolitical disruptions. Sales Tax Policy No. 2/2026 is a timely intervention that supports manufacturers and exporters facing extraordinary challenges. By removing unintended tax burdens, it offers businesses much-needed breathing space.
For the policy to achieve its full impact, customs authorities must implement it with flexibility rather than rigid insistence on paperwork. Proactive support and practical guidance will help cushion taxpayers from the difficulties they already face, ensuring the measure delivers genuine relief instead of adding new burdens.
This article is contributed by Thannees Tax Consulting Services Sdn Bhd managing director SM Thanneermalai (www.thannees.com).