Customs Circular Doesn’t Change Existing Taxation On Cigarettes Sold In Free Zones: Deputy Minister

Deputy Finance Minister Steven Sim says a recent Customs circular doesn’t reverse a 2021 policy on the taxation of cigarettes in Free Zones, and that the circular simply changes the beer quota.

KUALA LUMPUR, May 25 – Deputy Finance Minister Steven Sim clarified today that a recent circular by the Customs Department did not change the government’s existing policy on the taxation of cigarette retail in Free Zones.

According to a Customs Department circular on the standardisation of retail sales of alcoholic beverages and cigarettes in Free Zones, dated May 5, 2023, sighted by CodeBlue, there is an amendment to the Customs Department Circular No.8/ 2005 dated October 28, 2005, specifically replacing paragraph 3.1 with the following revised statement: 

“The quantity of retail sales is limited as follows: i) 3 bottles of liquor (1-litre bottles), ii) 3 cartons of cigarettes (200 sticks per carton), and iii) 48 cans of beer (2 crates) or 48 bottles of beer (2 boxes).”

The circular has been making rounds among anti-tobacco groups, giving the impression that either the government increased the limit for duty-free cigarettes for travellers from one to three cartons, or that the government reversed a previous decision to list cigarettes and tobacco products as taxable goods on all duty-free islands since January 1, 2021. 

“First of all, the letter is regarding zon bebas. These are not duty-free shops,” Sim told CodeBlue today.

“For duty-free shops at airports, duty will be imposed on any amount of cigarettes if these are brought into Malaysia. If they don’t bring into Malaysia (i.e., they buy and fly off without entering Malaysia), then the quota is one carton. For zon bebas, all cigarettes are taxed. There’s no duty-free quota for cigarettes.”

Sim clarified that the May 5 Customs circular simply revises the retail sales quota for beer sold in Free Zones by now including 48 bottles of beer, as the old quota had limited this to 48 cans of beer.

“As I said, they were focusing to revise the part on beer in bottle forms to the earlier pekeliling. Hence, they cite the paragraph from the old pekeliling. Cigarettes quota is now irrelevant as they are being taxed.”

Correction: This story was corrected to state that the May 5, 2023 Customs circular does not change existing policy on cigarettes, but only revises the retail sales quota for beer sold in Free Zones.

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