The government has reiterated that the move to cap the duty and tax exemptions at a value of RM300,000 for vehicles sold in Langkawi has been to prevent high-net-worth individuals from abusing Langkawi and Labuan’s tax-free status to purchase luxury cars at lower prices.
Deputy finance minister Liew Chin Tong said that changes to the duty and tax exemption policy for vehicles, which were introduced on January 1 this year, were to address revenue leakages and discourage the practice of having individuals keep luxury vehicles on the island for several years before bringing them into the Principal Customs Area to avoid paying higher taxes.
“At its core, this is a business model that we do not wish to promote, and we hope this policy will be accepted by all citizens,” he told the Dewan Rakyat.
Liew was responding to a supplementary question from Datuk Mohd Suhaimi Abdullah (PN-Langkawi), who sought clarification on the government’s review of the RM300,000 threshold for vehicle tax exemptions in Langkawi and called for stricter enforcement to prevent abuse of the facilities, Bernama reports.
He acknowledged that the new policy would affect some business operators, but stressed that local residents would not be impacted. He said the threshold was reasonable and sufficient to meet the needs of local residents, car rental operators, taxi services and commercial vehicle users, while ensuring that the exemptions remained focused on vehicles used for daily activities and local business operations.
“Although there have been changes to the tax exemption policy for certain products on Langkawi Island, its status as a duty-free Island remains in effect,” he said.
Purchasing high-value luxury, sports and supercars in Langkawi to evade import and excise duties – which would otherwise push prices to millions of ringgit – has hitherto been a widely-accepted practice, so much so that some luxury carmakers previously quoted duty-free prices for their cars.
While cars registered on these islands are meant to stay there, they are allowed to leave the duty-free areas for up to 90 days per year. Prior to the new policy, this practice opened the exemptions up to tax evasion. In making the announcement of the new policy during the tabling of Budget 2026 in October last year, prime minister Datuk Seri Anwar Ibrahim said the duty exemptions were meant to be enjoyed by those living in Langkawi.
