Langkawi's tax-free vehicle status remains, but with new restrictions

The tax-free status for vehicle purchases in Langkawi has not been entirely abolished, but rather subjected to stricter conditions as part of the 2026 budget. Starting January 1, 2026, only new vehicles priced at RM300,000 or below will be eligible for this incentive.

Datuk Mohamed Nazari Noordin, president of the Malay Vehicle Importers and Traders Association of Malaysia (Pekema), explained that this policy adjustment is designed to enhance fiscal governance, improve tax compliance, and prevent long-standing abuses of the incentive. Under the new framework, while tax exemption for purchases continues, it is now capped by a price limit, excluding most luxury and high-performance vehicles from the benefit.

Regarding claims that Malaysia could lose at least RM400 million due to this policy shift, Mohamed Nazari stated that Pekema lacks detailed data to confirm the figure. He suggested the amount might represent projected sales losses in the luxury vehicle segment affected by the new price cap. Pekema views this change as a move towards a more transparent and equitable taxation system, supporting the local automotive industry and reducing revenue leakage.

Earlier, Kedah Menteri Besar Datuk Seri Muhammad Sanusi Md. Nor alleged that Malaysia was losing at least RM400 million due to the federal government's decision to revoke the tax-free status for luxury vehicle purchases on the tourist island. This was revealed by industry players following the government's announcement in the 2026 Budget. Mohamed Nazari also clarified that vehicles registered in Langkawi can still be brought to the mainland for up to 90 days annually, but permanent registration on the mainland requires full excise duty payment. The tax-free status remains valid as long as the vehicle is registered in Langkawi.