Why Malaysia is ending tax exemptions for supercars
Malaysia’s decision to scrap tax exemptions for luxury cars on its duty-free islands marks a sharp shift in how the government wants to police wealth, compliance and revenue — and one of its archipelagos is set to feel it first.
Under new measures, luxury vehicles valued above 300,000 ringgit ($74,000) will no longer enjoy tax-free status in Langkawi and Labuan, effectively doubling the price of high-end brands such as Ferrari, Lamborghini and Porsche.
The move is framed by the government as a matter of fairness and enforcement, amid growing concerns that tax incentives meant to boost local economies have instead enabled loopholes, abuse and weak compliance among wealthy vehicle owners.
For years, Langkawi’s duty-free status allowed supercars that would cost up to 5 million ringgit ($1.2 million) elsewhere in Malaysia to be registered on the island for roughly half the price, making it the preferred hub for luxury car buyers nationwide.
Industry figures indicate that around 90% of Ferraris in Malaysia were registered in Langkawi, not for island use but to take advantage of lower taxes.
After uncovering unpaid tax
Officials have also been under pressure to act after stepped-up enforcement revealed widespread non-compliance, including hundreds of luxury vehicles with unpaid road tax, forged plates or years of arrears despite their high market value.
Since July 2025, road transport authorities have seized more than 900 luxury vehicles nationwide, including Ferraris, Aston Martins and Rolls-Royces, some owing tens of thousands of ringgit in unpaid tax.
By removing exemptions, Malaysia appears to be signalling that ownership of high-value assets must come with full fiscal responsibility, particularly at a time when the government is seeking to broaden its tax base.
The policy also aligns with Prime Minister Anwar Ibrahim’s broader reform agenda, which emphasises closing leakages, curbing elite privileges and restoring confidence in the tax system.
Backlash on economy
However, industry veterans warn the move could backfire economically, arguing that Langkawi’s tax-free status generated sustained revenue through corporate tax, customs charges, tourism spending and high-end services tied to luxury vehicles.
They say the island evolved into a niche automotive and lifestyle hub, hosting international car launches and supporting specialised workshops, logistics firms, hotels and secure storage facilities.
Dealers report immediate fallout, with cancellations already being felt amid uncertainty over implementation, while local business groups fear job losses and a decline in premium tourism.
This story is written and edited by the Global South World team, you can contact us here.
