Budget 2026: Tax-Free Cars from Langkawi & Labuan Will Be Limited to RM300K

Tax-free cars from Langkawi and Labuan will only be limited to RM300,000 in value from Jan 1, 2026, onwards.

The days of ultra-high net-worth individuals abusing Langkawi and Labuan’s tax-free status to purchase luxury cars at lower prices might be over soon. That is because the government will set a ceiling price of RM300,000 for tax exemptions for vehicles in said duty-free islands from Jan 1, 2026, onwards.

Announced by Prime Minister Datuk Seri Anwar Ibrahim during today’s Budget 2026 tabling, this RM300,000 cap will be applied to the actual value of the car itself before any taxes or duties are applied.

Even when applied to their pre-taxed prices, this new price cap would potentially eliminate almost every new performance and exotic car in Malaysia, given that most of them are priced way above the RM300,000 cap even before the tax comes into effect.

Ultimately, this move is part of the government’s plan to curb several tax evasion syndicates that have been looming for years in Malaysia, as purchasing high-valued cars in Langkawi or Labuan to evade import and excise duties has been a widely accepted practice among the ultra-high net-worth individuals.

While cars registered in these tax-free heavens are meant to stay there, the government allowed them to be used in other parts of the country for up to 90 days in a year, which has opened up an entire loophole for abuse and syndication.

That said, while this decision is made for the greater benefit of preventing tax evaders, it could also result in the declining sales of premium and luxury cars in Malaysia but also a potential boost to the local grey import car market—both of which we’d reckon will not bode well with premium automakers here in Malaysia.