This guide provides a comprehensive look at the e-Invoice Compliance Review Framework (RKe) issued by the Inland Revenue Board of Malaysia (LHDN). Effective as of December 15, 2025, this framework serves as the official manual for how tax officers will verify digital invoicing across the country.
Why Malaysia Is Moving to E-Invoice?
The introduction of e-Invoicing is more than a technical update; it is a move toward a transparent, real-time digital economy. By requiring businesses to validate transactions through the LHDN portal, the government aims to reduce “shadow economy” leakages.
Example: Imagine a local furniture manufacturer that previously issued manual paper invoices. Under this framework, LHDN can now see its sales in real-time. If the manufacturer delivers a large order of office chairs but fails to generate a digital e-Invoice, the RKe framework provides the legal mechanism for LHDN to detect the gap and initiate an inquiry.
What Is an E-Invoice Compliance Review (RKe)?
A compliance review is an enforcement activity where e-Invoice Compliance Officers (PEI) verify if your digital records match your actual business activity.
How Does LHDN Conduct an E-Invoice Compliance Review?
LHDN uses a “Comprehensive Review” method, which involves on-site visits and digital data analysis. These reviews generally cover the past two years of tax assessments. However, if there is a suspicion of a criminal offense, LHDN has the power to look back as far as 12 years.
Example: A grocery chain is selected for review. Instead of just auditing bank statements, PEIs visit the main office to interview the IT Manager about how their cash registers sync with the MyInvois portal. They might compare the digital logs of milk sales from March 2024 against the actual physical inventory records found in the cold storage facility.
What Happens During an E-Invoice Compliance Review?
The framework ensures that reviews are structured and predictable rather than “ambush” style audits:
- You will receive a formal notification at least 14 calendar days before the visit.
- Usually lasting 1 to 3 days, officers will use their authority to access your computers or cloud storage to download invoicing data.
- After the review, you receive a “Finding Letter” stating whether you are compliant or not.
- If the officer claims you missed 100 invoices, but you have proof they were sent, you have 18 days to file a formal objection.
Example: A marketing agency receives a notice on June 1st. On June 15th, officers arrive to check their records. The officers find several missing “Self-Billed” invoices for international influencers. The agency received a Finding Letter on June 20th and used the 18-day window to gather technical logs proving those specific influencers were exempt under a digital service tax treaty.
E-Invoice Non-Compliance Penalties Under Malaysian Tax Law
The law treats e-Invoice failures seriously. Under the Income Tax Act 1967, the following penalties apply:
| Offense | Law | Penalty |
| No e-Invoice issued | Sec 82C(1) | Fine: RM200 – RM20,000 / Jail: up to 6 months |
| No Self-Billed e-Invoice | Sec 82C(6) | Fine: RM200 – RM20,000 / Jail: up to 6 months |
| No Consolidated e-Invoice | Sec 82C(7) | Fine: RM200 – RM20,000 / Jail: up to 6 months |
Example: A property management firm collects thousands of small monthly security fees but fails to issue “Consolidated e-Invoices” as required for high-volume, low-value transactions. During a review, the PEI discovers this systemic failure. Under Section 82C(7), the firm could face a fine of up to RM20,000 for every reporting period they failed to consolidate.
Voluntary Disclosure: How to Reduce Penalties Before LHDN Acts
If a business realizes it has made an error—such as a software bug that prevented data from uploading—it can utilize Voluntary Disclosure. By reporting the error in writing before LHDN initiates a review, the business can often settle the matter without facing the harshest penalties.
Example: A logistics startup discovers that a “server timeout” caused 200 invoices to fail validation over the last month. Rather than waiting for an audit, they send a formal letter to LHDN explaining the technical error and providing the corrected data. LHDN accepts the disclosure, and the startup avoids a surprise field visit and a potential fine.
A Guideline of Conduct & Obligations for All Parties Involved
The framework defines a code of conduct for both parties. Officers must show their authority cards and cannot accept bribes. Taxpayers must provide a reasonable workspace and access to equipment like photocopiers or scanners.
Example: During a review, a business owner refuses to give the officer the password to the accounting software, claiming the “accountant is on vacation.” If the officer believes this is a tactic to hide records, the owner could be charged with Obstruction under Section 116 of the Income Tax Act, which carries its own separate fines and potential jail time.
FAQs
1. What is the e-Invoice Compliance Review Framework (RKe)?
The e-Invoice Compliance Review Framework (RKe) explains how LHDN checks whether a business’ e-Invoices match its real transactions and day-to-day operations. It guides how officers conduct reviews, what they can request, and how compliance is assessed.
2. When does the RKe framework apply in Malaysia?
The RKe framework takes effect from 15 December 2025. From this date, e-Invoice compliance reviews will follow the procedures and standards set out in the framework.
3. What happens during an e-Invoice compliance review?
LHDN will usually give at least 14 days’ notice. Officers may visit your premises, review your invoicing system and MyInvois records, interview staff, and compare e-Invoice data with sales, inventory, or service delivery records.
4. What penalties apply if a business fails to issue e-Invoices?
Failure to issue required e-Invoices (including self-billed or consolidated e-Invoices) can lead to fines ranging from RM200 to RM20,000, and in serious cases, possible imprisonment under the Income Tax Act 1967.
5. Can voluntary disclosure reduce e-Invoice penalties?
Yes. If you discover errors (such as missing or failed e-Invoices) and inform LHDN before a review starts, voluntary disclosure may reduce penalties and help avoid harsher enforcement actions.
