Malaysian SMEs with an annual turnover below RM500K are temporarily exempted from implementing the e-Invoice system. The Inland Revenue Board of Malaysia (LHDN) has released a new phased timeline for e-Invoicing based on annual business turnover. Here’s the latest breakdown of the e-Invoice rollout:
Phase-by-Phase E-invoice Implementation
| Phase | Annual Turnover | Implementation Date | Grace Period |
| Phase 3 | RM5 million – RM25 million | 1 July 2025 | 1 July 2025 – 31 December 2025 |
| Phase 4 | RM5 million – RM25 million | 1 January 2026 | 1 January 2026 – 30 June 2026 |
| Phase 5 | RM5 million – RM25 million | 1 July 2026 | 1 July 2026 – 31 December 2026 |
| Phase 6 | RM5 million – RM25 million | Exempted from e-Invoice | – |
Key Transaction Rule Effective 1 January 2026
Starting 1 January 2026, all businesses—regardless of size or industry—must issue e-Invoices for sales or service transactions exceeding RM10,000.
Note: Consolidated e-Invoices will no longer be allowed.
This new requirement applies across all industries and is part of LHDN’s effort to strengthen tax compliance and transparency.
When Should Your Business Start E-Invoicing?
The e-Invoice start date depends on when your business commenced operations and your annual revenue:
| Business Start Year | Implementation Timeline |
| From 2023 to 2025 (≥ RM500k turnover) | 1 July 2026 |
| From 2026 onwards | If revenue ≥ RM500k in the first year: – E-Invoice starts 1 July 2026 or upon business start If revenue is below RM500k in first year: – E-Invoice starts 1 Jan of the second year after turnover exceeds RM500k |
| Started before 2023 | Implementation date determined based on FY2022 annual turnover |
What This Means for Malaysian Businesses
- Mid-sized businesses (RM5m–RM25m) must be ready by July 2025.
- Smaller businesses (RM1m–RM5m) will start January 2026.
- Micro businesses (RM500k–RM1m) join in July 2026.
- Businesses earning below RM500k/year are exempt—unless revenue later crosses the RM500k mark.
If your SME business is new or still growing, stay alert to your turnover and be prepared to implement e-Invoicing once the RM500k threshold is crossed.
Malaysia E-Invoicing Implementation 2025 FAQs
1. Who is required to issue e-Invoices in Malaysia?
All taxpayers including companies, partnerships, sole proprietors, and freelancers are required to issue e-Invoices based on their annual turnover. Businesses earning below RM500,000 are exempt unless their revenue later exceeds that threshold.
2. What is the RM10,000 e-Invoice rule?
Effective 1 January 2026, any sales or service transaction exceeding RM10,000 must be supported by an individual e-Invoice. Issuing consolidated e-Invoices for multiple transactions will no longer be allowed. This applies to all industries.
3. What is the e-Invoice implementation date for new businesses in Malaysia?
The following are three likely implementation scenarios for existing and new businesses:
Scenario 1: Existing Business Since YA2022
| Annual Revenue（YA2022） | Subsequent Year(YA2023–YA2025） | Implementation date |
| RM5million – RM25million | 1 July 2025 | |
| RM1million – RM5million | 1 January 2026 | |
| ≥ RM500,000 – RM1million | 1 July 2026 | |
| < RM500,000 | any year between YA2023 to YA2025, above RM500,000 | 1 July 2026 |
| < RM500,000 | YA2026 and after, above RM500,000 | 1 Jan of 2nd year after threshold hit |
| < RM500,000 | Below RM500,000 | Exempted |
Scenario 2: New Business Between YA2023–YA2025
| Annual Revenue (YA2023–YA2025) | Implementation Date |
| ≥RM500,000 (any year between YA2023 to YA2025) | 1 July 2026 |
| <RM500,000 (exempt) | Exempt |
| Exceeds RM500k in YA2026 or after YA2026 | 1 Jan of 2nd year after threshold hit |
Scenario 3: New Business From YA2026 Onwards
| Annual Revenue (First YA) | Implementation Date |
| Non-exempt | 1 July 2026 OR business start date (whichever later) |
| ≥RM500,000 | 1 Jan of 2nd Year after threshold hits (e.g., 2028 for YA2026) |
| <RM500,000 (exempt) | Exempt until revenue exceeds RM500k and 1 Jan of 2nd Year after threshold hits |
Non-exempt conditions：
- Your holding company with revenue exceeding RM500,000
- Your related companies with revenue exceeding RM500,000
In this case, you must implement the E-Invoice by July 1, 2026, even if your own revenue is below RM500,000.
4. Who is exempt from e-invoice implementation?
If you qualify for the MSME (Micro, Small, and Medium Enterprises) exemption, you must meet the following criteria:
- Operate independently (no holding or related companies);
- Annual revenue is below RM500,000.
5. Is e-Invoicing compulsory for freelancers or small businesses?
Yes, if your annual income or business revenue is RM500,000 or more, e-Invoicing becomes compulsory based on the phased rollout. If you’re below this threshold, you’re currently exempt, unless your income increases in future.
6. How do I check which e-Invoice phase my business is in?
Refer to your financial year 2022 turnover (if your business started before 2023) or monitor your latest annual turnover. Here’s a quick guide:
- RM5m – RM25m → Phase 3 → 1 July 2025
- RM1m – RM5m → Phase 4 → 1 Jan 2026
- RM500k – RM1m → Phase 5 → 1 July 2026
- Below RM500k → Phase 6 → Exempt (unless turnover increases)
7. What happens during the e-Invoice grace period?
The moratorium period is a 6-month grace period after your phase’s implementation date, where you are encouraged to adopt e-Invoicing without penalties. For example, Phase 3 businesses have a moratorium from 1 July to 31 December 2025.
8. What system should I use to issue e-Invoices in Malaysia?
Businesses must issue e-Invoices through the LHDN MyInvois system or an approved e-Invoicing provider that integrates with the LHDN platform. Ensure your accounting software is compliant.
Stay Compliant with LHDN E-invoicing
Whether you’re preparing for Phase 3 or planning ahead for 2026, now is the time to start evaluating your invoicing system and getting familiar with LHDN’s e-Invoice platform.Follow us on Facebook for the latest updates or start with our E-invoicing Guide for Malaysian Businesses.
