Introduction
The Ministry of Finance (“MOF”) has announced a six-month extension for the mandatory implementation of e-Invoicing for Micro, Small, and Medium Enterprises (“MSMEs”). Initially scheduled to take effect on 1 July 2025, the deadline has now been postponed to 1 January 2026.
This decision was revealed by Finance Minister II, Senator Datuk Seri Amir Hamzah Azizan, in the Dewan Rakyat on 20 February 2025. The extension is expected to benefit over 240,000 MSMEs, providing them with additional time to prepare for the transition and adapt to the new system.[1] Overall, the postponement in the implementation of the third phase of e-Invoicing is a huge relief for the industry players, and the government was praised for being pragmatic in its approach.
What is E-Invoicing?
E-Invoicing is a digital version of a transaction record between a supplier and a buyer, serving as a replacement for traditional paper or electronic documents like invoices, credit notes, and debit notes. Essentially, an e-Invoice contains the same salient information as any traditional document, i.e., the supplier’s and buyer’s information, item descriptions, quantity, price (excluding tax), applicable taxes, and the total amount, ensuring accurate transaction documentation for daily business operations.
Table 1 illustrates what is considered an e-Invoice and what is not:[2]
This initiative is part of Malaysia’s Digital Economy Blueprint (“MyDIGITAL”), aimed at strengthening Malaysia’s digital services infrastructure and digitalising tax administration.[3]
Additionally, the government has introduced e-Invoicing in phases based on business turnover:[4]
Recognising the challenges faced by smaller businesses, the government has postponed the mandatory implementation of e-Invoicing for taxpayers with an annual turnover between RM150,000 and RM500,000 to 1 January 2026. Additionally, businesses with an annual turnover below RM150,000 have been exempted from e-Invoicing requirements.[5]
Additional Support for MSMEs
To assist MSMEs in adopting e-Invoicing, several initiatives have been launched, including:
- MyInvois Portal: A free platform provided by LHDN that allows businesses to issue e-Invoices. This is ideal for businesses without access to Application Programming Interface (“API”) integration. MSMEs can also use the MyInvois mobile app to generate e-Invoices conveniently from their smartphones.
- API: An API is a programming code to enable direct data transmission between the taxpayers’ system and the MyInvois system. This is ideal for large taxpayers or businesses with substantial transaction volumes.
Table 2 provides a summary to aid businesses in deciding which e-Invoicing method best suits their needs:
The government has also introduced tax incentives and grants related to the e-Invoice implementation in Budget 2024. This incentive provides a tax deduction of up to RM50,000 per year for expenses related to environmental, social, and governance (“ESG”) initiatives, including consultation fees for MSMEs implementing e-Invoicing. The tax relief is applicable from the year of assessment 2024 to 2027.[6]
Final Thoughts
The extension of the e-Invoicing deadline offers a valuable opportunity for MSMEs to adequately prepare for this transition. However, businesses should not view this as an indefinite postponement but rather as a crucial window to implement necessary changes.
For further information, please contact:
Alfred Tan Hsiong Vel, Azmi & Associates
afred.tan@azmilaw.com
- See page 21 of the Parliament’s Hansard (Bil. 10, 20 February 2025) (“Hansard”).
- Lembaga Hasil Dalam Negeri (“LHDN”), e-Invoice Guideline, 21 February 2025.
- LHDN, e-Invoice, ‘Introduction’ (https://www.hasil.gov.my/en/e-invoice/).
- LHDN, ‘e-Invoice Implementation Timeline’ (https://www.hasil.gov.my/en/e-invoice/e-invoice-implementation-timeline/).
- See page 20 of the Hansard.
- LHDN, ‘Implementation of E-Invoice in Malaysia Frequently Asked Questions’, 22 February 2025.
