e-Invoice for small businesses: who must comply and how to do it

Summary

e-Invoice is a digital representation of a transaction between a supplier and a buyer, in a structured machine-readable format (XML/JSON), that is validated by LHDN (HASiL). It is submitted through two mechanisms: the MyInvois Portal or the API. Malaysia's model adopts the Continuous Transaction Control (CTC) model. (Source: General e-Invoice FAQs, HASiL.)

For small businesses, the two most important numbers are:

• RM3 million exemption threshold — businesses with annual income/sales of less than RM3 million are not required to implement e-Invoice (from 1 September 2026).
• Phase 4 (up to RM5 million) — businesses with turnover up to RM5 million must implement e-Invoice from 1 January 2026.

Who must implement e-Invoice?

Mandatory: Phase 4 (turnover up to RM5 million)

Taxpayers with turnover up to RM5 million must implement e-Invoice from 1 January 2026 — or 1 July 2026 for businesses that commenced operations in 2023–2025 with income ≥ RM3 million. (Source: e-Invoice Specific Guidelines v4.9, Table 16.1; General e-Invoice FAQs, question 13.)

Not mandatory: RM3 million exemption threshold

The Government raised the e-Invoice implementation threshold from RM1 million to RM3 million, effective 1 September 2026. SMEs with annual income/sales of less than RM3 million are not required to implement e-Invoice (including self-billed e-Invoices). (Source: HASiL media statement, 30 August 2026; e-Invoice Guidelines v4.8, §1.6.1(e).)

However, this exemption does not apply if the business has:

• non-individual shareholders;
• a holding company; or
• a related company/joint venture with turnover ≥ RM3 million.

(Source: General e-Invoice FAQs, question 99; e-Invoice Guidelines v4.8, §1.6.10.)

Voluntary participation is encouraged even if the business is not required to. (Source: HASiL media statement, 30 August 2026.)

Implementation phases

Phases 1–3 (2024–2025)

Before Phase 4, phases 1–3 were implemented for businesses with higher turnover: above RM100 million from 1 August 2024; RM25 million – RM100 million from 1 January 2025; and RM5 million – RM25 million from 1 July 2025. (Source: General e-Invoice FAQs, question 10.)

Phase 4 (from 2026)

Taxpayers with turnover up to RM5 million must implement e-Invoice from 1 January 2026 — or 1 July 2026 for businesses that commenced operations in 2023–2025 with income ≥ RM3 million. (Source: Specific Guidelines v4.9, Table 16.1; General e-Invoice FAQs, question 13.)

Soft landing period until 31 December 2027

During the interim soft landing period, monthly consolidated e-Invoices are allowed for all activities/transactions, including consolidated self-billed invoices, until 31 December 2027. During this period, LHDNM will not take prosecution action under section 120 of the Income Tax Act 1967 as long as the consolidated e-Invoice is submitted in accordance with the requirements of section 16.2 of the guidelines. (Source: Specific Guidelines v4.9, Table 16.1; sections 16.2–16.3.)

After the soft landing period ends, full enforcement is expected to begin from 1 January 2028. Important note: the date 1 January 2028 is not stated literally in the guideline table — it is an interpretation after the soft landing period ends (31 December 2027). This item still awaits official confirmation from HASiL — check again with HASiL before deciding.

e-Invoice SVDP (Special Voluntary Disclosure Programme / PKPS)

This programme is in effect from 7 July 2026 to 31 December 2027, and is open to: (a) those who implemented e-Invoice on time but did not submit completely for some transactions; (b) those who submitted with errors/non-compliance; and (c) those who have not submitted at all since the mandatory date. Corrections/voluntary disclosures via MyInvois within that period are not subject to penalties, except for submissions that do not comply with specifications, fraud, intentional default or negligence. (Source: HASiL media statement 7 July 2026; Specific Guidelines v4.9, sections 17.1, 17.3–17.4.)

How to implement

1. Identify your business status — annual turnover, the date operations commenced, and whether the RM3 million exemption applies.
2. Use the MyInvois Portal (free) or the API. The MyInvois Portal is the official free portal for issuing e-Invoices, with documents, user guides, SDKs, and e-POS for retailers. (Source: MyInvois Portal, HASiL.)
3. e-POS for retailers — a free digital POS platform for SMEs; it can be used to generate e-Invoices without a whole system. (Source: HASiL media statement, 9 January 2026.)
4. BRN/TIN numbers — businesses registered with SSM are required to state the new BRN number (12 digits) when submitting e-Invoices. HASiL has temporarily disabled the BRN validation requirement from the e-Invoice submission process starting 19 July 2024 (due to validation failures), and that status remains disabled as of this review. (Source: General e-Invoice FAQs, question 36.)
5. Keep records — records and supporting documents must be kept in line with existing tax requirements; e-Invoice-specific details — this item still awaits official confirmation from HASiL — check again with HASiL before deciding.
6. Existing tax claims — taxpayers may continue claiming tax deductions/personal reliefs using existing documentation until the legislation is amended. (Source: General e-Invoice FAQs, question 4.)

Simple examples

Mak Cik Salmah's Grocery Store — annual turnover RM2.4 million (less than RM3 million). It is not required to implement e-Invoice, but may participate voluntarily using the MyInvois Portal. (Illustrative example to show the concept — not specific tax advice.)

Encik Rahman's Food Supplier — annual turnover RM3.5 million (Phase 4, up to RM5 million). It must implement e-Invoice and can use the MyInvois Portal or e-POS; until 31 December 2027, it can submit monthly consolidated e-Invoices during the soft landing period. (Illustrative example — not specific tax advice.)

FAQ

Q. Is my business required to implement e-Invoice? A. It depends on turnover and exemptions: businesses with annual income/sales of less than RM3 million are not required (from 1 September 2026); businesses with turnover up to RM5 million (Phase 4) must implement from 1 January 2026 (or 1 July 2026 for businesses that commenced operations in 2023–2025 with income ≥ RM3 million). Verify your specific situation with HASiL or a qualified tax advisor.

Q. What is a self-billed e-Invoice? A. A self-billed e-Invoice is an e-Invoice issued by the taxpayer themselves for certain types of payments. Full details of self-billed situations — this item still awaits official confirmation from HASiL — check again with HASiL before deciding.

Q. Do I need to change my entire accounting system? A. Not necessarily. You can use the MyInvois Portal (free) or e-POS to generate e-Invoices without building a new system. (Source: MyInvois Portal; HASiL media statement 9 January 2026.)

Q. What happens if I don't submit e-Invoices? A. During the soft landing period (until 31 December 2027), LHDNM will not take prosecution action under section 120 of the Income Tax Act 1967 as long as the consolidated e-Invoice is submitted in accordance with the requirements of section 16.2 of the guidelines. Penalties or actions outside that situation — this item still awaits official confirmation from HASiL — check again with HASiL before deciding.

Q. Can I still use existing receipts and documents? A. Yes, for now. Taxpayers may continue claiming tax deductions/personal reliefs using existing documentation until the legislation is amended. (Source: General e-Invoice FAQs, question 4.)

Glossary

• e-Invoice — a structured digital transaction document validated by LHDN.
• MyInvois — HASiL's official free portal for issuing e-Invoices.
• API — a way to connect systems directly to LHDN's systems for e-Invoice submission.
• CTC (Continuous Transaction Control) — the continuous transaction control model used by Malaysia.
• Self-billed invoice — an e-Invoice issued by the payer for certain types of payments.
• PKPS / SVDP — Special Voluntary Disclosure Programme for correcting e-Invoice compliance.
• Interim relaxation (soft landing) — a transition period during which monthly consolidated e-Invoices are allowed.
• Turnover — a business's total annual gross sales/income.
• SME — micro, small and medium enterprises.
• BRN — business registration number (SSM).
• TIN — Tax Identification Number.
• Section 120 ITA 1967 — provision of the Income Tax Act 1967 relating to e-Invoice-related failure.