E-Invoicing in Malaysia

Summary E-invoicing in Malaysia will change financial transactions by replacing traditional paper invoices with structured electronic formats like XML and JSON. The phased implementation started in 2024, with full adoption expected by 2027.

Businesses with annual revenues above RM100 million are to be the first to comply, followed by mid-sized companies and others by 2026. E-invoicing enhances tax compliance, reduces manual errors, and improves cash flow management.

The MyInvois portal facilitates registration and submission, while legal compliance requires a digital signature and mandatory fields. Benefits include cost savings, faster payments, and better integration with accounting systems.

Introduction

E-invoicing is replacing traditional paper-based invoicing by automating the exchange and processing of invoices between buyers and suppliers. Besides offering a structured electronic format and integration with accounting systems, it expedites payment procedures and guarantees compliance.

Given its propensity to reduce mistakes, support payment cycles, and foster better cash flow management, e-invoicing is seeing increased global adoption. And Malaysia doesn’t plan to be left behind in this digital transformation!

In fact, Malaysia started enforcing mandatory e-invoicing regulations via a phased approach in 2024—aiming for full implementation by 2027. It's anticipated that this drive will improve tax efficiency and encourage digital innovation in the corporate sector. This blog aims to answer all questions related to invoicing and its role in boosting tax compliance.

General Questions about E-Invoicing in Malaysia

Q1: What is e-invoicing?

Electronic invoicing, often known as e-invoicing, is the process of programmatically sending, receiving, and issuing invoices in a structured electronic format. In contrast to traditional invoicing, e-invoicing exploits formats like XML or EDI.

These structured formats ensure secure, machine-readable data exchange to facilitate automated invoice generation, validation, and transmission. Thereby, appreciably reducing manual errors and delayed processing times that plague traditional invoicing.

This data automation and interoperability allow companies to adhere to tax regulations and compliance guidelines in an efficient and cost-effective manner.

Q2: Why is Malaysia implementing e-invoicing?

Malaysia is introducing e-invoicing to improve tax administration efficiency as well as to foster the expansion of the digital economy.

As part of its larger digital transformation strategy, the Malaysian government believes e-invoicing will significantly improve financial transaction transparency. This, in turn, will foster a more compliant business environment that pushes the economy forward.

Q3: Who is required to use e-invoicing in Malaysia?

In Malaysia, the implementation of e-invoicing is structured into phases based on business size—measured by annual turnover. The first phase began on August 1, 2024, and is mandatory for large corporations with a turnover exceeding RM100 million.

The second phase started on January 1, 2025, targeting mid-sized businesses with a turnover between RM25 million and RM100 million. The third phase commences on July 1, 2025. It includes all companies except those with a turnover of RM500,000 or less. These companies are required to adopt e-invoicing by January 1, 2026.

Generally, businesses can voluntarily adopt e-invoicing ahead of their scheduled phase to avoid penalties during compliance deadlines. However, a six-month relaxation period is provided in each phase to ease the transition.

Q4: Is e-invoicing mandatory in Malaysia?

Yes, e-invoicing is mandatory in Malaysia. The first phase began on August 1, 2024. The second phase started on January 1, 2025. The third phase begins on July 1, 2025.

This phased approach aims to ease the transition for businesses of varying sizes, with a six-month relaxation period in each phase to avoid penalties.

Large corporations face stricter compliance requirements earlier. However, smaller businesses will be given more time to adapt their systems to meet the new e-invoicing standards.

Q5: What is the timeline for e-invoicing in Malaysia?

Businesses with yearly sales over RM100 million were required to adhere to e-invoicing requirements by February 1, 2025. Non-compliance will result in penalties. Businesses with annual revenue between RM25 million and RM100 million started the implementation phase on January 1, 2025—with a grace period ending on July 1, 2025.

By July 1, 2025, all businesses except those with a turnover below RM500,000 are required to adopt e-invoicing. This marks the end of the second phase's relaxation period. For smaller companies with turnovers between RM500,000 and RM25 million, the mandatory adoption starts on July 1, 2025—with a grace period until January 1, 2026.

Q6: Is there a grace period for e-invoice in Malaysia?

Yes, Malaysia has a grace period for electronic invoicing. For every stage of the adoption of e-invoicing, the IRBM has instituted a six-month grace period. The purpose of this grace period is to assist companies in acclimating to the new e-invoicing regulations and avoiding fines while doing so.

Q7: Who is exempted from an e-invoice?

A number of entities in Malaysia are excluded from sending electronic invoices. These include taxpayers with an annual turnover below RM150,000. However, this exclusion is contingent on them not having shareholders, subsidiaries, or joint ventures with a turnover exceeding RM150,000.

Other exemptions apply to foreign diplomatic offices, individuals not carrying on business, statutory bodies, and international organisations for specific transactions. Furthermore, several forms of income or expenses are exempt.

For example, pensions, alimony, job income, some dividend distributions, Zakat, and transactions involving securities or derivatives. Small traders, including hawkers—with annual sales below RM150,000—are also exempt.

E-invoice Malaysia Regulations & Compliance

By implementing e-invoicing, Malaysia aims to improve tax compliance, minimise fraudulent transactions, and support the growth of the digital economy. This digital approach also facilitates real-time verification—enabling businesses to maintain audit-ready records and comply with tax laws.

Q8: What are the legal requirements for e-invoicing in Malaysia?

In Malaysia, the legal requirements for e-invoicing are set by the Lembaga Hasil Dalam Negeri (LHDN). These requirements dictate that e-invoices include mandatory fields such as supplier and buyer details, invoice number, date, and tax information.

LHDN also enforces that businesses digitally sign e-invoices and store them for up to seven years for audit purposes. Companies will adopt e-invoicing by utilising the MyInvois portal. Failure to comply may result in fines and other penalties. However, penalties for non-compliance start after a six-month grace period for each phase.

Q9: What format should an e-invoice be in?

The Inland Revenue Board of Malaysia (IRBM) specifies that e-invoices should be generated in either XML or JSON formats. These structured formats are machine-readable and enable seamless integration with accounting systems. In fact, the IRBM doesn’t accept unstructured formats like PDF or JPG as e-invoices.

Q10: How do I register for e-invoicing in Malaysia?

Businesses must complete a detailed procedure via LHDN’s MyInvois portal in order to register for e-invoicing in Malaysia. After reading and agreeing to the terms and conditions, business owners can register with the portal.

Subsequently, they can enter their Sales and Service Tax (SST) registration number. After that, they can click "Register ERP" to register their Enterprise Resource Planning (ERP) system. Afterwards, a client secret and client ID will be given to the business owner to integrate into their accounting software.

To guarantee the legitimacy of e-invoices, companies also need to acquire a digital signature certificate from a Malaysian certifying body. The MyInvois portal allows manual or bulk e-invoice generation, while an API integration is also available for automated submissions.

Q11: What information must be included in an e-invoice?

An e-invoice in Malaysia must include several mandatory fields to ensure compliance with MyInvois standards. For instance, buyer and seller names, tax identification numbers (TIN), addresses, and contact numbers.

Tax information, including tax type, rate, and amount, is also mandatory. Transaction specifics, such as invoice type, number, date, and digital signature, are also requisites for authentication and validation. Additionally, the e-invoice should include product or service details, such as descriptions, quantities, and unit prices.

Compliance with MyInvois standards dictates that all e-invoices be generated in XML or JSON formats to facilitate real-time validation and processing.

How to implement e-invoicing in your business?

Q12: How do businesses generate e-invoices?

Businesses in Malaysia can create electronic invoices in various ways. For instance, they can employ dedicated e-invoicing software solutions that support XML and JSON formats. Alternatively, companies can directly leverage the MyInvois portal, which allows for manual or batch generation of e-invoices via spreadsheet uploads.

APIs can also be utilised to integrate with accounting or Enterprise Resource Planning (ERP) systems. Such integrations are usually facilitated by third-party providers, guaranteeing smooth data flow and adherence to IRBM regulations.

Q13: How can companies integrate e-invoicing with their accounting software?

Companies in Malaysia can integrate e-invoicing with their accounting software via API Integration with the MyInvois portal. This integration is ideal for large taxpayers or businesses with substantial transaction volumes since it streamlines processes and reduces manual errors.

Many cloud-based e-invoicing solutions also provide seamless integration with various business systems. Most of these solutions offer automated data extraction, format conversion, and real-time validation with IRBM's MyInvois system. For smaller businesses without API capabilities, manual upload options are available through the MyInvois portal.

Q14: What are the benefits of adopting e-invoicing for businesses?

E-invoicing reduces processing expenses by up to 80% as compared to traditional methods. This is because it doesn’t require paper, printing, or postage. It also significantly increases operational efficiency by reducing human data entry and invoicing time. Thereby, freeing up staff members to concentrate on strategic tasks.

It also leads to faster transactions, which facilitate faster payment cycles and better cash flow management. Furthermore, by eliminating manual data entry, e-invoicing appreciably lowers the possibility of human error, fraud and disputes.

Technical & system integration FAQs

Q15: What is the role of LHDN’s e-invoice API?

LHDN's e-invoice API facilitates the seamless integration between businesses' internal systems and the MyInvois platform. As such, it serves as the bridge to electronic invoicing.

By connecting via the LHDN e-invoice API, businesses can automate the submission of e-invoices. Thereby, enabling real-time validation of transaction data before invoices are sent to customers.

Generally, the LHDN API augments efficiency via automation, which accelerates invoice processing and improves cash flow management. Additionally, real-time validation ensures that any discrepancies are pinpointed immediately—allowing for prompt corrections and compliance with regulatory requirements.

Q16: Can small businesses use e-invoicing without an ERP system?

Yes, small businesses can leverage e-invoicing without an ERP. Alternatively, Small and medium-sized enterprises (SMEs) with lesser transaction volumes can employ the MyInvois portal. This free platform by IRBM enables to produce, submit, and manage e-invoices manually.

SMEs can also exploit low-cost and free e-invoicing tools like cloud-based solutions. Some of these accessible solutions provide streamlined invoice submission procedures without necessitating intricate ERP integrations.

Q17: What should I do if my e-invoice submission fails?

Your e-invoice submission may fail in some circumstances. For instance, structural non-compliance with XML or JSON formats, missing or inaccurate information such as incorrect Tax Identification Numbers (TIN) or addresses, and invalid digital signatures.

To troubleshoot, first review and correct any data errors or compliance issues in the invoice. Then, resubmit the corrected invoice through the MyInvois portal. If failure persists, for B2B transactions, contact the buyer to confirm invoice details. For B2C, notify the customer promptly about the issue and offer assistance if needed. For technical support, taxpayers can contact the LHDN e-Invois Help Desk.

Regularly updating invoicing software and conducting data audits can prevent future failures.

Q18: How can businesses ensure data security and compliance in e-invoicing?

To ensure data security and compliance in e-invoicing, businesses should adopt several best practices to comply with Malaysia’s data protection laws. First, ensure secure transmission by exploiting encryption methods like TLS for data in transit and AES for stored data. Secondly, implement robust authentication mechanisms, such as multi-factor authentication.

Third, businesses should iteratively conduct regular security audits to identify vulnerabilities and maintain up-to-date security software. Additionally, companies should provide security awareness training for employees to recognise and handle potential security threats effectively.

E-Invoicing for different business sectors

Q19: How does e-invoicing work for B2B transactions?

In Malaysia, e-invoicing for business-to-business (B2B) transactions entails several crucial procedures. First, the supplier creates an e-invoice in a structured format (XML or JSON) within their ERP system or a dedicated e-invoicing platform.

The e-invoice is then programmatically submitted to IRBM via the MyInvois portal. Alternatively, it’s sent via an API for real-time validation. Upon validation, IRBM assigns a unique identifier to the e-invoice.

This identifier is then relayed back to the supplier's system. This validated e-invoice is subsequently transmitted to the buyer, who can verify its authenticity utilising the unique identifier.

Approval workflows may vary depending on the buyer's system. However, it generally involves automated checks for invoice accuracy and compliance. To ensure the e-invoice satisfies all regulatory criteria, IRBM's validation checks minimise errors and improve adherence to tax legislation.

Q20: Is e-invoicing mandatory for B2C transactions?

In Malaysia, e-invoicing isn’t required for business-to-consumer transactions unless the buyer specifically demands it. However, if retail companies decide to send e-invoices to customers, they must ensure they appropriately record and submit all relevant data.

For instance, clear transaction details, which may be in electronic format, should be provided by businesses for digital receipts. However, unless the buyer requests it, these details don’t have to be submitted via the MyInvois portal.

Costs & challenges of e-invoicing

Q21: How much does it cost to implement e-invoicing?

The cost implication of e-invoicing largely depends on the size of the company and the complexity of the integration. In fact, most costs may revolve around staff training.

Furthermore, some companies may have to factor in annual license fees that range from RM1,200 to RM60,000. To help offset these expenses, the Malaysian government lends a helping hand via tax benefits. It offers deductions of up to RM50,000 annually for consultancy fees associated with the adoption of e-invoicing for micro, small, and medium enterprises (MSMEs) between 2024 and 2027.

Q22: What are the common challenges businesses face with e-invoicing?

When implementing e-invoicing, businesses frequently encounter a number of difficulties. For instance, the transition process can sometimes be complicated and necessitate major adjustments to current workflows and systems. To overcome this challenge and quickly adapt to new digital procedures, extensive employee training is mission-critical.

Another significant obstacle is system integration. It can be expensive and time-consuming because e-invoicing solutions need to be integrated with existing accounting and ERP systems. To overcome this, businesses can employ e-invoicing platforms that facilitate smooth connection with ERP systems.

Additionally, they can invest in software that automatically updates to meet new regulations and keep up with regulatory changes.

Q23: Can businesses outsource e-invoicing to third-party providers?

It’s highly recommended that businesses outsource the implementation of e-invoicing to an experienced third party. This eases any pain points and frustrations that inherently come with technology adoption.

Third-party technology firms like Techies are extensively knowledgeable about the latest e-invoicing regulations—appreciably lowering the risk of non-compliance in an evolving legislative landscape.

By working with specialist personnel, companies can conserve internal resources, enabling them to concentrate on their core competencies. Furthermore, third-party suppliers frequently provide scalable solutions that don't require large internal investments and can adjust to the expanding needs of the company.

Conclusion

Undoubtedly, e-invoicing is seismically transforming how Malaysian companies handle financial transactions—which is a game-changer. Among its many advantages are increased productivity, decreased human error, financial savings from elimination of paper and printing expenses, and improved data security.

By guaranteeing accurate and timely reporting of financial transactions, e-invoicing also streamlines tax compliance—advancing the government's modernisation of tax administration. All things considered, e-invoicing is ushering in a new era of financial inclusivity and transparency that will spur innovation and foster economic growth.