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Malaysia Lifts the e-Invoicing Threshold to RM3m, Again Moving the Ground Under Software Vendors

LHDN says more than 1.1 million smaller businesses are covered by the exemption from 1 September, and the ones that already integrated with MyInvois now have a choice to make.

Fakhrul

2 min read ·

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In his National Day address on 30 August, Prime Minister Anwar Ibrahim announced that the e-invoicing exemption threshold will rise from RM1m to RM3m in annual revenue or sales, effective 1 September. The Inland Revenue Board (LHDN) says more than 1.1 million micro, small and medium businesses benefit, according to The Star. The exemption covers sole proprietors, freelancers, gig workers and content creators as long as revenue stays below RM3m, RinggitPlus notes. There is a catch for group structures: the exemption does not apply if the business has a non-individual shareholder, holding company, related company or joint venture with annual turnover of RM3m or more. Check the group, not just the entity.

This is the second increase in about a year. In December 2025 the threshold went from RM500,000 to RM1m, effective January 2026. Each change was welcome to the businesses it exempted. Each one also moved the target for the people building the software.

Who is now in, and who is out

The mandate was rolled out in phases by turnover. The largest companies went live in August 2024, and later phases brought in smaller bands. The last main phase, for businesses with RM1m to RM5m in annual revenue, started on 1 January 2026. With the new threshold, the part of that cohort below RM3m is exempt again, eight months after going live.

LHDN's message is that it strongly encourages voluntary participation. There is a small incentive: businesses that implement voluntarily can still claim tax deductions of up to RM50,000 a year on implementation costs for years of assessment 2024 to 2027. LHDN also reports that more than 265,000 taxpayers have submitted over 1.84 billion e-invoices since August 2024, so the system clearly works at scale.

For businesses still inside the mandate, the operational rules have not changed. Submissions go to MyInvois as UBL 2.1 XML or JSON, and any single transaction over RM10,000 needs its own validated e-invoice instead of going into a monthly consolidated one. Storecove's August guide sets out both rules clearly.

The cost of a moving threshold

From a builder's seat, the policy itself is defensible. Making a hawker-sized business run a clearance-model e-invoicing integration was always heavy, and the government has clearly decided the collection benefit at the bottom of the market is not worth the friction. My complaint is not the destination. It is the route.

Accounting, POS and billing vendors spent 2025 and early 2026 building MyInvois connectors, onboarding flows and support teams sized for a mass-market mandate. Many priced their roadmaps on the assumption that every business above RM500,000 would have to comply. Customers in the RM1m to RM3m band paid for integrations, trained staff and changed their checkout flows. Some of that spend is now optional. A few vendors will see churn as customers decide that "voluntary" means "off".

The deeper problem is credibility. When a mandate is announced, phased, softened, then softened again, the reasonable response for any business near the line is to wait. That is the opposite of what a digitalisation policy wants.

What to do if you build in this space

  • Do not rip anything out. The RM3m line can move again in either direction, and businesses grow through thresholds. Keep e-invoicing a toggle, not a fork.
  • Sell the workflow, not the compliance. Validated invoices, structured buyer data and automatic reconciliation are worth paying for even without a mandate. Vendors who only sold "avoid the penalty" have the most to lose.
  • Watch your large customers' suppliers. Mandated businesses still have to issue e-invoices to everyone they sell to, so their workflows will keep pulling some smaller counterparties into the system.

What is still unclear is how LHDN will treat businesses in the newly exempt band that already issue e-invoices. Can they simply stop, or will opting out need a formal step? Clear written guidance on that would help vendors more than another round of hand-holding sessions.

Sources

Responses (2)

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  • Marcus Tan

    I would push back a little: phasing in, watching the data and then raising the line is how you would want a revenue authority to behave. The cost fell on vendors who treated an early threshold as permanent.

  • Amira Zainal

    The "toggle, not a fork" advice is right. I have seen two codebases where the e-invoicing path was a separate checkout entirely, and unwinding that is a much bigger job than it should be.

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