E-Invoice Exemption at RM3 Million: Who Qualifies and Who Doesn't

Since 1 September 2026, the e-invoice exemption in Malaysia covers businesses with annual turnover below RM3 million, up from RM1 million. LHDN announced the change on 30 August after the Prime Minister's National Day address, and updated its e-Invoice Guideline to version 4.8 the same day. According to LHDN, more than 1.1 million businesses benefit from the exemption.

Since then we have had a steady stream of questions from clients. Some owners want to switch e-invoicing off tomorrow. Others are not sure whether the exemption even applies to them, especially when they sit inside a group. This article sets out what the new rule says, the catch for related companies, what happens if you already started, and the deadlines that have not moved.

What Changed on 1 September 2026

The exemption sits in section 1.6 of the LHDN e-Invoice Guideline. In version 4.8, taxpayers with an annual turnover or revenue of less than RM3,000,000 are not required to implement e-invoicing. The previous version set that line at RM1 million.

Nothing else about the rollout schedule moved. The phases were always set by turnover in financial year 2022, and the mandatory dates are unchanged:

In practice, the change takes a large slice of what used to be Phase 4 out of the mandate. Companies between RM1 million and RM3 million were preparing for full compliance by the end of 2027. They now have no obligation at all, unless the group rule below catches them.

The Group Company Catch

This is the part most summaries skip, and it is where we expect the most mistakes. Section 1.6.10 of the guideline says the exemption does not apply to a business that:

• has a non individual shareholder (a company, for example) with annual turnover or revenue of at least RM3 million;
• is a subsidiary of a holding company with turnover or revenue of at least RM3 million; or
• has a related company or joint venture with turnover or revenue of at least RM3 million.

A typical example: a family runs a trading company with RM12 million turnover and a smaller service company with RM800,000 turnover, both owned through the same holding company. The service company looks exempt on its own numbers. It is not, because its holding company and its related trading company are both above RM3 million. It has to issue e-invoices.

"Related company" follows the meaning in the Promotion of Investments Act 1986, so if your group structure is anything more than one company owned by individuals, confirm your position with your tax agent before you stop anything.

Already Started? Think Before You Switch Off

Many companies between RM1 million and RM3 million spent most of 2026 getting ready, and some have been issuing e-invoices since January. The guideline does not clearly say whether they may now stop. It does say that any business may take part voluntarily, regardless of turnover.

Our advice to clients in this band is to keep the setup running until LHDN clarifies, for three practical reasons:

1. Your customers may still ask for it. Larger buyers have built their accounts payable process around validated e-invoices. Telling a key customer you have stopped can create friction you do not need.
2. Turnover moves. The guideline does not spell out which year's turnover decides the exemption. A good year that pushes you over RM3 million could pull you back in. Switching off and on again costs more than leaving it running.
3. The cost is mostly already paid. If your system is connected to MyInvois, the ongoing effort is small. The expensive part was setup and cleaning customer TIN data.

If you are firmly exempt, have no group exposure and no customers asking, stopping is a reasonable business decision. Just document why, and keep the records.

Deadlines That Still Apply

The higher exemption does not change two dates that matter to businesses still inside the mandate.

Phase 4 relaxation until 31 December 2027

In April 2026 the government extended the relaxation period for Phase 4 taxpayers by twelve months, to 31 December 2027. During this period they may issue monthly consolidated e-invoices instead of one e-invoice per transaction, and no penalties are imposed for non compliance. Enforcement starts on 1 January 2028. If you are now in the RM3 million to RM5 million band, you have about fourteen months to move from consolidated submissions to proper transaction level e-invoices.

Voluntary disclosure window until 31 December 2027

LHDN also runs a special voluntary disclosure programme for e-invoices, known as PKPS. Businesses that missed transactions, submitted e-invoices with errors, or never submitted from their mandatory date can correct their records without penalty until 31 December 2027. On 1 October 2026, LHDN's chief executive said about 268,000 taxpayers had joined e-invoicing and nearly 1.9 billion e-invoices had been submitted for validation, and he urged anyone with errors to use the programme.

Budget 2027, tabled on 9 October, did not change the e-invoice rollout. So for now these are the dates to plan around.

What This Means by Business Size

Getting Off Consolidated E-Invoices

For companies still in the mandate, the real work in the next year is replacing the monthly consolidated submission with an e-invoice per transaction. That is where manual tools start to hurt. Issuing every invoice through the MyInvois portal by hand works for a few dozen invoices a month. It does not work for a distributor issuing hundreds of invoices, credit notes and debit notes a week.

The three ways to issue e-invoices

• MyInvois portal: free and manual. Fine for low volume, slow and error prone beyond that.
• Accounting software with a built in connector: most local packages now submit directly. A good fit for smaller companies on AutoCount, SQL Account and similar tools.
• ERP integrated through the API: invoices, credit notes and self billed documents submit automatically from the ERP, and the validated QR code prints on the document. This is how we connect SAP Business One to MyInvois.

Whichever route you choose, most failures come from data, not software: missing customer TINs, wrong classification codes, and credit notes that do not reference the original invoice. Our article on e-invoice setup mistakes lists the ones we fix most often, and the older beginner's guide to e-invoicing covers the basics if your team is new to it.

When this becomes an ERP question

For trading companies especially, e-invoicing tends to expose deeper problems: customer records kept in three places, stock that does not match the books, invoices typed twice. If that sounds familiar, the fix is not a better e-invoice tool but one system for sales, stock and finance. Our guides to ERP for wholesale and distribution and moving a service business from accounting software to ERP cover when that step makes sense. If you are weighing a move, our companion post on SAP Business One implementation in Malaysia explains what the project looks like and how long it takes.

And if a local package is all you need, that is fine too. Our comparison of SAP Business One vs SQL Account is honest about where each one fits.

Questions to Settle with Your Tax Agent

The guideline answers the headline question but leaves a few practical ones open. These are the points we suggest raising with your tax agent or auditor before you make any change, and getting their view in writing:

• Which turnover figure applies to us? Section 1.6 refers to annual turnover or revenue but does not name the year. Agree with your agent which financial statements you rely on, and keep a copy with your decision.
• Who counts as related? Walk through your shareholders, holding company, sister companies and joint ventures one by one. Directors often forget dormant or overseas entities that still count.
• What if we cross RM3 million later? Section 1.5 sets out when new and growing businesses must start. Know your trigger point in advance so you are not scrambling in the middle of a busy year.
• What do our big customers expect? This is a commercial question rather than a tax one, but it often decides the matter. Ask your top ten customers directly.

A Simple Checklist for This Quarter

1. Confirm your turnover band and write down the figure and year you used.
2. Map your group: shareholders that are companies, holding company, related companies and joint ventures, with their turnover.
3. If you are exempt and already live, decide with your finance lead whether to keep issuing. Record the decision.
4. If you are still in the mandate, list every document type you issue (invoices, credit notes, debit notes, refunds, self billed invoices) and check each one submits correctly.
5. Check past submissions for gaps or errors and fix them through PKPS before 31 December 2027.
6. Clean customer master data: TINs, registration numbers and addresses.

For official updates, LHDN publishes guidelines, FAQs and the developer documentation on the MyInvois portal. Our e-invoice integration team can review your setup, and if the work needs to run alongside wider IT support, our IT outsourcing service covers that too.