Malaysia Enters Fourth Phase Of E-invoicing To Strengthen Tax System, Ease SME Compliance

By Siti Noor Afera Abu

KUALA LUMPUR, Jan 1 (Bernama) -- Malaysia entered the fourth phase of electronic invoicing (e-invoicing) rollout today, marking another part of the government’s effort to strengthen tax administration while easing the compliance burden on small and medium enterprises (SMEs).

Introduced as a digital platform to streamline invoicing and improve tax compliance, e-invoicing requires businesses to generate and submit invoices electronically, enhancing reporting and tax collection efficiency while reducing leakage.

Under the current timeline, the government planned to implement the fifth phase on July 1, 2026, for businesses with an annual turnover of up to RM1 million, with those earning less than RM500,000 annually exempt.

However, on Dec 6, 2025, Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim announced that the exemption threshold would be raised to RM1 million from RM500,000, meaning firms with annual revenue below RM1 million will not be required to comply with e-invoicing beginning in 2026.

The rollout of e-invoicing began on Aug 1, 2024, initially covering companies with annual sales above RM100 million. As of Nov 4, 2025, the Inland Revenue Board of Malaysia (IRB) recorded more than 106,000 registered taxpayers and transactions exceeding RM675 million through the e-invoicing system, reflecting growing adoption across the business ecosystem.

Meanwhile, businesses with transactions exceeding RM10,000, as well as electricity and telecommunications services providers, will be required to issue individual e-invoices instead of consolidated ones from Jan 1, 2026.

Currently, seven industries are required to issue individual e-invoices: automotive (sales of motor vehicles), aviation (flight tickets and private charters), gold products and luxury goods, construction, wholesale and retail of construction materials, licensed betting and gaming activities, and payments to agents or distributors.

Easing the Burden of SMEs, Room for Expansion 

To recap, the Center for Market Education’s chief executive officer, Dr Carmelo Ferlito, had stated that exempting companies with annual revenue below RM1 million from implementing e-invoicing will ease administrative pressure on small and medium enterprises (SMEs) and allow them to focus on their core business activities.

He said that the exemption would free up time and resources to focus on business rather than on questionable administrative compliance, giving SMEs more space to focus on strategy and growth before adopting digital tax tools.

Malaysia Micro Enterprises Academy chief executive officer Abd Azharee Abdul Wahid also stated earlier that the move is expected to encourage entrepreneurs to become more competitive in advancing their businesses and allow them to focus on developing their businesses, products and services.

He said that entrepreneurs can also improve in areas such as marketing, expanding their networks, and exploring opportunities at the local and international levels.

“It is giving us room to breathe because in this challenging economic situation, we have the opportunity to restructure our strategies, especially in 2026,” he said.

Meanwhile, the president of the Small and Medium Enterprises Association Malaysia, Datuk William Ng, has previously said that the phased approach would ultimately benefit SMEs by creating room for reinvestment and expansion once the system is fully embedded.

He said the association also does not support calls to exempt or further postpone e-invoicing for SMEs, stressing that delays would not necessarily improve readiness.

Ng said that simply postponing the implementation for six months, a year, or even two years will not make businesses ready.

Anwar previously said e-invoicing would be implemented comprehensively in 2026, alongside the self-assessment system for stamp duty, to further strengthen tax compliance, while tax refunds would also be expedited.

Expressing optimism about the IRB’s performance, the Prime Minister previously noted that the introduction of new systems, such as e-invoicing, has improved efficiency and discipline, thereby contributing to stronger revenue collection.

Tax collections in 2026 are projected to rise, with direct taxes estimated at RM187.4 billion and indirect taxes at RM83 billion, supported by targeted measures, sustained domestic demand and the gradual maturation of the e-invoicing system.

-- BERNAMA