The Inland Revenue Board of Malaysia (IRBM/LHDN) has introduced an important update to Malaysia’s e-Invoice implementation framework. Following the increase of the e-Invoice exemption threshold from RM1 million to RM3 million, taxpayers with annual turnover or revenue below RM3 million may now be exempt from e-Invoice implementation, subject to the applicable exemption criteria. This development provides significant relief to many micro and small businesses that were previously required to implement e-Invoice from 2026.
1. The e-Invoice exemption threshold is now RM3 million
Under the latest IRBM guidance, taxpayers with annual turnover or revenue below RM3 million may be exempted from issuing e-Invoices. The exemption applies to various categories of taxpayers, including individuals, sole proprietorships, partnerships, companies and cooperatives, subject to the conditions prescribed under the e-Invoice Guidelines.
Therefore, a business with annual turnover of, for example, RM800,000, RM1.5 million or RM2.8 million may potentially be outside the mandatory e-Invoice requirement. However, businesses should not rely solely on the RM3 million turnover test. The exemption is subject to specific eligibility criteria.
2. Not every business below RM3 million is automatically exempt
The RM3 million threshold should be considered together with the exemption criteria under Section 1.6.10 of the e-Invoice Guidelines. IRBM has specifically clarified that the exemption does not apply to certain taxpayers even where their own annual turnover or revenue is below RM3 million.
For example, the exemption criteria take into account certain ownership and group-related circumstances, including cases involving:
- a non-individual shareholder or equivalent with annual turnover or revenue of at least RM3 million;
- certain subsidiaries of entities that have reached the RM3 million threshold; and
- certain related companies or joint venture arrangements involving taxpayers that have reached the relevant threshold.
Accordingly, companies should consider their shareholding, group structure and related entities, rather than looking only at their own revenue.
3. What if the business has already started e-Invoice?
One of the most important clarifications from IRBM is that businesses which have already commenced e-Invoice implementation may, if they meet the exemption criteria, discontinue issuing e-Invoices. For example, a company with annual revenue below RM3 million that commenced e-Invoice implementation on 1 July 2026 may discontinue issuing e-Invoices if it qualifies for the exemption.
IRBM has also clarified that:
- no separate application to IRBM is required;
- no prior approval from IRBM is required; and
- the taxpayer may discontinue issuing e-Invoices immediately once it qualifies for the exemption.
Alternatively, the taxpayer may voluntarily continue issuing e-Invoices.
4. What about e-Invoices that were not issued previously?
The latest FAQ also provides relief for certain taxpayers who were previously required to implement e-Invoice under the earlier RM1 million threshold but are now exempt under the RM3 million threshold.
IRBM has clarified that an eligible taxpayer with annual turnover or revenue below RM3 million is not required to participate in the e-Invoice Special Voluntary Disclosure Programme (SVDP) merely because of previously omitted e-Invoices, provided the taxpayer qualifies for the exemption. No e-Invoice compliance action or penalty will be imposed on an eligible exempt taxpayer for the period in which the taxpayer was exempt.
5. What happens if turnover subsequently exceeds RM3 million?
The exemption is not necessarily permanent. Where an eligible taxpayer subsequently reaches or exceeds RM3 million in annual turnover or revenue, the taxpayer may become subject to e-Invoice implementation.
For taxpayers that meet the exemption criteria and subsequently exceed RM3 million from YA2026 onwards, IRBM’s latest FAQ states that e-Invoice implementation generally starts on 1 January of the second year following the Year of Assessment in which the annual turnover or revenue reaches or exceeds RM3 million.
Businesses should therefore monitor their turnover or revenue annually rather than assuming that the exemption will continue indefinitely.
Conclusion
The increase of the e-Invoice exemption threshold to RM3 million provides welcome relief to many Malaysian micro and small businesses. Nevertheless, eligibility depends on more than the taxpayer’s own turnover. Ownership, group structure and other prescribed conditions should also be reviewed.
Businesses that are currently below RM3 million should therefore review their e-Invoice status based on the latest IRBM guidance and continue monitoring their annual turnover going forward.