Malaysia Implementation of e-Invoicing

Malaysia’s adoption of mandatory e-invoicing is revolutionizing business transactions. Discover the key aspects of Malaysia’s e-invoicing regulations and how SNI’s solution guarantees full compliance to the country’s regulations.

Regulation Overview

In October 2022, the Inland Revenue Board of Malaysia (LHDNM) and the Malaysian Digital Economy Corporation (MDEC) jointly announced their collaboration on the National e-Invoicing Initiative. LHDNM is responsible for tax administration in Malaysia. The goal of the new system is to enhance efficiency and reduce tax costs. After six months, both parties announced the phased mandatory implementation of the National e-invoicing system.

Several countries have already implemented mandatory regulations for electronic invoicing, while others are planning to introduce it in phases. Malaysia is among the countries planning to introduce it gradually, through the Malaysia e-Invoice System. Therefore, businesses with current or future interests in Malaysia should prepare accordingly to avoid penalties from tax authorities. The new e-invoicing will apply to all tax-registered businesses and government entities in Malaysia. The regulations will apply to all organizations, whether engaged in domestic or cross-border transactions.

With Malaysia accelerating its digital tax transformation, e-invoicing has become a central part of compliance for businesses of all sizes. Introduced by the Inland Revenue Board of Malaysia (LHDN), this system mandates the electronic issuance, validation, and storage of invoices. It is intended to enhance transparency, reduce fraud, improve record-keeping, and simplify tax reporting for both taxpayers and the government.
E-invoicing will fundamentally change how businesses issue, manage, and archive invoices. All transactions that fall under the mandate will need to go through LHDN’s system for validation before being shared with the buyer, making early preparation essential.

e-Invoicing Implementation Timeline in Malaysia

According to the 2023 Budget, a phased introduction of Malaysia e-invoice obligation is confirmed by the Inland Revenue Board of Malaysia (IRBM). The shared e-invoice implementation dates by IRBM are in the following::

• August 1, 2024: Taxpayers with annual income or sales exceeding RM100 million
• January 1, 2025: Taxpayers with annual income or sales exceeding RM25 million and up to RM100 million
• July 1, 2025: All taxpayers

Timeline for E-Invoicing in Malaysia

The e-invoicing rollout is staggered based on annual turnover:

Annual Turnover	Mandatory Date	Full Enforcement
> RM100 million	1 Aug 2024	1 Feb 2025
RM25m – RM100m	1 Jan 2025	1 Jul 2025
RM5m – RM25m	1 Jul 2025	1 Jan 2026
RM1m – RM5m	1 Jan 2026	1 Jul 2026
≤ RM1 million	1 Jul 2026	1 Jan 2027
≤ RM500k	Exempt for now	—

From 1 January 2026, all transactions above RM10,000 including B2C—must be issued as individual e-invoices. Businesses with annual turnover below RM500,000 are currently exempt from the mandatory e-invoicing requirement (though this exemption may not apply in all cases).

Is E-Invoicing Mandatory in Malaysia?

Yes. Malaysia e-invoicing is mandatory for businesses that meet the annual turnover thresholds set by LHDN. The mandate is being rolled out in stages, starting with larger companies and eventually covering almost all registered businesses.

This phased approach allows businesses to adapt gradually, but the government has made it clear that penalties will apply after the soft-landing period ends. Even companies not immediately in scope are encouraged to adopt e-invoicing early to avoid last-minute compliance issues.

Exemption Thresholds

Currently, businesses with annual turnover below RM500,000 are exempt from mandatory e-invoicing. Exemptions are determined by the Inland Revenue Board (LHDN) and may evolve over time. Therefore, all businesses are encouraged to stay updated with official LHDN communications to remain compliant with the latest requirements.

e-Invoicing process in Malaysia

To support the growth of the digital economy, the Government intends to implement e-Invoice in stages to enhance the efficiency of Malaysia’s tax administration management. It is in line with the Twelfth Malaysia Plan, where the focus is on strengthening the digital services infrastructure and digitalizing the tax administration. The e-invoice implementation date in Malaysia is crucial for enabling real-time or near-real-time validation and storage of transactions, catering to Business-to-Business (B2B), Business-to-Consumer (B2C), and Business-to-Government (B2G) transactions. Also, the following documents will be under the scope:

• Credit and Debit Notes
• Invoices
• Receipts
• Cancellations and Refund

What is E-Invoicing Malaysia?

The e-invoicing system in Malaysia is a clearance-based system where invoices are generated digitally in a structured format and sent to LHDN for validation before being issued to the customer. Once the invoice passes validation checks, an Invoice Reference Number (IRN) is generated and attached to the invoice. Only then can an invoice be considered legally valid.

This process applies to B2B (business-to-business) and B2G (business-to-government) transactions. B2C (business-to-consumer) transactions are also partially covered any sale above RM10,000 must be issued as an individual e-invoice to the buyer. For high-value transactions, consolidated invoicing is restricted, ensuring that large sales are individually recorded in the tax system.

Introduction of Centralized Continuous Transactions (CTC) in Malaysia

In this model, for verification purposes, the invoices and receipts are first sent to the tax authorities in real time before the buyers. For the verification, a structured XML invoice file is required to be submitted to the IRBM platform via API. After verification is done, the supplier will receive the XML invoice then it can be exchanged with a trading party in any format or method. The Buyers will be notified by the IRBM for access to invoices that have been cleared. Regarding the exchange of invoices with the buyers, PDF and other paper forms can be used, however a QR code with a URL needs to be displayed.

How Malaysia’s E-Invoicing System Works

The system follows a clearance model:

1. Invoice Generation: The seller creates an invoice in JSON format containing all mandatory data fields.
2. Submission to LHDN: The invoice is sent via API to LHDN’s system.
3. Validation: LHDN checks the invoice for accuracy, completeness, and compliance with the schema.
4. Approval: If valid, an IRN is generated.
5. Delivery: The approved invoice is then sent to the buyer.
6. Archiving: The seller must securely store the validated invoice for the legally required retention period.

If the invoice fails validation, it must be corrected and resubmitted. This means real-time error handling is essential for smooth operations.

Details and Issuing Process of the Malaysian e-Invoicing

In Malaysia, an e-invoice includes 55 fields detailing the transaction, such as information about the seller and buyer, item description, quantity, price, tax, total amount, and payment details. Once validated and generated, e-invoices are assigned a Universally unique identifier (UUID) and a QR Code by the MyInvois Portal or via e-invoicing software using an API, allowing for online validation.

The IRBM then validates the invoice and notifies both the supplier and buyer. Once validated, it is the supplier’s responsibility to provide the buyer with the e-invoice, which includes an embedded QR code.

Grace Period and Consolidated Invoices in Malaysia

Businesses are supported by certain flexibility measures designed to ease the transition into mandatory compliance. One of these is the grace period, which refers to a temporary window—typically six months after each phase’s mandatory date during which taxpayers can continue issuing invoices manually or make necessary corrections without facing penalties.

Another key feature of Malaysia’s framework is the use of consolidated invoices. These allow businesses to combine multiple small transactions with the same buyer into a single e-invoice rather than issuing one for each sale. This method is especially beneficial for sectors like retail, utilities, or hospitality, where numerous low-value transactions occur daily.

From 1 January 2026, individual e-invoices will be required for transactions exceeding RM10,000, including B2C sales, ensuring greater transparency and accuracy in high-value reporting.

How to Register for E-Invoicing in Malaysia

To begin using e-invoicing, businesses must log into the MyTax portal and activate the e-invoicing module. Registration steps include:

• Logging in with valid taxpayer credentials.
• Activating the e-invoicing feature for the business account.
• For API integration, generating OAuth authentication tokens and other technical credentials.

Registration gives businesses access to both the production environment (live transactions) and the sandbox environment (testing). Vendors, system integrators, and accounting software providers must also register to ensure their solutions can communicate securely with LHDN’s API.

Who Provides the E-Invoicing Platform?

The Inland Revenue Board of Malaysia (LHDN) is the official provider of the e-invoicing platform. All invoices regardless of whether they are created in-house or through third-party software must be validated through LHDN’s central API.

Businesses can choose between:

• Direct API integration with LHDN’s platform.
• Using authorized service providers who handle integration on behalf of clients.

In both cases, the process is centralized, and LHDN handles validation, compliance checks, and invoice reference number generation.

Technical Requirements for Integration

LHDN’s technical documentation specifies:

• JSON as the mandatory invoice format.
• Secure API communication using OAuth authentication.
• Mandatory data fields (e.g., Tax ID, invoice number, item details, payment terms).
• Error-handling protocols for rejected invoices.
• Archiving rules to meet audit requirements.

Businesses can integrate their ERP, accounting software, or billing systems directly or via a certified solution provider. Testing in the sandbox is highly recommended to avoid disruption at go-live.

Practical Steps for Taxpayers to Submit an E-Invoice

Once a business is registered on the MyInvois portal or connected via API, the submission process involves several practical steps:

1. Prepare the Data: Ensure your ERP or accounting software captures all mandatory fields (supplier, buyer, tax, item, and payment details) according to LHDN’s technical schema.
2. Generate and Validate Locally: Convert the invoice into JSON format and run internal validation to check for errors before submission.
3. Submit via API or Portal: Send the invoice to LHDN’s clearance system directly through API integration or upload it manually through the MyInvois web portal.
4. Receive IRN and Status: If approved, the system issues a unique Invoice Reference Number (IRN). Rejected invoices must be corrected and resubmitted.
5. Share and Store: Deliver the validated e-invoice (with IRN) to the buyer and archive it securely for the statutory retention period.

Testing and Validation

LHDN offers a sandbox environment for businesses to simulate:

• Standard invoice submissions.
• Rejections due to validation errors.
• Cancellations and credit notes.

Testing ensures that systems work correctly before switching to the production environment. This is especially critical for companies with high invoice volumes or complex tax rules.

Common Mistakes to Avoid

• Submitting invoices with missing or invalid data.
• Entering incorrect Tax ID numbers.
• Ignoring rejection notices from LHDN.
• Skipping sandbox testing before going live.
• Waiting until the last moment to integrate systems.

Early preparation avoids these pitfalls and reduces the risk of non-compliance penalties.

How can SNI help you?

SNI offers SAP solutions for generating and transmitting qualified invoices between public authorities, and private entities.

SNI’s solution extracts taxpayers’ data from their accounting system and directly converts it into the required electronic format. It is transmittable through the Peppol Network by Access Point Providers.

SNI’s solution provides complete support for both outbound and inbound invoices. Outbound invoices are transmitted to the tax authorities through official APIs or web services. Similarly, for inbound invoices (issued by suppliers to clients), solution automatically retrieves data at regular intervals using the appropriate APIs or web services provided by the tax authorities.

All inbound invoices are displayed on SNI’s Inbound Cockpit, a dedicated interface designed to enhance the user experience and allow efficient management. Each invoice is available in both XML and (human-readable) HTML/PDF formats, ensuring detailed insight and compliance with regulatory requirements.

SNI’s invoice reconciliation feature offers seamless validation of incoming invoices by automatically matching them with purchase orders, delivery notes, or other internal records. This feature simplifies the validation of incoming invoices, reduces manual effort, and minimizes errors thus offering a quick resolution. With enhanced accuracy and efficiency, businesses can gain better control over their financial workflows and ensure smooth operations.

SNI solution integrates with clients’ systems without the need for updates to existing system versions and is independent of SAP versions. SNI’s SAP solution is compatible with SAP ECC 4.7 and above, as well as SAP Business Technology Platform (BTP), SAP R3 and SAP S/4HANA. In addition, SNI provides ERP-independent solutions designed to integrate with any ERP system clients may use.