E-invoicing Guidelines Malaysia 2026: What You Need To Know

From 2026 onwards, all businesses with annual turnover above RM1 million fall within the mandatory e-invoice framework, following the phased dates set by IRBM. Businesses at or below RM1 million remain exempt for now, but still need to keep proper tax records for seven years and may adopt e-invoicing voluntarily if it suits their operations

The challenge is rarely the invoice itself. It is the confusion around formats, validation timing, system readiness, and what actually triggers penalties. Many businesses only realise gaps when payments stall or audits begin.

Hence, let the best accounting firm in Malaysia explain how e-invoicing works in practice, the changes made in 2026 and how businesses can reduce compliance and audit risk. Let’s begin shall we?

What Is E-Invoicing in Malaysia?

E-invoicing is the mandatory submission of structured invoice data to LHDN for validation before an invoice is issued to a buyer.

Unlike traditional invoices, e-invoices are transmitted electronically in machine-readable formats. Once validated, the invoice receives a unique identifier and becomes an official tax record.

From a practical standpoint, e-invoicing shifts invoicing from document-based proof to data-based reporting. 

This allows tax authorities such as LHDN to verify transactions in near real time and reduces post-filing discrepancies.

Who Must Comply With E-Invoicing in 2026?

All persons carrying on a business in Malaysia are required to comply once their turnover crosses the relevant threshold and their phase’s date applies. This includes:

• Companies and corporations
• Partnerships and limited liability partnerships
• Sole proprietors and freelancers
• Associations, co-operatives, and trusts
• Branches, representative offices, and regional offices

From 2026 onwards:

• Businesses with annual turnover above RM1 million are within the mandatory e-invoicing regime, with earlier deadlines already in force for taxpayers above RM5 million.
  
  
• Businesses with annual turnover of RM1 million or below are currently exempt, following the government’s decision to raise the exemption threshold from RM500,000 to RM1 million to ease micro and small-business compliance.

Purely personal, non-commercial transactions between individuals are generally outside scope. 

However, where an individual is carrying on a business, profession or rental activity, IRBM’s guidelines treat them as a business and expect e-invoices (for example, certain landlords, content creators, or professional service providers). 

What Is the Official E-Invoicing Implementation Timeline?

Malaysia’s e-invoicing rollout is still phased by annual turnover, but the final phase for micro-businesses has been removed following the new RM1 million exemption.

Points for SMEs:

• Businesses with annual turnover of RM1 million or below are currently exempt from mandatory e-invoicing, following the Cabinet’s decision in December 2025 to raise the exemption threshold from RM500,000 to RM1 million.
  
• For Phase 4 taxpayers (RM1m–RM5m), IRBM has granted a full-year interim relaxation from 1 January 2026 to 31 December 2026. During this period:
  
  
  • You may issue consolidated e-invoices instead of individual e-invoices for each transaction (subject to IRBM’s rules).
  • No penalties under Section 120 will be imposed if you comply with the transitional conditions (e.g. timelines, data quality, record-keeping).

Transaction Types

E-invoicing in Malaysia is designed to apply to a broad spectrum of transactions, covering the main types of interactions within the economy:

B2B (Business-to-Business): This is the most common type, involving the exchange of goods or services between companies. E-invoicing streamlines these interactions by providing a standardised and efficient method for invoice delivery and processing. Very beneficial supply chain management and trade.

B2C (Business-to-Consumer): Most prominently found in the retail industry. While the volume of B2C transactions can be very high, e-invoicing aims to bring the same efficiency and accuracy to these interactions, though there may be specific considerations for handling large numbers of consumer invoices.

B2G (Business-to-Government): E-invoicing also facilitates transactions with government agencies, ensuring transparency and accountability in public procurement and other government-related financial dealings. This helps reduce administrative burdens for both businesses and government departments.

Types of E-invoice in Malaysia

Malaysia’s e-invoicing system accommodates various transaction scenarios through different types of e-invoices, each serving a specific purpose:

Standard Invoices: These are the most common type, utilised for routine sales transactions when goods or services are exchanged between a supplier and a buyer. A standard invoice details the specifics of the transaction, including the items or services, quantities, prices, and any applicable taxes.

Credit Notes: Credit notes are issued by a supplier to a buyer to make adjustments to a previously issued invoice. This might be necessary to rectify errors in the original invoice, account for discounts, or process refunds for returned goods or cancelled services.  Accurate bookkeeping is a-must for managing these adjustments.

Debit Notes: Conversely, debit notes are used by a supplier to request additional payments from a buyer for charges that were not included in the original invoice. This could be for extra services provided, unforeseen costs, or corrections that increase the amount the buyer is liable to pay.

Self-Billed Invoices: In certain situations, the buyer might generate the invoice themselves, rather than the supplier. This is known as self-billing and is often agreed upon in specific commercial arrangements, such as those involving commission payments or supplier agreements where the buyer has detailed sales data.

E-invoicing Overall Workflow: A Step-by-Step Guide

For a clear explanation of the e-invoicing procedure in Malaysia, the following details the typical workflow. This outlines the sequence of steps from the generation of an e-invoice to its completion.

1. Issuance of e-invoice

The process begins when a transaction occurs, prompting the supplier to create an e-invoice. This digital document, inclusive of any necessary adjustments, is then shared with the Inland Revenue Board of Malaysia (IRBM) via the MyInvois Portal or API for validation.

2. Validation of e-invoice

IRBM undertakes a real-time validation process, verifying that the e-invoice meets all stipulated standards and criteria. Once validated, a Unique Identifier Number is assigned, enhancing traceability and reducing the potential for tampering.

3. Notification of validated e-invoice

Upon successful validation, both the supplier and buyer are notified by IRBM through the MyInvois Portal or APIs. This notification confirms the e-invoice’s acceptance into the system.

4. Sharing of e-invoice

The supplier then shares the validated e-invoice, which includes a QR code, with the buyer. This QR code allows for verification of the e-invoice’s existence and status via IRBM’s official portal.

5. Rejection or cancellation of e-invoice

In cases where rejection or cancellation is required, a stipulated time period is allotted. The buyer can request rejection, and the supplier can initiate cancellation, both of which must be accompanied by valid justifications.

6. MyInvois Portal

Both the supplier and the buyer can access a summary of their e-invoice transactions through the MyInvois Portal, providing a comprehensive overview of their digital invoicing activities.

What Are the Technical Requirements for E-Invoicing?

Compliance is both procedural and technical.

Format Requirements

• XML or JSON only
• Mandatory fields include supplier details, buyer details, invoice number, item descriptions, tax amounts, and totals
• PDFs, images, or scanned documents are not valid e-invoices

Submission and Transmission

• Invoices must be validated before issuance
• Submission is via MyInvois Portal or approved API integration
• PEPPOL providers must be validated by MDEC

Security Controls

• Digital certificates are required for authentication
• Encrypted transmission protects data integrity

Record Retention

• Validated e-invoices must be retained for at least seven years
• Overseas data storage requires approval from the Director General of Customs

Read more: We Offer FREE HRDF Claimable E-Invoice Training (If You Contribute)

What Are the Penalties for Non-Compliance?

Failure to issue e-invoices is an offence under Section 120(1)(d) of the Income Tax Act 1967.

Potential consequences include:

• Fines between RM200 and RM20,000
• Imprisonment of up to six months
• Additional exposure under SST and audit provisions

Beyond penalties, non-compliance increases audit risk, delays refunds, and complicates financial reporting.

What Changed in 2026 for Businesses Using E-Invoicing?

2026 is a split-screen year:

For larger taxpayers (above RM5 million turnover): e-invoicing has moved firmly into enforcement, IRBM is using e-invoice data as a primary audit and reconciliation tool.

For Phase 4 taxpayers (RM1 million–RM5 million): 2026 is a penalty-free but mandatory preparation year. The government has granted a 12-month interim relaxation period where no penalties apply under Section 120 if transitional rules are followed.

“As of 22 December 2025, IRBM reported that more than 820.5 million e-invoices had been issued nationwide by over 111,600 taxpayers, reflecting broad adoption of the system even before the Phase 4 segment fully comes on stream.”

1. Stricter Validation Expectations for Businesses Already in Enforcement Phases

For taxpayers already past their relaxation periods (generally above RM5 million turnover), IRBM places less emphasis on “are you issuing e-invoices?” and far more on data quality and consistency, including:

• Correct buyer and supplier identifiers
• Proper classification of documents (standard vs self-billed invoices, credit notes, debit notes)
• Justified cancellation and re-issuance patterns (within the standard 72-hour window)

Repeated errors may not block validation, but they feed into IRBM’s risk analytics, increasing the chance of audit queries.

2. Heavy Audit Reliance on E-Invoice Data

For taxpayers in enforcement phases, IRBM increasingly cross-checks e-invoice data against tax returns and SST records, including:

• E-invoice totals vs declared income
• Timing differences between revenue recognition and validation
• Patterns in credit/debit notes across periods

Good “e-invoice hygiene” (accurate references, clean master data, clear narratives) now directly affects audit outcomes.

3. 2026 Is a Penalty-Free “Build Year” for Phase 4 (RM1m–RM5m)

For Phase 4 businesses (RM1m–RM5m turnover), the 2026 extended interim relaxation means:

• You are in scope for e-invoicing from 1 January 2026.
• You may use consolidated e-invoices and simplified descriptions during 2026 where allowed by IRBM.
• No penalties under Section 120 will be imposed during 2026 if you follow IRBM’s transitional rules.

Practically, 2026 should be treated as the year to:

• Clean up customer/supplier master data
• Test systems and integrations
• Train staff and stabilise SOPs

So that by 2027, individual e-invoices and full enforcement are not disruptive. 

4. Greater Scrutiny on Self-Billed and Adjustment Documents

Self-billed invoices, credit notes, and debit notes receive more attention in 2026.

These documents are frequently reviewed because they:

• Directly affect taxable amounts
• Can be used to shift timing or values if poorly controlled

Businesses issuing a high volume of adjustments should expect:

• More questions during audits
• Requests for commercial justification
• Closer examination of approval workflows

5. System Integration Quality Matters More Than Software Choice

In 2026, the issue is no longer which software you use, but how well it integrates.

Problems that surface include:

• Accounting systems not syncing cleanly with MyInvois
• Manual uploads creating data mismatches
• Delays between transaction occurrence and validation

Whether submissions go through the MyInvois Portal or APIs, process discipline now matters more than tooling.

6. Data Retention and Access Readiness

E-invoice storage is no longer just about keeping records, but retrieving them quickly.

During reviews, businesses may be asked to:

• Produce validated invoices for specific periods
• Explain adjustments made months earlier
• Reconcile invoice data with financial statements

Retention requirements remain at seven years, but retrieval speed and clarity increasingly affect audit outcomes.

“The authorities are increasingly clamping down on business transactions and e-invoices; we urge businesses to review their invoicing processes to avoid unnecessary compliance exposure.” – Mrs Lim, Senior accountant from Accounting.my.

Conclusion On E-invoicing Guidelines Malaysia: What You Need To Know

E-invoicing in Malaysia has moved beyond rollout and into steady enforcement. 

This matters even more for businesses approaching or crossing turnover thresholds. Once the threshold is passed, compliance is immediate, and gaps in systems, workflows, or record-keeping tend to surface quickly.

At Accounting.my, our accounting services support businesses navigating e-invoicing and ongoing compliance through:

• E-invoicing implementation and system alignment
• Accounting and bookkeeping support aligned with validated e-invoice records
• Tax compliance and advisory services covering income tax and SST
• Audit preparation and support, including document reconciliation
• Process reviews and internal control improvements as businesses scale

If you don’t want to deal with the taxman or don’t want to deal with the hassle of paperwork, why not let us, the tax experts, help you? 

You can focus on your business while you leave the boring but necessary compliance to us.

Disclaimer: This article is based on IRBM’s e-Invoice Specific Guideline, General FAQs (updated to 5 January 2026) and public announcements as well as interpretations by leading tax and accounting firms. Always check the latest LHDN/IRBM guidance or consult a professional advisor before making decisions for your business.

Source:

• • IRBM / LHDN – e-Invoice General FAQs (latest update: 5 Jan 2026)
  • IRBM – e-Invoice Implementation Timeline
  • IRBM / MAICSA – Implementation of e-Invoice in Malaysia – General FAQs (compilation)
  • EY Malaysia – Tax Alert: The Inland Revenue Board’s updated guidelines on e-invoices and the SDK
  • BDO Malaysia – Guide to e-Invoicing in Malaysia
  • Grant Thornton Malaysia – Tax Alert: Updated e-Invoice Specific Guideline and General FAQs (Phase 4 relaxation)
  • The Edge Malaysia – “e-invoice exemption threshold raised to RM1m — Anwar” (6 Dec 2025)
  • Bernama – “RM1 mln e-invoice exemption threshold eases MSMEs’ compliance costs” (7 Dec 2025)
  • The Star – “Over 800 million e-invoices issued so far, says LHDN” (22 Dec 2025)
  • Royal Malaysian Customs Department – General Guide on Sales Tax (record-keeping & 7-year retention)
  • IRBM – Public Ruling on Record Keeping / Electronic Records (7-year retention)