Malaysia raises e-invoice exemption threshold to 3 million Malaysian Ringgit for Micro, Small and Medium Enterprises (MSMEs)

Malaysia has raised the mandatory e-Invoice threshold from RM1 million to RM3 million from 1 September 2026. More than 1.1 million MSMEs will be exempt, while voluntary e-Invoice adoption remains encouraged as part of Malaysia’s wider digitalisation strategy.

Malaysia’s Inland Revenue Board (IRB) has confirmed that micro, small and medium enterprises (MSMEs) with annual sales below RM3 million will no longer be required to implement mandatory e-Invoicing. The change follows the government’s decision to increase the e-Invoice implementation threshold from RM1 million to RM3 million. The new threshold applies from 1 September 2026.

The measure was announced by Prime Minister  during the 2026 National Day Prime Minister’s Address and is intended to reduce the compliance and cost burden on smaller businesses.

Under the revised rules, MSMEs with annual sales of less than RM3 million are exempt from mandatory e-Invoice implementation. Previously, the relevant threshold was RM1 million. This meant that a much larger number of smaller businesses were expected to prepare their systems and processes for e-Invoicing. By increasing the threshold to RM3 million, the government is giving smaller businesses more time and flexibility to manage their digital transformation.

The government’s intention is therefore to allow smaller businesses to focus more on maintaining and expanding their operations instead of facing immediate e-Invoice implementation costs.

However, the exemption does not mean that Malaysia is stepping back from its wider e-Invoice programmed.

Although MSMEs below the RM3 million threshold are exempt from mandatory implementation, they are still strongly encouraged to participate voluntarily. Businesses below the threshold can therefore still use e-Invoicing if they believe it is beneficial for their operations.

For companies that have already invested in e-Invoice preparation, the new exemption does not require them to stop implementation. They can continue voluntarily and potentially benefit from more structured digital invoicing and record-keeping processes. The exemption should therefore be seen as a reduction in regulatory pressure rather than a recommendation to avoid e-Invoicing.

As a reminder, Malaysia began implementing e-Invoicing on 1 August 2024. The authority views e-Invoicing as an important part of Malaysia’s wider digital transformation and as a mechanism for ensuring that transactions are properly recorded and stored.

Larger businesses and businesses that remain within the mandatory scope must continue following the applicable implementation requirements, while smaller businesses below the new threshold receive additional flexibility.

One important practical point is that the exemption is linked to annual sales. A business that currently records annual sales below RM3 million may qualify for the exemption, while a business that grows beyond the applicable threshold may later become subject to mandatory e-Invoicing. MSMEs should therefore continue monitoring their revenue and maintaining accurate financial records.

If we analyse the change, increasing the threshold from RM1 million to RM3 million is a practical adjustment to Malaysia’s e-Invoice rollout. It reduces the immediate financial and administrative burden on smaller businesses while keeping the wider digitalization programme in place. The important point is that this is an exemption from mandatory implementation, not a rejection of e-Invoicing. Businesses that are growing or have already prepared their systems should still consider voluntary implementation, especially if digital invoicing can simplify their accounting and internal processes.

Implementation impact and what the business should do?

The main impact is that MSMEs with annual sales below RM3 million are exempt from mandatory e-Invoice implementation from 1 September 2026. More than 1.1 million businesses are expected to benefit from the higher threshold.

Businesses should first verify whether their annual sales fall below RM3 million and keep proper records supporting their status. They should continue monitoring revenue because future growth could change their e-Invoice obligations.

MSMEs that have already invested in implementation should assess whether voluntary adoption is still useful instead of automatically cancelling their projects. Businesses above the threshold should continue their e-Invoice preparations and follow IRB guidance.

The text above is based on the already published article from The Edge Malaysia. Source

Nikolina Basić, Senior Legal Consultant at Fiscal Solutions 

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