LHDN e-Invoice Update 2026: RM3 Million Exemption and What SMEs Need to Know

Malaysia’s e-Invoice landscape has changed again. Following the Government’s decision to increase the e-Invoice exemption threshold from RM1 million to RM3 million, as set out in the latest LHDN E-Invoice Guideline (Version 4.8), some SMEs that have already started issuing e-Invoices may now find themselves exempt.

But what happens if your business has already implemented e-Invoice?

Do you need to apply to the Inland Revenue Board of Malaysia (IRBM/LHDN) to stop? Can you simply switch off your e-Invoice system? And what if you prefer to continue issuing e-Invoices voluntarily?

Here is a practical example given by LHDN in the latest guideline to help clarify the situation.

A Practical Example: A Company That Already Started e-Invoice

Consider Raj, who wholly owns a standalone company.

The company recorded:

• ● YA2022 annual revenue: RM850,000
• ● YA2024 annual revenue: RM2 million
• ● e-Invoice implementation date: 1 July 2026

Based on the previous e-Invoice threshold, Raj’s company started issuing e-Invoices from 1 July 2026.

However, following the Government’s announcement increasing the e-Invoice exemption threshold from RM1 million to RM3 million, the company’s annual revenue of RM2 million now falls below the revised exemption threshold.

So, does Raj need to submit an application to IRBM before stopping e-Invoice?

No Separate Application Is Required

If Raj’s company meets all the applicable e-Invoice exemption criteria, it does not need to submit a separate application or obtain prior approval from IRBM to enjoy the exemption.

As the company has annual turnover or revenue below RM3 million and meets the relevant exemption conditions, it may discontinue issuing e-Invoices immediately.

This is particularly relevant to SMEs that have already invested time and resources in implementing e-Invoice based on the previous RM1 million threshold.

Being Below RM3 Million Is Not the Only Condition

While the RM3 million threshold provides relief to many smaller businesses, companies should not determine their exemption status based on their own revenue alone.

Under the latest e-Invoice rules, certain corporate structures and relationships can affect eligibility. For example, the exemption may not apply where the taxpayer has:

• ● A non-individual shareholder with annual turnover or revenue of at least RM3 million;
• ● A holding company with annual turnover or revenue of at least RM3 million; or
• ● A related company or joint venture with annual turnover or revenue of at least RM3 million.

Therefore, a company with RM2 million in annual revenue should still review its ownership and corporate structure before deciding to stop issuing e-Invoices.

For Raj’s scenario, the company is described as a standalone company wholly owned by an individual, making it a straightforward example of a business that may qualify, provided it satisfies all other applicable exemption criteria.

Can the Company Continue Issuing e-Invoices Voluntarily?

Yes.

Businesses that qualify for the exemption may choose to continue issuing e-Invoices voluntarily in support of the Government’s digitalisation initiative.

For some SMEs, continuing with e-Invoice may be a practical choice, particularly if their accounting system and internal processes are already integrated.

There can also be operational advantages to maintaining an established digital invoicing workflow rather than changing processes again.

However, voluntary participation is a business decision. An eligible taxpayer is not required to continue issuing e-Invoices simply because it had already implemented the system.

What Should Businesses Already Using e-Invoice Do?

If your business falls between RM1 million and RM3 million and has already started issuing e-Invoices, consider the following steps before making a change:

1. Review your latest turnover or revenue

Confirm that your annual turnover or revenue remains below the RM3 million exemption threshold.

2. Check your business structure

Review your shareholders, holding companies, related companies and joint ventures to ensure that none of the relevant exemption conditions prevent you from qualifying.

3. Confirm your exemption eligibility

Do not assume that being below RM3 million automatically means you are exempt. The applicable conditions under the latest LHDN guidance should be considered.

4. Decide whether to stop or continue voluntarily

If your business qualifies for the exemption, you can discontinue issuing e-Invoices. Alternatively, you may choose to continue voluntarily.

5. Review your accounting software settings

If you decide to stop, review your accounting or ERP system configuration to prevent e-Invoices from being generated or submitted unnecessarily.

For businesses that continue voluntarily, ensure that your accounting system remains properly configured to support the e-Invoice workflow.

What Happens If Revenue Increases Above RM3 Million Later?

The RM3 million exemption should not be viewed as a permanent exemption regardless of future business growth.

Businesses should continue monitoring their annual turnover or revenue.

If a business that qualifies for the exemption subsequently reaches the RM3 million threshold, the applicable implementation rules will apply based on the relevant year and circumstances. Under the latest guidance, for taxpayers reaching the threshold in YA2026 or later, implementation generally begins on 1 January of the second year following the year in which the RM3 million threshold is reached.

This means SMEs should continue monitoring their revenue as they grow rather than assuming that e-Invoice will never apply to them.

e-Invoice Is More Than a Compliance Requirement

For businesses that have already adopted e-Invoice, the decision to continue voluntarily can also be viewed from a business-process perspective.

An integrated accounting system can help businesses manage invoicing alongside their:

• ● General Ledger
• ● Sales
• ● Purchase
• ● Cash Management
• ● Fixed Assets
• ● Tax Management
• ● e-Invoicing

Instead of treating e-Invoice as a standalone compliance exercise, businesses can use digital accounting processes to reduce manual data entry, improve transaction visibility and create more structured financial records.

For SMEs planning for continued growth, maintaining an e-Invoice-ready accounting system can also make it easier to respond when regulatory requirements change or when the business eventually crosses the applicable threshold.

What This Means for Raj’s Company

Coming back to Raj’s example, his company recorded RM2 million in annual revenue in YA2024 and has already been issuing e-Invoices since 1 July 2026.

Following the increase of the exemption threshold to RM3 million, the company may now qualify for the exemption, provided it meets all applicable exemption criteria.

If eligible:

• ● No separate application to IRBM is required.
• ● No prior approval from IRBM is required.
• ● The company may discontinue issuing e-Invoices immediately.

Alternatively, Raj may choose to continue issuing e-Invoices voluntarily.

The key takeaway is that businesses already using e-Invoice should not automatically assume that they must continue simply because they have already started. At the same time, they should not stop solely because their revenue is below RM3 million without first checking the relevant exemption conditions.

Stay Ready as Your Business Grows

The increase of the e-Invoice exemption threshold to RM3 million gives many Malaysian SMEs greater flexibility. For businesses that have already implemented e-Invoice, it also provides an opportunity to reassess whether continuing voluntarily makes sense for their operations.

Whether you choose to stop or continue, the important step is to review your eligibility, business structure and accounting processes carefully.

For SMEs that remain subject to e-Invoice requirements—or prefer to continue voluntarily—having an e-Invoice-ready accounting system can make compliance more manageable.

Biztrak MSB Accounting Software and Biztrak Online Cloud Accounting provide core accounting functions including General Ledger, Sales, Purchase, Cash Management, Fixed Assets, Tax Management and e-Invoicing, helping Malaysian businesses manage their financial operations within a more connected accounting environment.

As Malaysia’s digital tax landscape continues to evolve, keeping your accounting system ready can help your business stay compliant, efficient and prepared for what comes next.

Source: Inland Revenue Board of Malaysia (IRBM/LHDN), e-Invoice Guideline and latest e-Invoice FAQs, September 2026.

This article is intended for general information only and does not constitute tax, accounting or legal advice. Businesses should refer to the latest IRBM/LHDN guidance or consult a qualified tax professional regarding their specific circumstances.</p>

For the latest official information, refer to the E-Invoice Guideline (Version 4.8) published by LHDN. If you have questions about implementing or upgrading your e-Invoice solution, contact us as we're ready to help your business stay compliant with confidence.