Malaysia’s e-Invoicing Deadline Extended for SMEs
The Malaysian government has announced a postponement of e-Invoicing for small and medium enterprises (SMEs) with annual sales between RM150,000 and RM500,000 to January 1, 2026. The six-month transition period allows over 240,000 SMEs additional time to adapt to the new system.
1.1 Exemptions for Small Traders
Businesses with annual sales below RM150,000, including small food vendors and micro-businesses, are exempt from e-Invoicing requirements. This decision benefits over 700,000 small traders, reducing their administrative burden while still allowing larger businesses to transition towards digital invoicing.
1.2 Government Support for Businesses
To facilitate the transition, the Malaysian government is providing:
- Free access to the MyInvois portal and mobile app for tax submission.
- Nationwide free training conducted by the Inland Revenue Board (LHDN).
2. Current e-Invoicing Adoption in Malaysia
The e-Invoicing system was first introduced in August 2024 for large businesses with an annual revenue exceeding RM100 million. Since its launch:
- Over 25,000 companies have implemented e-Invoicing.
- More than 181.3 million e-Invoices have been generated.
This demonstrates strong early adoption among larger corporations and sets the stage for SMEs to follow in the coming years.
3. New Tax and Compliance Updates for Employers
In addition to e-Invoicing developments, the government has introduced a mandatory Employees Provident Fund (EPF) contribution for foreign workers.
3.1 EPF Contributions for Foreign Workers
Prime Minister Datuk Seri Anwar Ibrahim announced that employers must contribute 2% to EPF for foreign workers, with an additional 2% deducted from employee wages. This policy aims to create equal employment conditions between local and foreign workers.
3.2 Tax Deductions for Employers
Employers can claim tax deductions on EPF contributions under Section 34(4) of the Income Tax Act 1967, up to 19% of total employee wages. This move is intended to encourage compliance while mitigating additional financial burdens on businesses.
4. Tax Incentives for SMEs Transitioning to e-Invoicing
To further assist SMEs in adopting e-Invoicing, the government has introduced the following incentives:
4.1 Capital Allowances for ICT Investments
Businesses investing in ICT equipment and software can now claim capital allowances with a deduction period reduced from four years to three years from 2024 onwards.
4.2 Tax Deductions for e-Invoicing Consultancy Fees
SMEs can claim up to RM50,000 per year in tax deductions on consultancy fees related to e-Invoicing from 2024 to 2027. This measure aims to support businesses in covering advisory and implementation costs.
5. What This Means for Businesses
The e-Invoicing delay provides SMEs with additional time to prepare, while tax incentives encourage digital transformation. With ongoing government support, businesses should take advantage of available resources, including free training, tax deductions, and capital allowances, to ensure a seamless transition by 2026.
