How to Get Ready for LHDN e-Invoicing in Your Company

Malaysia’s tax landscape is changing. With the introduction of e-Invoicing by LHDN, all invoices must now be submitted, verified, and stored digitally.

This shift aims to improve transparency, prevent fraud, and make reporting more efficient. But for employers, it also means adjusting internal systems, training teams, and reviewing daily processes.

To know more about LDHN e-Invoicing, check the explanation below. We cover about the positive impact of this changes, the timeline, and other key informations that you should understand.

What is LHDN e-Invoicing?

LHDN e-Invoicing is a digital tax reporting system introduced by Lembaga Hasil Dalam Negeri Malaysia (LHDNM). Starting in 2024, businesses in Malaysia will be required to issue and manage invoices electronically through a system called MyInvois, either via the LHDN portal or through approved API integration.

Instead of printing or manually emailing invoices, companies must generate structured e-Invoices that are submitted to LHDN for validation. Once approved, the e-Invoice comes with a unique validation number and QR code. This information is then shared with both the seller and buyer as proof of a valid transaction.

The purpose of this system is to help improve tax transparency, reduce fraud, and make tax reporting more efficient. By using e-Invoicing, companies no longer need to submit physical invoices during audits, since verified digital records are already stored and accessible.

Why LHDN e-Invoicing Matters for Your Business

The move toward LHDN e-Invoicing changes how financial documentation is handled daily.

1. Real-Time Invoice Validation

With e-Invoicing, every invoice your company creates must go through LHDN for checking. Once approved, it gets a unique validation number and QR code. It will confirm that the invoice is valid and prevents issues like double billing or tax underreporting.

2. Better Compliance with Tax Rules

Because invoices are verified directly by LHDN, your records will already follow official tax formats. Furthermore, it will reduce the chance of non-compliance and help during audits or tax reviews.

3. Standard Format for All Businesses

LHDN requires a standard layout for all e-Invoices, which means everyone will use the same structure. Whether you're working with clients, suppliers, or government bodies, the format is predictable and easier to manage.

4. Faster and More Accurate Reporting

When invoices are stored digitally and validated early, your finance team will have better records. Easier to track cash flow, monitor monthly revenue, and prepare financial reports without digging through manual files.

5. Reduces Risk of Fraud or Error

By working within a secure LHDN-monitored system, it’s harder for fake invoices to go unnoticed. Everything must be recorded and submitted officially, which adds a layer of protection to your financial process.

Who Must Comply & When

LHDN e-Invoicing will be introduced in stages, giving businesses time to prepare based on their yearly revenue. Check out the rollout timeline:

1. 1 August 2024: Large Companies

Businesses with an annual turnover of RM100 million or more must start using e-Invoicing from 1 August 2024. These companies are expected to lead the way and set the groundwork for wider adoption.

2. 1 January 2025: Mid-Sized Companies

The next group includes businesses with an annual turnover of RM25 million and above. They are required to start from 1 January 2025. Many medium-sized suppliers, service providers, and retailers fall under this group.

3. 1 July 2025: All Remaining Taxpayers

From 1 July 2025, all businesses, including small and medium enterprises (SMEs), freelancers, and self-employed individuals, must use the e-Invoicing system.

No matter your business size, prepare earlier. Waiting until the deadline could make the transition more stressful, especially if you need to update software or train staff.

Key Information Required in Each e-Invoice

LHDN has specified what every e-Invoice must include. These details help identify the transaction clearly and confirm that it meets tax requirements. Gather these information below correctly before submitting an invoice through the MyInvois system.

1. Seller and Buyer Details

This includes the full name, tax identification number (TIN), and address of both parties. If you’re issuing an invoice to a company, their business registration and TIN must be listed. For individuals, a personal TIN is needed if available.

2. Description of Goods or Services

Each invoice must state what was sold or provided. This means listing the product or service name, quantity, unit price, and total amount. If the transaction includes both goods and services, each item must be clearly separated.

3. Tax Breakdown

If the transaction involves tax, such as Sales and Service Tax (SST), you’ll need to break it down, including the tax rate, taxable amount, and total tax charged.

4. Invoice Date and Reference Number

The invoice must show the date it was issued and a unique invoice number from your system to keep the traceability and record-keeping.

5. LHDN Validation Details

Once your invoice is submitted and approved, it will come with a validation number and a QR code. These are generated by LHDN and confirm that the invoice is officially recognised. You must include these on the final version shared with the buyer.

Types of Transactions Covered

LHDN’s e-Invoicing system is designed to cover a wide range of business transactions, not just those between large corporations. Here’s how different types of transactions are handled:

1. Business-to-Business (B2B)

When one business sells products or services to another, an e-Invoice must be generated and validated by LHDN. This is the most common use case for vendors, wholesalers, service firms, and suppliers.

2. Business-to-Consumer (B2C)

Even if your customers are individuals, not companies, you still need to issue e-Invoices for transactions, especially if your business is required to comply. The customer’s Tax Identification Number (TIN) can be replaced with "not applicable" if they don’t have one.

3. Business-to-Government (B2G)

Companies that provide goods or services to government departments must issue validated e-Invoices for those transactions too. This adds transparency and aligns public sector payments with tax compliance.

4. Self-Billed Invoices

In some cases, the buyer issues the invoice on behalf of the seller, common in industries like agriculture or manufacturing. These self-billed invoices still need to go through LHDN validation.

5. Credit and Debit Notes

If you need to make adjustments after the invoice is issued, like reducing the amount due (credit note) or adding extra charges (debit note), those documents must also be submitted as part of the e-Invoicing system.

No matter the type of transaction, once the e-Invoice is validated, it becomes an official tax document for both parties.

How Employers Should Prepare

The move to e-Invoicing will change how companies in Malaysia handle billing, reporting, and tax submissions.This means taking early steps to avoid future disruption. How to get ready?

1. Review Your Current Invoicing and Accounting System

Look at how your company currently generates and stores invoices. If you're still relying on manual entries or disconnected systems, it’s time to think about digital upgrades. You may need to move to software that supports LHDN’s MyInvois platform or can integrate through an API.

2. Start Integration Planning Early

LHDN provides two main ways to use the e-Invoicing system: through their MyInvois portal (manual entry) or via API integration for larger companies. If you’re in the early rollout group, integration may require IT and vendor coordination. Don’t wait until the last minute.

3. Train Your Finance and HR Staff

Anyone involved in issuing invoices, especially payroll-related billing, freelance payments, or B2B invoicing, should understand how the new system works. Internal training or consultation with tax professionals will help prevent mistakes later.

4. Work With Your Auditors or Tax Advisors

If you’re unsure which transactions fall under e-Invoicing or how your systems should be updated, seek advice from tax consultants. They can help make sure your approach follows LHDN guidelines and avoids compliance risks.

FAQs

Will salary payments be included under e-Invoicing?

No. According to LHDN’s current guidance, salary payments to employees do not require e-Invoices. This is because salaries are handled under separate income tax and payroll systems, not through commercial transaction invoicing.

Can employers use third-party software to submit e-Invoices?

Yes. Businesses can connect to LHDN’s MyInvois system using software that is API-integrated and approved. If your company uses accounting platforms like SQL, AutoCount, or others, check with your vendor about e-Invoicing readiness.

Is manual invoice entry allowed for SMEs?

Yes. SMEs can use LHDN’s MyInvois portal to manually submit invoices, especially if they don’t have access to an integrated system. This is suitable for companies with fewer transactions or limited digital resources.

What are the penalties for non-compliance?

LHDN has not yet announced the specific penalties for failing to comply with e-Invoicing. However, since it is part of official tax reporting, failure to issue valid e-Invoices may be treated as a breach of tax obligations. Businesses are encouraged to prepare early to avoid operational and legal issues once enforcement begins.

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