LHDN e-Invoice Guideline for Malaysian Employers and What They Must Know

Malaysia is moving toward a fully digital tax system, and the introduction of e-Invoice by Lembaga Hasil Dalam Negeri (LHDN) marks a major step in this direction. This new system changes how businesses issue and manage invoices for tax purposes.

Read the details about e-Invoice by LDHN Malaysia below

What is LHDN e-Invoice Malaysia?

An e-Invoice is a structured digital tax invoice that records transactions between suppliers and buyers. Unlike traditional PDF or paper invoices, e-Invoices must be issued in XML or JSON format and validated through LHDN’s MyInvois system.

This validation process returns a Unique Identifier Number and a QR code that confirms the invoice is recognised for tax purposes. Malaysia’s e-Invoice model follows a Continuous Transaction Control (CTC) approach, meaning invoices are verified in real time, improving tax transparency and reducing fraud.

LHDN introduced this system to modernise tax administration, streamline audits, and support digitalisation across Malaysian businesses.

When Will e-Invoice Start in Malaysia?

Implementation is phased based on a company’s annual turnover (2022 audited financial statements). Here is the official timeline:

Annual Turnover (RM)	Mandatory Start Date
More than 100 million	1 August 2024
25 million – 100 million	1 January 2025
5 million – 25 million	1 July 2025
1 million – 5 million	1 January 2026
Up to 1 million (incl. MSME)	1 July 2026

When Should Companies Start Using e-Invoice?

Even if your deadline is later, it’s wise to start preparing now. Businesses should:

Register for a Tax Identification Number (TIN) via MyTax.
Familiarise themselves with the MyInvois portal or plan for API integration with existing systems.
Train finance and HR teams on the issuance and validation process.

How Does the e-Invoice System Work in Malaysia?

The e-Invoice process involves four steps:

Issuance

Supplier generates an invoice through MyInvois portal or accounting/ERP software integrated via API.

Submission to LHDN

Invoice is sent to MyInvois in XML or JSON format.

Validation

LHDN checks and validates the invoice (usually in under two seconds) and issues a Unique Identifier with QR code.

Sharing with Buyer

Supplier provides the validated e-Invoice or a visual representation (including the QR code) to the buyer.

Different Ways to Use e-Invoice in Malaysia

Businesses can choose between two main approaches:

MyInvois Portal (Free): Suitable for SMEs and micro businesses with lower invoice volumes.
API Integration: Ideal for larger companies that want to connect existing accounting or ERP systems directly to LHDN for automated submissions.

Both methods allow creation of draft invoices, adjustments, and cancellation (within 72 hours of validation).

Who Must Use e-Invoice in Malaysia?

All taxpayers conducting commercial activities in Malaysia must comply, including:

Corporations and partnerships
Sole proprietors and freelancers
SMEs and micro businesses
Special Purpose Vehicles (SPVs) under Section 60I ITA

There are no industry-wide exemptions, but certain transaction types are excluded (see below).

Are There Any Transactions Not Included?

Not every transaction requires an e-Invoice. Common exclusions include:

Internal transfers within the same company (e.g., between departments).
Refundable deposits.
Employment income (e.g., salaries under contract of service).
Certain exempt supplies under SST and specific government-related transactions.

What About MSMEs and Small Businesses?

Micro and small enterprises with annual revenue under RM500,000 may qualify for exemption if they meet LHDN’s MSME criteria (e.g., independent operations, no corporate shareholders).

If exempt, these businesses are not required to issue e-Invoices but must monitor their turnover. Once they exceed RM500,000, compliance begins January of the second year following the year the threshold was crossed.

What is the Government’s Role?

LHDN oversees the e-Invoice system through the MyInvois platform, handling validation, monitoring, and support. It works closely with the Royal Malaysian Customs Department (RMCD) to harmonise SST-related data.

The government provides:

Engagement sessions and industry workshops.
Technical support via helpdesk, live chat, and FAQs.
Incentives, including tax deductions up to RM50,000 (2024–2027) for ESG-related expenses such as e-Invoice consultation and setup.

What Happens If You Don’t Follow the e-Invoice Rules?

Failure to issue e-Invoices is an offence under the Income Tax Act 1967 and may result in:

Fines between RM200 and RM20,000 per offence
Imprisonment up to 6 months, or
Both fine and imprisonment

Additionally, invalid invoices may be disqualified from tax deduction claims during audits.

Is My Data Safe with e-Invoice?

Yes. LHDN confirms that data submitted via MyInvois is encrypted and securely stored, with access limited to authorised parties (supplier, buyer, and LHDN).

Businesses must also manage their own data securely in compliance with the Personal Data Protection Act (PDPA) 2010.

How to Change from Manual Invoicing to e-Invoice?

Transitioning involves three key steps:

Assign a team to oversee implementation, training, and compliance.
Review current invoicing workflows and identify required changes.
Decide whether to use the MyInvois portal or integrate with your accounting/ERP system.

During transition, businesses can still issue traditional invoices until their mandatory start date, but early testing avoids disruption.

What About International Transactions?

Cross-border sales and imports are also covered under e-Invoice:

Foreign buyers without Malaysian TIN, use the general code EI00000000020.
Imports, Malaysian buyers must issue self-billed e-Invoices within two months of customs clearance.
Multi-shipment imports require separate self-billed invoices for each clearance.

Can e-Invoice Work with My Current System?

Yes. Most modern accounting and ERP systems can integrate with MyInvois using API specifications provided in LHDN’s SDK.

For businesses without digital systems, the free MyInvois portal is available.

Things to Know for Specific Industries

Different industries have specific workflows addressed in the Specific Guideline:

Retail/FMCG: Consolidated e-Invoices may be issued for high-volume consumer sales.
Construction: E-Invoices are required for milestone-based or progressive payments.
Agents/Distributors: Self-billed e-Invoices must be issued for commissions, incentives (including non-monetary), and reimbursements.

How Can Professional Services Help?

Tax agents and consultants can assist with:

Assessing readiness and identifying compliance gaps.
Setting up API integrations or portal workflows.
Training staff on issuance, validation, and adjustments (credit/debit/refund notes).
Managing exemptions and preparing for audits.

Businesses lacking in-house expertise, external support can reduce risk and speed up implementation.

Sources to Read More

For further information, you can check these sources below:

FAQs

What is LHDN e-Invoice and why is it important?

It’s a digital tax invoice validated by LHDN, ensuring transparency and compliance with Malaysia’s tax system.

Who needs to register for e-Invoice?

All businesses, phased according to annual turnover, with full coverage by July 2026.

Can small businesses delay e-Invoice?

Yes, until their assigned phase or if they qualify for MSME exemption.

Is there a free option to issue e-Invoice?

Yes, the MyInvois portal is free for all taxpayers.

How do I connect my system to LHDN?

Either via API integration with existing accounting software or by using the portal manually.

What if my customer prefers paper invoices?

Validated e-Invoices must still be issued to LHDN, a visual version with QR code can be shared with the customer.

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