Government Delays E-Invoicing Rollout for SMEs to 2026, Implements Tax Relief Measures
The government has announced a deferment in the implementation of e-Invoicing for SMEs with an annual turnover between RM150,000 and RM500,000.
The new deadline is now set for 1st January 2026, accompanied by a six-month transition period. Finance Minister II, Senator Datuk Seri Amir Hamzah Azizan, in response to a question by Lim Guan Eng in the Dewan Rakyat today, said that this decision would benefit over 240,000 SMEs, granting them additional time to adapt to the system.
Meanwhile, businesses with an annual turnover below RM150,000—such as small food vendors—are exempt from e-Invoicing requirements, offering relief to over 700,000 micro-traders.
The government remains committed to easing the transition, providing free access to the MyInvois portal and mobile app for tax submissions. Additionally, the Inland Revenue Board (LHDN) is conducting free nationwide training sessions to support businesses.
Since e-Invoicing was introduced in August 2024 for companies with an annual revenue exceeding RM100 million, over 25,000 firms have adopted the system, generating a total of 181.3 million e-Invoices to date.
Tax Incentives for SMEs
To further support SMEs, businesses can now claim capital allowances for ICT equipment and software purchases, with the deduction period shortened from four years to three years starting from 2024.
Additionally, from 2024 to 2027, SMEs can claim up to RM50,000 in tax deductions annually for consultancy fees related to e-Invoicing implementation.
Earlier, it was reported that the Phase 2 rollout of Malaysia’s e-invoicing system on Jan 1 had presented challenges, with technical issues, unclear directives and logistical constraints complicating the transition for businesses. This phase targets companies with an annual turnover of between RM25mil and RM100mil.
The delay was attributed to unclear updates from the Inland Revenue Board (LHDN) and difficulties in obtaining information, such as the Tax Identification Number from the supply chain side.
Mandatory EPF Contributions for Foreign Workers
In a separate development, employers will be required to contribute 2% to the Employees Provident Fund (EPF) for foreign workers, with employees matching this contribution at 2%. Prime Minister Datuk Seri Anwar Ibrahim confirmed that this policy will remain in effect until further review.
The government has justified the move as necessary to level the playing field between local and foreign workers, as lower employment costs for foreign workers have previously disadvantaged Malaysian employees.
Employers will be entitled to tax deductions on these contributions under Section 34(4) of the Income Tax Act 1967, up to a maximum of 19% of total employee wages.
The introduction of e-Invoicing is part of Malaysia’s broader digital transformation strategy, aimed at improving tax compliance, reducing fraud, and streamlining business operations. The move aligns with global trends, as many countries have already adopted or are in the process of implementing e-Invoicing frameworks to enhance transparency and efficiency in tax administration.
Countries such as Singapore, Indonesia, and India have successfully integrated e-Invoicing into their tax ecosystems, demonstrating its potential to improve financial governance.
For Malaysia, the transition to e-Invoicing is expected to reduce manual tax filing errors, curb tax evasion, and enhance revenue collection efficiency. The government also anticipates that digital invoicing will lead to cost savings for businesses by automating record-keeping and minimising paperwork.
Beyond tax compliance, e-Invoicing is seen as a stepping stone towards greater financial digitalisation in the SME sector. By integrating digital solutions, businesses can improve cash flow management, access real-time financial data, and position themselves for future technological advancements.
The government’s decision to extend the timeline reflects its commitment to ensuring a smooth transition without placing undue financial or operational strain on small businesses.
