Malaysia's E-Invoice Rollout - What MSME's Need to Know

Malaysia’s upcoming e-invoicing mandate in 2025 is a significant shift, and it’s crucial for MSMEs to understand the implications. Malaysia e-invoicing 2025 will fundamentally change how businesses handle transactions, requiring them to adopt digital invoicing systems that comply with the Inland Revenue Board of Malaysia (LHDN). Therefore, MSME compliance with e-invoicing is no longer optional.

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What is an e-invoice in Malaysia? 

An e-invoice is a digital representation of a transaction between a supplier and a buyer that replaces all paper or electronic documents serving as invoices, credit notes and debit notes.

According to the new framework, an electronic invoice is a structured file that is produced in a specific format and that the appropriate systems can handle automatically. There are 53 required fields in the e-invoice structure, and it must be submitted in JSON or XML format.

In accordance with current procedures, an e-invoice will have the same basic information as a traditional invoice, including the buyer's and supplier's information, item description, quantity, price (excluding tax), and total amount.

E-invoices must have a QR code included after the validation procedure.  

PDFs, Doc, JPG and paper will not be considered as e-invoices.

Key Takeaways for MSMEs:

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Phased Implementation:

• Malaysia is implementing e-invoicing in phases, allowing businesses time to adapt.
• Specifically for MSMEs with annual sales between RM150,000 and RM500,000, the implementation has been postponed to January 1, 2026, with a 6 month transition period.
• All businesses including MSMEs, with turnover of more than RM500,000 will be required to implement e-invoicing by July 1st 2025.

Exemption for Small Traders:

• Small traders with annual sales below RM150,000 are exempt from e-invoicing requirements. This is a significant relief for very small businesses.

Importance of Compliance:

• While there are phased implementations and exemptions, it’s crucial for MSME’s to understand that e-invoicing will eventually affect most businesses.
• Being prepared is essential to ensure smooth operations and avoid potential penalties.

Benefits of E-Invoicing:

• E-invoicing aims to modernise the invoicing process, reduce paperwork, and improve efficiency.
• It can also enhance tax compliance and reduce the risk of fraud.

Understanding the Process:

• MSMEs should familiarise themselves with the LHDN e-invoicing requirements, including the required data format (XML or JSON) and transmission methods (MyInvois or API).
• It is very important to understand that the Inland Revenue Board of Malaysia (LHDN) is the governing body for this implementation.

Seeking Assistance:

• MSMEs should seek assistance from relevant authorities or professional service providers if they need help understanding or implementing e-invoicing.
• Proper preparation is essential to prepare for e-invoicing in Malaysia.

In conclusion, navigating the transition to Malaysia's e-invoicing system demands careful preparation and strategic adaptation for MSMEs. By diligently understanding the regulatory requirements and proactively implementing necessary changes, businesses can ensure seamless compliance and unlock the benefits of streamlined digital invoicing. However, to truly capitalise on this shift and minimise disruption, MSMEs should consider leveraging software solutions. This is where ARC software proves invaluable. ARC can simplify the e-invoicing process, automate data entry, ensure compliance with LHDN standards, and provide clear, real-time insights into financial transactions. 

By onboarding ARC, MSMEs can transform the mandatory e-invoicing implementation from a complex obligation into an opportunity for operational efficiency, enhanced financial clarity, and sustainable growth. Ultimately, by embracing digital tools like ARC, MSMEs can confidently navigate the future of Malaysian business.

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