e-Invoice Exemption Malaysia 2026: Can Your Business Stop? Read This Before You Decide

On 30 August 2026, the Prime Minister announced that the e-Invoice exemption threshold would rise from RM1 million to RM3 million, with effect from 1 September 2026. LHDN’s e-Invoice FAQ dated 4 September 2026 now tells you how that works in practice.

If your annual turnover or revenue is below RM3 million, and you meet the conditions in paragraph 1.6.10 of the e-Invoice Guideline, you may stop issuing e-Invoices immediately. You do not write in. You do not apply. LHDN has also said it will not take action for e-Invoices that were never issued from your original start date.

That is only true if you actually qualify. The exemption is not automatic. A RM400,000 subsidiary of a holding company at or above RM3 million is still in. So is a company with a corporate shareholder already at or above RM3 million. Stop first, check later, and you have a gap you thought was waived.

1. What the LHDN FAQ Settled

Three things are now confirmed:

• The e-Invoice exemption applies to taxpayers with annual turnover or revenue below RM3,000,000, across all taxpayer categories — individuals, sole proprietors, partnerships, companies, and co-operatives.
• Eligible taxpayers who have already been issuing e-Invoices may discontinue immediately. No separate application or prior approval from IRBM is required.
• IRBM encourages exempt businesses to continue voluntarily, in support of the government’s digitalisation initiative. It is not required.

Sources are listed at the foot of this article.

2. Who Qualifies — The Four-Question Test

Answer these in order before deciding anything.

Sole Proprietors with More Than One Business

For sole proprietors, the RM3 million test is on the person, not on each business. All sole proprietorship businesses registered under the same individual’s name are added together.

Example: Ahmad owns three businesses — a sundry shop (RM750,000), a laundry service (RM820,000), and a food stall (RM1,540,000). Combined, that is RM3.11 million. The RM3 million test is on Ahmad, not on each shop. When he must start depends on which YA first crossed RM3 million. If it was YA2023, YA2024, or YA2025, his start date was 1 July 2026. If it is YA2026 or later, it is 1 January of the second year after that YA.

Our view: sole proprietors with combined revenue anywhere near RM3 million should check which YA first crossed the line. The start date — and whether any gap since that date is live — depends on the answer.

A company with RM400,000 turnover does not automatically qualify either. If it is a wholly-owned subsidiary of a holding company with annual turnover or revenue of at least RM3 million, it does not get the exemption. The subsidiary’s own revenue is irrelevant once Q3 is triggered.

3. If You Qualify — Can You Stop, and What About Past Gaps?

Yes. Once you have confirmed you pass the four-question test:

• You can stop immediately without writing any letter to LHDN.
• SVDP participation is unnecessary for e-Invoices you never issued.
• Penalties are waived for the gap between your original mandatory start date and today.
• You are also not required to issue consolidated e-Invoices or self-billed e-Invoices going forward.
• e-Invoices already validated on MyInvois: leave them. Do not cancel or unwind what was already submitted.
• You may stop from the next document.

On invoices you never issued — including the June 2026 consolidated e-Invoice due on 7 July 2026 — LHDN’s position is clear enough for practice. FAQ 15 deals with a taxpayer who issued nothing from 1 January 2026: no penalty, if the exemption now applies. FAQ 19 deals with a taxpayer who was already issuing and then found missing invoices: SVDP is not required. You may stop from the next document. Leave anything already validated on MyInvois as it is.

This is LHDN’s published enforcement position as at 5 September 2026. It does not help you if you fail the group tests. In that case June and July remain outstanding, and the August 2026 consolidated was due on 7 September 2026.

4. Should You Stop? KS Chia’s Assessment

Qualifying for the exemption means you have a choice. It does not mean stopping is the right decision for every business.

Gate A — You do not qualify

If you do not qualify, do not stop. Do the group mapping first. If you are a subsidiary, or have a corporate shareholder or related company at or above RM3 million, continuing is the only correct position.

Gate B — You qualify. Now it is a business decision.

Consider staying on e-Invoice if:

• Your system and staff are already live and the ongoing cost is modest.
• You expect to cross RM3 million within one or two years of assessment — because once you cross, you start mandatory e-Invoice on 1 January of the second year after that YA, and you cannot step back out.
• Major customers already reconcile on MyInvois and you do not want two document trails.
• You want a clean digital transaction record for tax audits or financing purposes.

Consider stepping off if:

• Transaction volume is low and the Portal or API workload is disproportionate to the benefit.
• You have no group structure concern and no near-term plan to exceed RM3 million.
• You were only issuing because the old RM1 million threshold forced you in, and the compliance cost was always a burden.

Do not decide company-by-company if the shareholders are mixed. Decide on the group map first, then on cost. A standalone SME with individual shareholders only has a straightforward decision. A company with corporate shareholders — even at a minority stake — needs to confirm those shareholders’ revenue figures before any stop decision is made.

5. If You Grow Past RM3 Million

In the first year of assessment (YA) where your annual turnover or revenue reaches or exceeds RM3 million, you are required to implement e-Invoice starting from 1 January of the second year following that YA.

Example: your revenue exceeds RM3 million in YA2026 (financial year ending 31 December 2026). Your mandatory start date is 1 January 2028.

Once that start date is fixed, a later drop below RM3 million does not restore the exemption. Once in, stay in.

For new businesses commencing from YA2026 onwards: if you qualify for the exemption test, the same second-January rule applies once you cross RM3 million. If you fail the related-company or group structure test from the start, your mandatory date is 1 July 2026 or your operation commencement date, whichever is later.

6. Group Structure — Four Scenarios

The group structure test catches more businesses than owners expect. The last row is the one that surprises most.

One further point: a common director alone — with no shareholding — does not make two companies related for e-Invoice purposes. The test is at the shareholder level, not the director level. Per FAQ 103(c).

What to Do Now

Pull your YA2024 and YA2025 revenue figures. List every shareholder and identify whether any is a company. If yes, confirm that company’s annual revenue and check for related companies and joint ventures. Then decide: stop, stay, or prepare for 1 January 2028.

Sources: IRBM e-Invoice Guideline Version 4.8, paragraphs 1.6.1(e) and 1.6.10, published 30/08/2026. LHDN e-Invoice General FAQ, updated 04/09/2026, FAQs 15, 19, 102, 103(b), 103(c) and 104. Promotion of Investments Act 1986, section 2. Income Tax Act 1967, section 120. This article reflects LHDN’s published enforcement position as at 05/09/2026 and is intended as general guidance only. It does not constitute legal or tax advice for any specific engagement.