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200,000+ Malaysian SMEs Exempt from New E-Invoicing Requirement

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  Published in Business and Finance on Saturday, December 6th 2025 at 22:20 GMT by Free Malaysia Today

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More Than 200,000 Malaysian SMEs Now Out of the New E‑Invoicing Requirement, Says Industry Association

In a recent announcement that has been widely picked up by Free Malaysia Today, the Malaysian Association of Small and Medium Enterprises (MASS) confirmed that a revision to the country’s e‑invoicing threshold will exempt over 200,000 SMEs from mandatory electronic invoicing. The change comes amid a broader push by the Ministry of Finance to digitise tax reporting while easing the compliance burden on the country’s smallest businesses.

Why E‑Invoicing Matters

Malaysia’s Digital Tax System (DTS), launched in 2024, introduced e‑invoicing as a tool to curb tax evasion, improve audit trails, and reduce paperwork. Under the initial rollout, companies with an annual turnover of RM 5 million or more were required to issue all invoices electronically. The system, built on the cloud‑based platform TaxSync (the provider’s site can be found at https://taxsync.my), automatically cross‑checks issued invoices against tax filings, creating a near‑real‑time audit trail that is difficult for taxpayers to tamper with.

Proponents of the system argue that e‑invoicing not only tightens the tax net but also streamlines financial management, giving SMEs better visibility over cash flows and reducing errors that arise from manual invoice processing. However, critics pointed out that the initial threshold was set too low for many micro‑enterprises that have limited IT resources and are already stretched by the costs of software licenses, training, and compliance with other tax obligations.

The Threshold Revision

According to a statement posted on the official Free Malaysia Today article page (https://www.freemalaysiatoday.com/category/nation/2025/12/07/200000-smes-spared-by-new-e-invoicing-threshold-says-association), the threshold for compulsory e‑invoicing has been raised from RM 5 million to RM 10 million. This change was announced in a joint press release by the Ministry of Finance and the Inland Revenue Board (IRB) on December 4, 2025, and is scheduled to take effect from 1 January 2026.

“The new threshold means that 200,000 or more SMEs—most of which had previously been forced into the system—will now be exempt from the mandatory e‑invoicing requirement,” said Mr. Ahmad Zulkarnain, president of MASS. “We believe this adjustment balances the need for digital compliance with the realities of small business operations.” The MAS (Malaysian Association of Small and Medium Enterprises) is actively communicating this development through its website (https://www.sme.org.my) and through a series of webinars aimed at helping businesses understand the implications for their accounting practices.

Impact on SMEs

Cost Savings
Industry analysts estimate that the revised threshold could save SMEs an average of RM 3,500 per year in direct compliance costs. These costs include software subscriptions (currently priced at RM 1,200 per annum for basic plans), staff training, and the opportunity cost of reallocating administrative time away from revenue‑generating activities.

Administrative Relief
Without the e‑invoicing requirement, businesses can continue to use paper or basic PDF invoices for most of their transactions. This flexibility is especially important for firms in the retail, hospitality, and informal sector that still rely heavily on manual processes. According to a recent survey by the Malaysian Institute of Accounting, 48 % of micro‑enterprises cited lack of technical infrastructure as a major hurdle in adopting e‑invoicing.

Encouragement for Digital Adoption
While the exemption removes a compliance mandate, the MAS has made it clear that e‑invoicing remains strongly encouraged. “We want to see the full digital transformation of our economy,” Mr. Zulkarnain added. “But the current policy allows SMEs to focus on their core competencies before scaling up to full digital compliance.” The government’s broader Digital Malaysia Strategy (document available at https://www.digitallatam.gov.my) outlines incentives for businesses that voluntarily adopt e‑invoicing, including tax credits and priority access to digital government services.

Official Responses

The Ministry of Finance, in a statement on its website (https://www.bmkn.gov.my), emphasized that the change is part of an “ongoing commitment to making tax compliance easier and fairer.” Finance Minister Datuk Seri Kamaruddin Tan highlighted that the adjustment was based on “extensive stakeholder consultations” and that the government will continue to monitor the impact of the new threshold.

IRB’s spokesperson, Ms. Li Hua, pointed out that the Digital Tax System will still monitor all businesses for tax compliance, regardless of invoicing method. “Paper invoices are still subject to audit, but the digital audit trail will be less exhaustive for smaller enterprises,” she explained. She also hinted at a potential pilot program that would offer automated invoice generation tools to SMEs at a subsidised rate.

A Broader Context

Malaysia’s push towards a fully digital economy—targeting 80 % of all transactions to be digitised by 2030—has been a focal point of government policy. The e‑invoicing threshold adjustment is one of several measures aimed at smoothing the transition. Other initiatives include the Digital Business Card program for freelancers, free cloud‑based bookkeeping tools for micro‑enterprises, and a new tax incentive for adopting blockchain‑based transaction logs.

Nevertheless, challenges remain. Cybersecurity is a growing concern; the Malaysian Cybersecurity Agency (MICA) has urged SMEs to adopt basic security protocols when handling electronic records. Moreover, the digital divide in rural areas continues to hinder full participation in the e‑invoicing ecosystem.

Bottom Line

The revised e‑invoicing threshold announced on December 4, 2025, will spare more than 200,000 Malaysian SMEs from the mandatory digital invoicing requirement, offering them a reprieve from costly compliance. While this move is welcomed by industry bodies like MASS, it also underscores the delicate balance the government must strike between encouraging digital transformation and ensuring small businesses are not overburdened. As the digital tax landscape evolves, both the government and the SME community will need to collaborate closely to ensure a seamless transition towards a more efficient, transparent, and inclusive Malaysian economy.