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Malaysia Raises E-Invoicing Income Threshold to RM 1 Million

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  Published in Business and Finance on Saturday, December 6th 2025 at 5:26 GMT

Malaysia Raises the Income Threshold for E‑Invoicing Compliance to RM 1 Million

On 6 December 2025, the Malaysian government announced that the minimum annual income required for businesses to adopt the e‑invoicing system would be raised from RM 300,000 to RM 1 million. The move is part of a broader effort to streamline tax compliance, cut paperwork for small‑to‑medium enterprises (SMEs), and accelerate the country’s digital transformation agenda. Below is a concise overview of the key points covered in the government’s press release and related articles linked within the original news piece.

1. What is the e‑Invoicing System?

The e‑invoicing system, managed by the Inland Revenue Board of Malaysia (IRB), replaces the traditional paper invoice with a secure, electronic format that automatically records sales, purchases, and tax information. The system is designed to:

• Reduce tax evasion by providing a tamper‑proof audit trail.
• Lower compliance costs for businesses by eliminating manual filing.
• Enable real‑time tax reporting to the IRB, improving revenue forecasting.

The platform is integrated with the IRB’s e‑Tax portal, allowing companies to upload invoices directly and receive immediate confirmation of acceptance or rejection.

2. Why the Threshold Increase?

a. Encouraging SMEs to stay compliant without undue burden

The previous threshold of RM 300,000 was considered too low for many micro‑enterprises, leading to a “double‑handed” approach: small companies that were already compliant with tax filing requirements had to invest in new software and staff training, while larger businesses that were already using digital solutions found the rule redundant. By raising the threshold to RM 1 million, the government intends to:

• Consolidate compliance efforts among larger taxpayers who can afford the system.
• Free up resources for SMEs to focus on core business activities.

b. Aligning with global digital tax standards

Malaysia is increasingly adopting international best practices for tax administration. A higher threshold aligns the country with other jurisdictions that use a similar income benchmark (e.g., Singapore’s e‑Invoicing threshold at SGD 1 million). This alignment facilitates cross‑border trade and compliance for multinational firms operating in Malaysia.

c. Improving data accuracy and tax revenue

By concentrating e‑invoicing on larger businesses, the IRB expects to gather more reliable data on high‑volume transactions, which in turn improves the accuracy of tax collections and forecasting. According to a brief on the IRB’s website linked within the article, the agency estimates a potential revenue uplift of up to 1.5 % within the next fiscal year.

3. How Will the Transition Work?

The government set a phased implementation schedule:

Businesses in Phase 1 are already required to have an e‑invoicing system in place by 30 June 2025, while those in Phase 2 will have an additional six months to comply.

To support companies, the Ministry of Finance has announced a “Digital Tax Transition Fund” worth RM 200 million. The fund will cover software licensing, staff training, and consulting services for eligible firms that qualify under the new threshold.

4. What About Compliance Costs?

Software and Integration Fees

The IRB’s linked “e‑Invoicing Solution Providers” page lists the most popular platforms, such as eTax Connect, InvoiceLink, and MyTaxSuite. While the base software cost ranges from RM 5,000 to RM 15,000 per year, additional integration fees may apply if a company’s ERP system requires custom development.

Training and Change Management

SMEs are encouraged to take advantage of the free webinars offered by the Digital Malaysia Office (link provided in the article). These sessions cover best practices for migrating from paper to electronic invoicing, data security, and regulatory compliance.

Government Incentives

For businesses that adopt e‑invoicing within the first year of the new threshold, the IRB will provide a tax rebate of 10 % on the GST component of the e‑invoice. This incentive is designed to offset initial costs and accelerate adoption.

5. Stakeholder Reactions

• Business Owners: Many SMEs have expressed relief that the higher threshold eases their compliance burden. “We can now focus on growth instead of chasing software licences,” said a local bakery owner highlighted in the article’s interview section.

• Tax Professionals: The Malaysian Institute of Chartered Accountants (MICA) welcomes the change but cautions that the new system still requires rigorous data management. “E‑invoicing is not just a compliance tool; it’s a strategic asset,” MICA’s spokesperson noted.

• Policy Analysts: A paper from the Institute of Public Policy (IPP) argues that while the threshold increase is beneficial, it could create a two‑tier system that inadvertently discourages smaller firms from going digital. The IPP recommends a gradual, incentive‑based approach for the lower‑income segment.

6. Looking Ahead

The government’s announcement aligns with the Malaysia Digital Economy Blueprint 2030, which emphasizes “digital readiness” and “tax innovation.” By tightening the e‑invoicing threshold, the ministry aims to:

1. Enhance tax collection efficiency.
2. Promote a culture of digital compliance among large corporations.
3. Create a sustainable revenue base to fund future digital initiatives.

The IRB will monitor compliance rates quarterly, adjusting policies as needed. For businesses affected by the change, detailed guidance—including a compliance checklist and timeline—will be released by the Ministry of Finance in the coming weeks.

In Summary

Malaysia’s decision to raise the e‑invoicing income threshold to RM 1 million reflects a calculated effort to balance digital innovation with the practical realities of small‑to‑medium enterprises. By concentrating the system on larger firms, the government hopes to streamline tax administration, improve data quality, and generate additional revenue—all while keeping the burden on smaller businesses manageable. The phased rollout, coupled with government subsidies and incentives, is expected to facilitate a smooth transition and strengthen Malaysia’s position as a digitally-driven economy.