(Tax Update) E-Invoicing Update: A Breakthrough for Micro-SMEs in Malaysia

Early Development to MSME

In early July 2024, during a parliamentary session, Finance Minister II Datuk Seri Amir Hamzah Azizan announced new e-invoicing regulations and supports for MSMEs. These regulations exempt MSMEs with annual revenues below RM150,000 from the obligation to issue e-invoices.

However, they also permit these MSMEs to issue consolidated e-invoices that summarize monthly sales transactions, offering flexibility in managing their invoicing requirements.

Latest Development to MSME

Abu Tariq, CEO of the Inland Revenue Board of Malaysia (LHDN), has announced a important update to e-invoicing regulations, marking a significant development for small enterprises nationwide on 16 July 2024

Major Update

Micro-SMEs with annual revenues below RM 150,000 are now completely exempt from e-invoicing mandates.

Impact of the Exemption:

• No requirement to issue e-invoices: Micro-SMEs are relieved from the obligation of generating electronic invoices, allowing them to continue using their current billing systems without additional upgrades or changes.

• No need to consolidate e-invoices: These enterprises are not required to merge multiple e-invoices into a single document, which typically helps in reporting and compliance, thus saving time and reducing complexity.

• Full exemption from adopting the e-invoicing system: This complete waiver frees micro businesses from the financial and logistical challenges associated with setting up and maintaining a compliant e-invoicing system.

This amendment substantially alleviates the administrative load for thousands of micro businesses, enabling them to concentrate on growth and sustainable development.

Our Thoughts

This initiative indicates LHDN's acknowledgment of the unique hurdles that micro businesses encounter, demonstrating a commitment to support the smallest economic contributors in our country.

To secure tax deductions from purchases made from MSMEs, taxpayers should meticulously document transactions and retain detailed invoices as proof for claims. However, potential abuse, such as overstating expenses, could occur.

Buyers also need to conduct thorough due diligence on MSME transactions to ensure legitimacy and accuracy. This approach allows buyers to responsibly benefit from tax deductions while maintaining the integrity of the tax system.

Final Words

While larger enterprises will see the continued rollout of the e-invoicing system as planned, aimed at simplifying tax procedures and increasing transparency with effect from 1 August 2024.

We will continue to monitor the progress of e-invoicing in Malaysia and provide further updates. Should you have any queries regarding your business’s e-invoicing obligations, please consult LHDN or your tax advisor.