LHDN e-Invoice Rollout: Which Phase Applies to You

Malaysia's e-Invoice regime under LHDN's MyInvois system rolled out in phases by annual turnover. Each phase has a different go-live date, and the smallest businesses are now exempt entirely. This guide explains which phase applies to you, how the December 2025 revisions changed the picture (Phase 5 cancelled, RM 1 million exemption), and the integration choices you need to make.

The four phases at a glance

Turnover bands are based on the audited financial statements for the 2022 financial year (LHDN's reference baseline) and are reviewed each phase. Businesses crossing a band threshold mid-stream become subject to e-Invoice from the start of the following calendar year.

The RM 1 million exemption (December 2025 update)

On 7 December 2025, the Prime Minister announced two significant revisions to the e-Invoice mandate:

• Phase 5 has been cancelled. The previously planned RM 150,000 – RM 500,000 turnover band will no longer be brought into scope.
• The exemption threshold is raised from RM 150,000 to RM 1 million from 1 January 2026. Any business with annual turnover below RM 1 million is fully exempt from issuing e-Invoices.
• For Phase 4 businesses (RM 1 million – RM 5 million), the mandatory go-live remains 1 January 2026, but a penalty-free grace period runs through 31 December 2027, with active enforcement only from 1 January 2028.

The exemption is a relief from issuing — businesses still receiving invoices from larger Phase 1–4 suppliers will see those suppliers record consolidated buyer-side self-billed e-Invoices on their behalf.

What counts as an e-Invoice

An e-Invoice in Malaysia is not just a PDF — it is a structured XML or JSON document validated by LHDN's MyInvois platform, returned with a Unique Identification Number (UIN), then transmitted to the buyer. There are 8 document types: invoice, credit note, debit note, refund note, plus four self-billed variants used by buyers.

Every e-Invoice carries dozens of mandatory fields, including:

• Supplier and buyer details (name, TIN, SST registration if any).
• MSIC code — the 5-digit code is a required field on every line. See our MSIC code guide and the MSIC code finder if you have not picked one yet.
• Classification code (for the type of supply).
• Tax codes (SST type and rate).
• Unit price, quantity, totals, currency.
• Date and time of issue.

Integration options

Companies have three broad routes:

1. Direct API integration with MyInvois. Suitable for large taxpayers and any ERP-driven business. Requires an accredited intermediary or in-house build against LHDN's API spec.
2. Accounting software with built-in MyInvois support. SQL, AutoCount, Million Software, Xero, QuickBooks, NetSuite, and SAP all have MyInvois adapters. Easiest path for SMEs.
3. MyInvois portal manual entry. LHDN's public portal accepts manual invoice creation. Useful for low-volume businesses but unsuited to anything over a few invoices per day.

Consolidated e-Invoice

For B2C transactions where the buyer is an end consumer not asking for an individual e-Invoice, sellers may issue a consolidated e-Invoice at month-end summarising all such sales. The buyer-not-known path is critical for retail (MSIC division 47) and F&B (MSIC division 56) operators.

Self-billed invoices

Five scenarios require the buyer to issue a self-billed e-Invoice:

• Payments to foreign suppliers.
• Payments to individuals/proprietorships not in the e-Invoice net.
• Profit distribution (dividends).
• e-Commerce platform payouts to sellers.
• Buy-back / claim / refund transactions.

Penalties

Failure to issue an e-Invoice when required is an offence under the Income Tax Act 1967 s. 120(1)(d). Fines range from RM 200 to RM 20,000 per offence, plus possible imprisonment up to 6 months. LHDN has applied a "soft enforcement" stance for the first 6 months of each phase, but documented post-soft-enforcement penalties are now being issued.

What to do now

• Check your turnover band against the table above.
• Confirm your MSIC code is the right 5-digit item code for your activity. If unsure, our code finder walks through the decision.
• Pick an integration route at least 60 days before your go-live. ERP changes take time.
• Confirm SST treatment for each product/service line — incorrect tax codes are one of LHDN's top rejection reasons. See our SST guide.
• Train accounts and sales teams on consolidated monthly e-Invoice generation if you serve consumers.

Sources: LHDN MyInvois Portal; LHDN e-Invoice Guideline; e-Invoice Specific Guideline (FAQ); Income Tax Act 1967.