KUALA LUMPUR (Jan 5): The rollout of e-invoicing for small and medium enterprises (SMEs) with annual sales of between RM1 million and RM5 million has been postponed by another year. Originally scheduled for Jan 1, 2026, the deadline has now been moved to 2027, Prime Minister Datuk Seri Anwar Ibrahim announced on Monday.
Acknowledging that e-invoicing has become a significant concern for the private sector, Anwar said the government recognised that some companies are not yet ready to adopt the system due to high compliance and setup costs.
"For companies with annual sales of between RM1 million and RM5 million, which were scheduled to begin e-invoicing on Jan 1, 2026, the government has agreed to extend the penalty-free transition period by an additional year," he said during his New Year's message at the monthly assembly of the Prime Minister’s Department.
In addition, Anwar said the Cabinet has agreed to expand the use of the integrated e-invoicing facility to the retail and building materials sectors.
First announced in Budget 2023, e-invoicing is a mandatory digital system introduced by the Inland Revenue Board (LHDN) that requires businesses to issue structured electronic documents for commercial transactions between a seller and a purchaser. The initiative aims to enhance tax administration efficiency and reduce revenue leakages.
The system was initially designed to be implemented in phases, starting with businesses with annual revenue exceeding RM100 million from Aug 1, 2024, followed by full implementation for all other businesses by July 1, 2025. Under the original plan, only those with annual revenue below RM150,000 were to be exempted.
However, the rollout has faced hurdles, with the business community highlighting the significant changes required for existing processes and systems, as well as high cost of compliance.
In response, the government raised the exemption threshold to cover companies with annual revenue under RM1 million. Currently, only taxpayers with annual revenue exceeding RM5 million are required to comply with e-invoicing.
Tax relief measures for SMEs
Separately, Anwar announced several tax relief measures on Monday to ease cost pressures on SMEs. They are:
- Service tax deferment: Newly established SMEs will get an additional one-year extension to help their business stabilise during their early operations.
- Reduced service tax rate: For existing SMEs, the service tax rate on rental will be cut to 6% from 8%.
- Higher exemption threshold: The exemption threshold has been raised to cover micro, small, and medium enterprises (MSMEs) with annual sales of up to RM1.5 million, up from RM1 million previously.
Anwar noted that many Cabinet ministers had suggested that the service tax on rental could continue, but at a reduced rate. Under the national taxation system, the minimum allowable rate is 6%.
"At this stage, I can only reduce it to 6%, which results in an annual revenue loss of nearly half a billion ringgit. I ask for understanding regarding this matter," he said.
Anwar also announced that zero-rated sales tax exemptions will be limited to inputs for registered manufacturers in the animal feed, fertiliser, and pesticide industries. The move is part of the government’s effort to reduce agricultural production costs.
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