(Join our Community Series: Mastering Statutory Contributions and Employee Benefits 21 August 2024 with LHDN Officer (Physical Event). Details at the end of this article.)


The Inland Revenue Board (LHDN) of Malaysia has recently announced a significant update regarding the implementation of the mandatory e-Invoicing system. Starting from August 1, 2024, businesses with an annual revenue of RM100 million or more are required to adopt e-Invoicing. However, recognizing the challenges of this transition, LHDN has granted a six-month grace period to facilitate a smoother shift for these enterprises.

Key Details of the Grace Period

Grace Period Provisions:

  • Consolidated E-Invoices: During this six-month period, businesses are allowed to submit consolidated e-Invoices for all their transactions instead of issuing individual e-Invoices per transaction. This measure aims to reduce the initial burden and provide companies with the time needed to integrate e-Invoicing into their regular operations.
  • Flexibility in Descriptions: Businesses can enter any transaction description in the “Product or Service Description” field, which adds a layer of flexibility during the adaptation phase.
  • Physical Receipts: Despite the push for digitalization, businesses are still permitted to issue physical receipts upon request by consumers, ensuring customer convenience during the transition.

Impact and Reactions

Affected Sectors:

  • The mandatory e-Invoicing system primarily impacts large corporations with annual revenues exceeding RM100 million. These companies are the first to adopt this system, setting the stage for broader e-invoicing implementation across other sectors in the future.

Business Community Response:

  • The announcement has been well-received by various business groups, including the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) and the Kuala Lumpur and Selangor Indian Chamber of Commerce and Industry (KLSICCI). These organizations emphasize the importance of education and awareness campaigns to help businesses understand the benefits and technicalities of e-Invoicing.
  • Awareness and Adoption Efforts: Both ACCCIM and KLSICCI are advocating for nationwide awareness programs and consultations to ensure businesses are adequately prepared. They suggest that LHDN should focus on promoting the adoption of e-Invoicing through informative campaigns rather than immediate enforcement.

Penalties for Non-Compliance

Legal Consequences:

  • Non-compliance with the e-Invoicing regulations can lead to significant penalties. According to Section 120(1)(d) of the Income Tax Act 1967, businesses failing to issue e-Invoices may face fines ranging from RM200 to RM20,000 for each instance. Additionally, offenders may be subject to imprisonment for up to six months or both.

Other Implications:

  • Revenue Loss: Businesses may face revenue losses if traditional invoices are refused.
  • Bill Discounting: Without e-Invoices, businesses might be ineligible for bill discounting facilities.
  • Legal Validity: E-Invoices carry higher legal validity than traditional invoices, reducing the risk of disputes.

Exemptions and Special Considerations

Currently, the mandatory e-Invoicing requirements apply to businesses with annual revenues exceeding RM100 million. However, the system will be phased in for all businesses by July 1, 2025. During the voluntary phase, businesses are encouraged to familiarize themselves with the system to avoid disruptions when compliance becomes mandatory.

How Businesses Should Prepare During the Grace Period

To effectively prepare for the mandatory e-Invoicing system, businesses should take several key steps during the six-month grace period:

  1. Conduct a Gap Assessment Analysis:
    • Assess current invoicing systems and processes to identify areas needing upgrades or adjustments to meet e-Invoicing requirements. This includes evaluating the compatibility of existing accounting systems and ensuring they adhere to the required e-Invoicing standards​ (BoardRoom)​.
  2. Update IT Infrastructure:
    • Ensure that the IT infrastructure is capable of handling e-Invoicing requirements. This includes integrating e-Invoicing software with existing ERP systems and preparing for real-time data validation and storage​ (ValtaTech)​.
  3. Choose the Right E-Invoicing Model:
    • Depending on the volume of transactions, select between using the MyInvois portal for low volume or integrating e-Invoicing software for higher volume. Ensure the chosen model aligns with business needs and compliance requirements​ (BoardRoom)​.
  4. Train Employees:
    • Provide comprehensive training for employees on the new e-Invoicing process. This includes initial awareness training followed by detailed sessions on handling e-Invoices, compliance requirements, and the use of new systems​ (BoardRoom)​.
  5. Engage with Stakeholders:
    • Communicate with clients, partners, and service providers about the transition to e-Invoicing. Understanding their timelines and requirements will help ensure a smooth transition and prevent disruptions​ (BoardRoom)​.
  6. Apply for Grants and Tax Incentives:
    • Take advantage of available grants and tax incentives to offset the costs of transitioning to e-Invoicing. These incentives can help cover expenses related to system upgrades, software integration, and staff training​ (BoardRoom)​.

Moving Forward

The six-month grace period is a strategic move by LHDN to ease the transition for businesses and ensure the effective implementation of the e-Invoicing system. It provides a valuable window for companies to adapt to the new requirements without the immediate threat of penalties. During this period, businesses are encouraged to familiarize themselves with the e-Invoicing process, seek necessary consultations, and leverage the flexibility offered to integrate this digital shift seamlessly into their operations.

For more information on the grace period and the e-invoicing implementation, you can refer to the detailed announcements from sources like Malay Mail and The Star.

By embracing e-Invoicing, businesses can not only comply with new regulations but also benefit from improved operational efficiencies and cost savings. The collaborative efforts of business groups and regulatory bodies will be crucial in ensuring a smooth and successful transition to a more digitalized future in Malaysia's financial landscape.

How Kakitangan.com Can Help Your Business

Kakitangan.com provides comprehensive HR software solutions that can streamline the integration of e-Invoicing into your business processes. By automating payroll, leave management, expense reimbursement, and attendance tracking, Kakitangan.com ensures that your organization remains compliant with e-Invoicing regulations while improving overall efficiency.

Key Benefits of Kakitangan:

  • E-Payroll Integration: Automates salary calculations, tax deductions, and wage disbursements, reducing the risk of manual errors and ensuring timely payments.
  • E-Leave Solutions: Centralizes leave requests, approvals, and tracking, boosting productivity and reducing administrative burdens.
  • E-Claim Systems: Streamlines expense reporting and approval workflows, ensuring faster reimbursement cycles and preventing fraudulent claims.
  • E-Attendance Solutions: Tracks employee attendance, monitors punctuality, and provides valuable insights for workforce management.

By adopting Kakitangan.com’s HR software solutions, businesses can achieve higher levels of efficiency, accuracy, and transparency throughout their workforce, making the transition to e-Invoicing smooth and hassle-free. To learn more about Kakitangan.com's offerings and how they can support your e-Invoicing needs, visit Kakitangan.com. 

Join our Community Series: Mastering Statutory Contributions and Employee Benefits 21 August 2024 with LHDN Officer (Physical Event). Sign up for the training here: https://www.kakitangan.com/company/events/community-series/2024/august