Key Announcements: E-Invoice Exemptions and Implementation for MSMEs

Malaysia is introducing e-invoicing to modernise the invoicing process, reduce paperwork and boost efficiency. To ensure a smooth transition, the government is rolling it out in phases, giving businesses time to adapt.

E-Invoice Exemption for Small Traders

The government has announced an exemption from e-invoice requirements for small traders with annual sales below RM150,000. This move benefits over 700,000 small traders, including hawkers, who will no longer need to issue e-invoices.

Postponement for MSMEs

To support micro, small, and medium enterprises (MSMEs), the implementation of e-invoicing for businesses with annual sales between RM150,000 and RM500,000 has been postponed to January 1, 2026. Additionally, a six-month transition period will be provided, benefiting over 240,000 MSMEs.

Phased Implementation of E-Invoicing

The e-invoicing system is being introduced in phases:

Phase	Effective Date	Turnover Threshold	Business Type/Size
Phase 1	August 1, 2024	More than RM100 million	Large Businesses
Phase 2	January 1, 2025	RM25 million - RM100 million	Medium Businesses
Phase 3	July 1, 2025	More than RM500,000	All Businesses, including MSMEs
Phase 4	January 1, 2026	RM150,000 - RM500,000	MSMEs

EPF Contributions for Foreign Workers

The government has mandated a 2% EPF contribution from both employers and employees for foreign workers. This policy aims to create a level playing field between local and foreign workers and encourage the hiring of more locals.

Employers contributing 2% to the EPF for foreign workers are eligible for tax deductions, capped at 19% of the worker’s total wages, regardless of citizenship.

Progress So Far

Since the launch of the e-invoicing program, 25,173 companies have adopted the system, issuing over 181.3 million e-invoices.

Tax Optimisation Strategy:

Consider establishing a separate entity to take advantage of the following benefits:

Setting up a separate company: Save more by shifting from a 24% tax rate to 15%/17% for qualifying companies. For qualifying companies, the first RM150,000 of chargeable income is taxed at 15%, the next RM450,000 of chargeable income is taxed at 17% and the remaining chargeable income is taxed at 24%.
Phased E-Invoicing Compliance: You may qualify for Phase 4 implementation (effective January 1, 2026), giving you more time to adapt to the new system.

Contact us today for expert support!