May 22, 2025
Achieving Compliance: Navigating Malaysia's 2024 e-Invoicing Regulations with Ease
With Phase 3 of Malaysia’s 2024 e-Invoicing Regulations looming just around the corner, it is imperative that all business owners are up to date with the new regulations and what they mean for their daily operations.
Since the rollout of Phase 1 on the 1st of August 2024, the new regulations have been closely examined and extensively analysed, resulting in their subject matter and contents being widely recognised and broadly familiar within the public domain.
This article attempts to examine these changes and what they mean for your business. It seeks to identify the best methods to achieve compliance, which would gain a competitive edge for your business. It also addresses the potential consequences of non-compliance and their impact on businesses.
The Phases
In pursuit of a comprehensive digital transformation of its infrastructure and to enhance efficiency in tax administration, Malaysia's Inland Revenue Board (LHDN) has introduced the mandatory rollout of e-invoicing for all taxpayers, to be implemented in several phases. This initiative will enable real-time validation and storage of transactions across Business-to-Business (B2B), Business-to-Consumer (B2C), and Business-to-Government (B2G) activities.
The implementation will follow a structured timeline, categorised according to the threshold of revenue/income generated by taxpayers, as outlined below:
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The Transition to Compliance
In order to facilitate the transition to e-invoicing, the Inland Revenue Board of Malaysia, also known as Lembaga Hasil Dalam Negeri (LHDN), has outlined two primary methods through which taxpayers can comply with these mandatory regulations: MyInvois Portal and Application Programming Interfaces (APIs).
The MyInvois Portal hosted by LHDN is a web-based solution available to all taxpayers, especially to small and medium-sized enterprises, at no cost. It allows for manual issuance, submission, and management of their e-invoices without the need for significant system integration or technical development. This platform is specifically designed to be user-friendly and accessible to all to ensure compliance, where businesses of all sizes can efficiently meet the regulatory requirements with minimal technological barriers.
APIs or Application Programming Interfaces are ideal for businesses with larger volumes of transactions. It involves a direct integration of an organisation’s internal accounting, invoicing, or Enterprise Resource System (ERP) with that of LHDN’s e-invoicing platform. With this method, the submission and validation of e-invoices are done in real-time, which allows for a seamless automated solution resulting in high efficiency. APIs are ideal platforms that promote scalability for businesses with varying invoicing needs.
Discover how Mogu’s API Solutions can streamline your compliance
The figure below, extracted from LHDN’s official guidelines, is an overview of the e-invoicing workflow. It illustrates the process from when the first point of sale or transaction is made, where an e-invoice is issued by the supplier via the MyInvois portal or through API integration. Once the e-invoice is submitted to the LHDN, it is then validated, where a Unique Identifier Number is issued to the supplier. This validated e-invoice is then available in the LHDN’s secure database for future reference.
This structured approach not only ensures transparency, accuracy, and traceability of transactions but also plays a critical role in supporting taxpayers' efforts to achieve full regulatory compliance.
With this real-time mandatory validation and storage of e-invoices in a secure database in place, risks of error, fraud, and even non-compliance are largely mitigated. This strategic implementation allows both the businesses and the authorities to have a clear and auditable trail of the transactions that occur, thereby simplifying the compliance verification process.
Moreover, this initiative aligns with Malaysia’s broader objective of fostering digital transformation of the business process, achieving enhanced tax compliance, in effect improving the overall efficiency and integrity of the tax administration.
In adopting either mechanism of transmission, i.e., via the MyInvois portal or through API integration, taxpayers are in a better position to meet their obligatory reporting standards as well as to mitigate the risks associated with non-compliance.
A comprehensive guide can be found in the article Your Strategic Guide to Adopting e-Invoicing in Malaysia by Mogu
The Impact of Compliance
Looming around the corner is Phase 3, scheduled to kick off on the 1st of July 2025. With this in place, taxpayers with a total turnover/revenue of over RM 500,000/- will now have to implement e-invoicing as their invoicing method. e-Invoicing is no longer just a matter of value addition and convenience to your financial management process, but is a vital mandatory requirement in modern business operations.
Transitioning to e-invoicing is not a straightforward task. It demands a fundamental transformation of the finance function in an organisation, where technical expertise becomes essential. Achieving compliance with the new regulations requires businesses to not only adapt their invoicing processes but also enhance their technological infrastructure, equip finance teams with the requisite technical know-how, and realign internal workflows to meet the demands of the new regulatory requirements.
The effects of complying are wide-ranging, with significant short-term demands but far greater long-term benefits.
Talk to a Mogu Expert today about building a future-proof finance system
Steps for a Smooth Transition
Achieving a smooth transition is paramount. Businesses must be well-informed and prepared to ensure a stress-free transition from legacy manual systems to e-invoicing platforms.
Here are a few steps to follow to achieve this:
1. Understand Compliance Requirements
Thoroughly familiarise yourself with the MyInvois framework, including structured formats, Tax Identification Numbers (TIN) and record retention requirements. It is important to stay informed about the phased implementation timelines and any sector-specific regulatory obligations that may be relevant.
2. Evaluate Current Systems
Conduct a thorough assessment of the current invoicing process, technology, and data management practices to be able to identify gaps and potential integration challenges. Determine the scope of the required changes based on the transaction volumes, business model, and internal capabilities.
3. Select Compliant e-Invoicing Solution
Choose a veritable e-invoice platform that is compliant with LHDN regulations, that offers seamless integration with the MyInvois portal, and that offers scalability for future business growth. Ensure that the selected solution provides enhanced data security, real-time validation, and has ‘Finance Friendly’ features for easy use. E-Invoicing with Mogu takes it a step further and provides unparalleled features with AI-driven SMART solutions.
4. Enhance the Capabilities of Your Team
Equip your team with the required skill set to ensure they understand how to use the selected e-invoicing system and that they comply with the new regulatory requirements. It is imperative to garner a cooperative culture of continuous learning to be able to adapt to the evolving upgrades and technologies that may occur.
5. Gradual Implementation of Changes
Roll out e-invoicing in phases, concentrating on high-volume transactions first. This method of adopting technical change will help in identifying problem areas as well as test the system’s performance and stability. It is important to monitor the performance and gather feedback, and resolve any operational issues that may occur before scaling across all business units.
6. Leverage Available Incentives
Capitalise on the available incentives such as LHDN’s capital reduction allowance claim periods for ICT-related investments, which will help offset the initial costs associated with the adoption of e-invoicing. Use all available resources such as industry webinars and advisory programmes to help in the transition.
Learn how Mogu helps businesses transition with minimum disruption
Consequences of Non-Compliance
Each phase of the e-invoice rollout has a grace period of 6 months after implementation for businesses to adopt the new system. Upon completion of the grace period, non-compliance with the mandate can result in penalties.
Section 120(1)(d) of the Income Tax Act 1967 stipulates that failure to issue e-invoices as per mandate shall result in “a fine of not less than RM200 and not more than RM20,000 or imprisonment not exceeding 6 months or both” as stated in the official LHDN website.
Failure to comply may result not only in legal consequences but also in inefficient tax reporting and missed opportunities for enhancing operational efficiency.
Key Takeaways
With Phase 3 of Malaysia’s e-invoicing mandate just around the corner, proactive actions must be taken to ensure the best framework that will suit your business's needs and achieve compliance with a smooth transition. A comprehensive solution must be compliant, scalable, and secure, and Mogu offers a future-proof solution that combines localised knowledge and regulatory compliance with the precision of European standard financial systems.
Partner with experts like Mogu that have the experience, technical prowess, and strategic services which can turn compliance into a competitive advantage, helping you navigate the regulatory landscape effortlessly while optimising your business processes.
