June 9, 2025
The Inside Scope of LHDN’s 2024 e-Invoicing Regulation
With the approach of the third phase (on the 1st July, 2025) of the e-invoicing mandate brought by the Malaysian Inland Revenue Board (Lembaga Hasil Dalam Negeri, or LHDN) in 2024, businesses are preparing for compliance. This sweeping new regulation was part of a broader digital transformation agenda aimed at modernizing the nation’s tax ecosystem. Here, we provide an insider’s scope on the intent behind the regulations, the goals LHDN expects to achieve, how e-invoicing helps accomplish these goals, and what businesses must do to prepare for the future.
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The Regulatory Intent- Why LHDN Introduced e-Invoicing
Implemented to streamline the tax process and enhance transparency and efficiency, this strategic initiative aims to address key challenges within the country’s tax ecosystem.
- Curbing unregulated economic activity
Malaysia’s shadow economy, with unregulated transactions such as revenue leakage from underreported transactions and unregistered businesses taking place, has been a matter of concern to the authorities. E-Invoicing creates greater transparency with a digital trail, making tax evasion significantly difficult.
- Boosting tax compliance and accuracy
The new regulations require real-time validation of each invoice across all business transactions, be it domestic (B2B, B2C, and B2G) or international transactions. The manual and paper-based system, which was prone to error, has now been eliminated. The validation process through the MyInvois Platform of the LHDN ensures accurate and prompt reporting of all transactions, eliminating previous tax discrepancies.
- Aligning with international standards
Complete overhauls of legacy systems being replaced with national e-invoicing platforms have seen success in countries such as Chile, Mexico, and Italy. The LHDN aims to align Malaysia with such international standards, enhancing investor confidence and streamlining cross-border trade in the digital age.
- Supporting digitalization
This regulation is another step in the broader direction of total digitalization that Malaysia intends to achieve in the modernization of the government's services. With this, LHDN aims for a system that is not only efficient but is more agile, which is capable of changing with technological development and evolving business models.
The Key Milestones and What This Means for Your Business
LHDN has adopted a staggered approach to ensure a smooth transition across the economy.
The phased rollout implemented by LHDN ensures that all businesses are fully compliant by 2026.
This means that all businesses need to be proactive in their preparation, whereby understanding technical requirements, integrating with Peppol or LHDN APIs, and adjusting internal workflows will give you a competitive edge.
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The implications for businesses in adhering to the regulations are beyond that of compliance.
The eventual real-time validation through LHDN’s MyInvois system of all invoices ensures greater operational accuracy with reduced manual errors, ensuring compliance in real-time.
The national e-invoicing framework is designed in line with global standards such as Peppol, paving the way for businesses to engage in international trade in compliance with cross-border tax requirements, opening up opportunities for scaling beyond borders.
Adhering to the e-Invoicing regulations acts not only as a mere means of regulatory compliance but also as a catalyst for technological advancement within the financial and operational streams of your business. It improves cash flow management with enhanced audit readiness and operational efficiency. Implementation of e-Invoicing nationwide is also a step towards sustainability and eco-friendly “finance”.
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The Expected Outcomes
There are several outcomes that the LHDN anticipates in the implementation of the nationwide e-Invoicing rollout:
- Boosted Revenue Collection- with real-time validation of transactions in place, LHDN can ensure compliance and enhanced tax reporting, thereby reducing the risk of tax evasion and fraud. This, in effect, closes the tax gaps and increases government revenue without having to increase tax rates.
- Streamlined Tax Administration- through this system, LHDN gets validated invoice data, improving audit efficiency with data-driven compliance checks and tax processing more efficient and less resource-intensive, which in turn reduces the burden on compliant businesses.
- Enhanced Transparency and Formalization- e-Invoicing fosters greater supply chain visibility and business formalization, strengthening trust across stakeholders, including regulators, trading partners, and financial institutions.
- Streamlined Refunds and Credit Claims- with standardized e-Invoicing and real-time validation, authorities are able to process refunds and credit claims, such as input tax credits, with much efficiency and accuracy, minimizing processing delays and enhancing system reliability.
How Regulation Helps Achieve LHDN’s Goals
The design and scope of the e-Invoicing regulations are structured in such a way that they align with LHDN’s objectives.
Today’s Priorities for Tomorrow’s Compliance
Adhering to the e-Invoicing regulations as set out by the LHDN not only ensures compliance, avoiding penalties and achieving a smooth transition, but can also be a competitive advantage. Businesses that have yet to comply will eventually be required to do so, making it prudent to prepare proactively and approach implementation with diligence to stay ahead of the curve.
- Identify Your Compliance Phase: Check your annual turnover and determine your mandated start date (as seen above)
- Assess and Upgrade Systems: Review your current invoicing processes, software capabilities, and ensure compatibility with LHDN’s XML/JSON requirements.
- Integrate or Register: Choose between API integration for automation or portal/manual entry based on your business size and transaction volume.
- Train Your Team: Provide training on new workflows, validation procedures, and error handling to all relevant staff.
- Establish Internal Controls: Set up Standard Operating Procedures (SOPs) for invoice corrections, credit notes, and refunds; implement secure digital storage and regular backups (invoices must be kept for at least seven years)
- Monitor and Audit: Schedule regular internal audits and subscribe to LHDN updates to stay informed of any system changes or new requirements.
Conclusion: A Policy Rooted in Long-Term Value
From a business standpoint, these 2024 e-Invoicing regulations aren’t just about compliance—they signal a broader shift toward a more transparent, digitally connected economy. While LHDN’s goal is to modernize tax administration and close compliance gaps, the real opportunity lies in how businesses respond. By embracing automation, real-time reporting, and data-driven processes, you’re not only meeting regulatory expectations—you’re future-proofing your operations, building trust with stakeholders, and contributing to Malaysia’s wider digital transformation.
Ready to future-proof your business?
Mogu is your partner in LHDN e-Invoicing compliance. From onboarding to real-time validation, we support you every step of the way.
