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KUALA LUMPUR (July 30): Parliament's Public Accounts Committee (PAC) has called on the government to review the threshold for mandatory e-invoicing, warning that the current income limit is “too low” and risks placing an undue compliance burden on micro businesses.
The PAC expressed concern that the mandatory e-invoice requirement for upcoming Phase 4 of the roll-out in 2026 — which was initially planned to be imposed on businesses earning RM150,000 annually and above — does not sufficiently account for on-the-ground challenges faced by small traders.
In its follow-up report on the Inland Revenue Board's (IRB) accounts receivable, the PAC recommended the government raise the threshold or exempting micro-entrepreneurs entirely from the requirement until they are better prepared.
Microenterprises are companies that have sales turnover of less than RM300,000, or less than five full-time employees, according to SME Corp Malaysia's definition.
“The PAC believes that the income threshold for mandatory e-invoicing should not burden micro-businesses and must reflect the realities faced by the rakyat operating at the smallest scale,” the committee said in its report released on Wednesday.
Officials from the IRB told the PAC that measures had been introduced to ease compliance for small traders, including allowing simplified monthly submissions via “consolidated e-invoicing” instead of requiring an invoice for every transaction.
“For micro businesses, they can just total their monthly sales and issue one e-invoice before the seventh day of the following month — meaning only 12 e-invoices a year,” said the IRB’s deputy chief executive officer of tax operations, Shaharrudy Othman, as quoted in the report.
Data from the Ministry of Finance estimated that the Phase 4 threshold of RM150,000 could affect about 700,000 taxpayer accounts. If the limit were raised to RM500,000, the number of impacted accounts will fall to 240,000.
At the moment, the government has temporarily paused its plans to impose mandatory invoicing for those with annual revenue below RM500,000, initially planned to begin in 2026.
It also deferred the implementation for those with sales below RM5 million annually to next year.
The PAC welcomed the move, noting that micro, small and medium enterprises (MSMEs) require sufficient preparation time and resources to transition to digital invoicing.
The latest schedule sees the RM1 million-RM5 million sales bracket adopting e-invoicing from January 2026. It will be compulsory from July 2026 for those with sales of RM500,000 to below RM1 million per year.
Malaysia’s e-invoicing system, launched in August 2024, is intended to improve record-keeping of sales and purchases, reduce tax evasion, and streamline operations for businesses. The IRB reported that over 283 million e-invoices had been transmitted and validated, involving nearly 29,000 taxpayers. A free MyInvois e-POS system was introduced in March 2025 to help MSMEs adopt the system at no cost.
The PAC follow-up session on May 21, chaired by Teresa Kok (Pakatan Harapan-Seputeh), forms part of its oversight of tax collection reforms and broader efforts to reduce outstanding receivables, which stood at RM34.6 billion in 2023, down 14.3% from RM40.39 billion in 2022, mainly due to write-offs and downward reassessments during the year.
The committee said the findings were based on the Auditor General’s Report 3/2024 on the Federal Government’s 2023 Financial Statements. The committee concluded that while e-invoicing is critical to modernising Malaysia’s tax system and improving compliance, its roll-out must be fair, practical, and tailored to the needs of the smallest businesses.
Source: https://theedgemalaysia.com/node/764554