6 Wrong Ideas Businesses Have About E-Invoicing

Fact or fiction? Read on to find out right from wrong

E-invoicing was first announced in 2024 with implementation being rolled out in phases. However, the final phase initially slated for July 2025 has been delayed to July 2026 in a recent announcement by the Ministry of Finance.

It’s an extra year for businesses to comply but it could be a year in vain if businesses are approaching E-invoicing integration from the wrong angle. That’s time and money down the drain, worse yet, you pay penalties that could really hurt your business’ bottom line.

These are 6 wrong ideas that could negatively affect your integration process.

“It’s Too Expensive”, “It’s Too Complicated to Implement”

Although there are various costs to consider such as software costs, API implementation costs, and ICT infrastructure etc., there are many affordable and user-friendly solutions that facilitate the e-invoicing process. LHDN also provides their proprietary MyInvois portal to make e-invoicing more accessible for small businesses.

“I Can Still Use Manual Invoices”

Many businesses still believe that traditional methods of issuing invoices–handwritten or Excel invoices–are still applicable under the new E-invoicing system. These also include erroneous ideas such as sending invoices via email or Whatsapp.

However, once enforcement kicks off, only LHDN validated e-invoices are legally recognised. These are structured digital invoices in either XML or JSON format that after submitted to LHDN, contain a Unique Invoice Reference Number (URN) which is then issued to the buyer who then validates and stores the invoice.

“E-Invoicing is Just About Tax Compliance”

Tax compliance isn’t only one of the benefits that businesses enjoy. Being compliant can also have other benefits including reduced errors, faster payments, greater transparency, and simplified audits etc.

“My Business is Small So I’m Exempt from E-Invoicing”

Many might think that if the size of their business is small, or if they think of the word ‘business’ in a traditional sense, then e-invoicing doesn’t apply to them.

But the e-invoicing mandate applies to all entities, covering sole proprietors and even freelancers especially if they issue B2B invoices.

The gist of it being, if there are invoices being issued, then e-invoicing applies to you.

“E-Invoicing Will Just Lead to More Tax Audits”

The e-invoicing system gives LHDN more transparency and visibility by reducing any discrepancies in their day-to-day operations, and giving them the ability to monitor taxpayers for the purposes of clarification or reconciliation. While the potential for scrutiny will increase, LHDN will have greater use of tax analytics to uncover non-compliant taxpayers, meaning that compliant taxpayers wouldn’t have much to worry about the risk of scrutiny or audits.

“Only Domestic Transactions Fall Under E-Invoicing”

E-invoicing applies to both domestic and foreign transactions. For foreign transactions, or cross-border transactions are transactions involving at least one party in Malaysia and another outside Malaysia. The e-invoicing process will vary, but typically the seller issues an e-invoice to record the transaction.

However, in the case of imports, the buyer is responsible for issuing a self-billed e-invoice.

For imported goods, this is done by the end of the month of when customs clearance is completed. For imported services, e-invoices must be issued by the end of the month once payment is made by the Malaysian supplier, or the receipt of the invoice is issued by the foreign supplier.

Summary

The implementation of e-invoicing already poses numerous challenges and obstacles for businesses in Malaysia alike. However, misunderstandings about the actual e-invoicing process could complicate things even further, resulting in penalties, time lost, and a disruption in business operations.

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Find the solutions you need in one platform, giving you clarity and saving you time from having to source solutions yourself. Reach out to us and we’ll help you become e-invoicing compliant by July 2026!

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