LHDN's e-Invoice Grace Period Ends 31 December 2026: What Malaysian Businesses Still Need to Fix

> Quick view: if your business turns over between RM1 million and RM5 million a year, you have been inside the e-Invoice regime since 1 January 2026 — and the no-penalty transition period expires on 31 December 2026. This is a factual explainer based on LHDN's own published timeline and media releases; it is not tax advice.

Where the rollout actually stands

Malaysia's e-Invoice programme is run by the Inland Revenue Board of Malaysia (LHDN / HASiL), and it has been rolled out in turnover bands since 2024. LHDN's own published implementation timeline, last updated on 7 December 2025, sets it out as:

• Taxpayers with annual turnover or revenue of more than RM100 million — 1 August 2024
• More than RM25 million and up to RM100 million — 1 January 2025
• More than RM5 million and up to RM25 million — 1 July 2025
• Up to RM5 million — 1 January 2026
• Taxpayers with annual turnover or revenue of less than RM1,000,000 are exempted from e-Invoice implementation

That last line is the change most small businesses are still catching up on. The exemption threshold was raised from RM500,000 to RM1 million, announced by the Prime Minister and Finance Minister in December 2025 and reflected in LHDN's updated timeline. In practice it removed the planned fifth phase: the 1 January 2026 group is the final mandatory one, and it covers businesses turning over between RM1 million and RM5 million a year.

The 12-month transition — and what it actually permits

In a media release dated 5 January 2026, LHDN confirmed that the government agreed to give the group starting on 1 January 2026 a transition period of 12 months instead of the six months previously set. Running from 1 January to 31 December 2026, taxpayers in that group are permitted to:

• Issue consolidated e-Invoices for all activities and transactions, including those industries or activities listed under Section 3.7 of the e-Invoice Specific Guideline — and consolidated e-Invoices are allowed even where a buyer has requested an individual e-Invoice
• Issue consolidated self-billed e-Invoices for all self-billing situations set out under Section 8.3 of the Specific Guideline
• Enter any transaction description in the "Product or Service Description" field

LHDN states that during this transition it will not impose penalties for non-compliance with e-Invoice requirements, provided taxpayers follow the conditions above. That is the important nuance: the relaxation is not a licence to do nothing. It is permission to use simplified formats while systems are being put in place.

The same release granted a separate, longer-term concession to the construction-materials wholesale and retail sector, effective 1 January 2026: those businesses may issue consolidated e-Invoices, and only need to issue an e-Invoice where a transaction exceeds RM10,000 or where the buyer requests one.

The RM10,000 rule

This is the requirement that catches out businesses that assume the transition period covers everything. In its 20 June 2026 media release, LHDN stated that from 1 January 2026, taxpayers must issue an e-Invoice for every sale-of-goods or provision-of-services transaction exceeding RM10,000, and that buyers need to supply their identification number or Tax Identification Number (TIN) so the e-Invoice can be issued accurately.

LHDN also named the four non-compliance patterns it is seeing most often: issuing e-Invoices inconsistently (some transactions covered, subsequent ones not); issuing e-Invoices that do not follow the e-Invoice Guidelines; submitting consolidated e-Invoices after the permitted window; and failing to issue an e-Invoice for transactions exceeding RM10,000 from 1 January 2026.

MyInvois e-POS — the free option

For micro and small businesses without accounting software, LHDN built its own. MyInvois e-POS is a free point-of-sale platform integrating sales recording, inventory management, financial reporting and e-Invoice support. LHDN's 9 January 2026 media release confirmed the government agreed to extend its scope to taxpayers with annual income or sales of up to RM5 million — that is, the whole of the final implementation group — alongside the longer transition period announced by the Prime Minister in his New Year 2026 address on 5 January 2026.

Why LHDN is not softening

The enforcement case is being made with numbers. Since implementation began on 1 August 2024, LHDN reports more than 230,000 taxpayers having submitted e-Invoices, totalling 1.505 billion e-Invoices issued. It has built analytics models to flag anomalies, suspicious transactions and unusual behaviour patterns — the release specifically cites high-value purchases exceeding RM100,000, vehicle and asset purchases, and active online transaction activity without matching income reporting.

The escalation is visible across its own 2026 releases: RM1.4 billion of unreported income detected in February, RM3.5 billion by April, and by 20 June, 52,540 taxpayers had come forward and filed back-year income tax returns declaring a total of RM4.07 billion in income with RM1.009 billion in tax payable.

The voluntary disclosure window

On 7 July 2026, following an announcement by the Prime Minister and Finance Minister in the Dewan Rakyat, LHDN introduced the Special Voluntary Disclosure Programme (Program Khas Pengakuan Sukarela, PKPS) for e-Invoice, effective until 31 December 2027. It is open to taxpayers who:

• implemented e-Invoice on time but did not submit e-Invoices in full for certain transactions;
• submitted e-Invoices containing errors or information that does not comply with the specifications; or
• did not submit e-Invoices for any period from their mandatory implementation date.

Disclosures must be made correctly and in order under the General and Specific e-Invoice Guidelines. The programme allows businesses to come forward, update, review and correct their e-Invoice position without penalty. Alongside it, the government agreed to accelerate a tax incentive: a full capital allowance claim within one year for expenditure on ICT equipment and on the development or customisation of computer software used for e-Invoice implementation.

What to do before 31 December

The practical reading is that 2026 was designed as a runway, and the runway ends. If your business is in the up-to-RM5-million group, the questions worth answering before year-end are: are you issuing individual e-Invoices where required rather than relying on consolidation past the window; are you capturing buyer TINs for transactions above RM10,000; and are there historic gaps that PKPS would let you close without penalty while it is still open.

LHDN runs dedicated e-Invoice channels for exactly these questions: an e-Invoice help desk on 03-8682 8000 (24 hours), the MyInvois Live Chat, general enquiries at myinvois@hasil.gov.my, and a customer feedback form at feedback.myinvois.hasil.gov.my. Its own guidelines, FAQ and implementation timeline sit on the HASiL portal.

Sources: LHDN / HASiL official portal, e-Invoice Implementation Timeline; LHDN media releases dated 5 January 2026 (additional transition period for Phase 4 and consolidated e-Invoice relaxation for building-materials businesses), 9 January 2026 (MyInvois e-POS), 20 June 2026 (e-Invoice strengthens tax compliance) and 7 July 2026 (PKPS e-Invois).

*This article is a factual explainer of published government policy. It is not tax advice — for your own position, refer to LHDN directly or to a licensed tax agent.*

*Cover image: Inland Revenue Board (Lembaga Hasil Dalam Negeri) office, Kuching — Photo: Cerevisae, CC BY-SA 4.0, via Wikimedia Commons*