e-Invoice Phase 5 in Malaysia: Key Changes, Requirements, and Implementation

e-invoicing mandate in Malaysia is being introduced in phases, based on annual business turnover (using FY2022 figures). Recently, IRBM published new guidelines and split the implementation into five different stages, with E-Invoicing Phase 5 beginning on 1st July 2026. This phase applies to businesses with annual turnover up to RM1 million (except for exempted businesses with turnover less than RM500,000), marking the final group to join the nationwide e-invoicing rollout.

Businesses mandated under Phase 5 should start generating e-invoices for all B2B, B2C, and B2G transactions via the MyInvois Portal, or accredited middleware providers. During the first six months (from 1 July 2026 to 31 December 2026), a grace period allows consolidated e-invoicing, with no penalty for non-compliance until 31 December 2026.

Malaysia e-Invoice Implementation Timeline [Recently Updated]

Annual turnover is based on 2022 audited accounts or tax returns. Once your phase is set, later changes in revenue won’t affect your compliance date.

Suggested Read: e-Invoice Implementation Date in Malaysia along with timeline & all 5 Phases

Businesses Covered Under Phase 5 Malaysia E-Invoicing

Phase 5 applies to businesses with annual turnover of up to RM1 million. To determine your annual turnover for e-invoicing purposes:

• Use the figure reported in your 2022 audited financial statements (statement of comprehensive income), or
• If audited statements are not available, use the annual revenue reported in your tax return for the year of assessment 2022.

Exemptions:

• Businesses with annual turnover below RM500,000 are exempt from e-invoicing under the latest IRBM guidelines.
• Certain entities such as individuals not conducting business, foreign diplomatic offices, statutory bodies, and authorities (for specific transactions) are also exempt.

Compliance Requirements for Phase 5

The following compliance requirements are mandatory for businesses and taxpayers covered under Phase 5 of e-invoicing:

• E-Invoice Issuance: Issue e-invoices for every sale or transaction, including B2B, B2C, B2G, credit notes, debit notes, and refund notes.
• Mandatory Data Fields: Each e-invoice must have at least 55 fields as specified by IRBM—covering seller and buyer details, descriptions, quantities, prices, tax, and payment terms. Use UBL 2.1 format (XML or JSON).
• Submission and Validation: Submit e-invoices for real-time validation via the MyInvois System using the portal, direct API, or accredited middleware. Each validated invoice receives a Unique Identification Number (UIN) and QR code.
• Digital Recordkeeping: Store validated e-invoices digitally for at least seven years.
• Consolidated E-Invoicing: For B2C sales where buyers don’t require individual invoices, aggregate all such sales into a single monthly e-invoice, submitted within seven days after month-end.

Relaxation Periods for E-Invoicing Phase 5

Malaysia’s e-invoicing rollout features a six-month interim relaxation period following each phase’s mandatory go-live date. For Phase 5, businesses with annual turnover up to RM1 million have a six-month e-invoicing relaxation period from 1 July 2026 to 31 December 2026, during which simplified compliance is allowed before full enforcement begins.

This grace period allows newly onboarded businesses, including those in Phase 5, to adapt and gradually ramp up compliance before full enforcement.

Relaxation Periods Timeline

What Does the Relaxation Period Mean for Phase 5 Businesses?

During the relaxation period, eligible businesses enjoy several key concessions:

• No Penalties for Non-Compliance: Businesses will not be penalized under Section 120 of the Income Tax Act 1967 if they face challenges in fully complying with e-invoice requirements during this window.
• Consolidated E-Invoicing Allowed: You can aggregate multiple transactions into a single consolidated e-invoice, making it easier to comply, especially for high-volume retail or service environments.
• Simplified Product Descriptions: There is flexibility in how products and services are described on e-invoices during this time.
• Opportunity to Test and Adjust: Use this period to trial e-invoicing solutions, train your team, and resolve any technical or process issues before full enforcement.

Post Relaxation Period

After your six-month relaxation period ends:

• Full compliance is required: Every transaction must have its own validated e-invoice with all mandatory data fields.
• No more consolidated monthly e-invoices.
• Penalties apply for non-compliance under Section 120 of the Income Tax Act 1967.

Note: These dates are based on the latest IRBM guidelines and may be updated. Always confirm with the official IRBM e-Invoice Guideline.

Steps to Implement E-Invoicing for Phase 5 Businesses

For Phase 5, most businesses are small or micro enterprises with annual turnover up to RM1 million. Here’s a step-by-step guide to help you get started with e-invoicing and ensure smooth, penalty-free compliance:

Steps to Implement E-Invoicing for Phase 5 Businesses (SMEs)

1. Assess Your Current Invoicing: Check your daily invoice volume and whether you use manual records, Excel, basic accounting software, or an ERP.
2. Select Your E-Invoicing Method:
   • MyInvois Portal: Free and available via the IRBM MyTax portal. Best for businesses issuing fewer than 10 invoices per day or using mostly manual processes. Allows manual entry or batch uploads from spreadsheets.
   • ERP or Accounting Software with Middleware: Ideal for SMEs with higher transaction volumes or frequent B2C sales. IRBM-accredited middleware providers (like ClearTax) can connect your existing software or Excel to MyInvois via API for automatic e-invoice generation and validation.
3. Register and Set Up: Sign up for the MyInvois Portal with your MyTax account, or work with your software/middleware provider to complete setup and integration.
4. Train Your Team: Make sure all relevant staff understand how to create, validate, and store e-invoices, and know how to address basic errors.
5. Start E-Invoicing During the Grace Period: Begin issuing e-invoices as soon as possible, ideally during the six-month relaxation period (1 July 2026 – 31 December 2026), so you can troubleshoot before enforcement starts.
6. Keep Digital Records: Securely store all validated e-invoices in digital form for at least seven years to stay audit-ready and compliant.

Conclusion

Phase 5 of the e-invoicing mandate will begin on 1 July 2026 and these businesses must generate and submit e-invoices for all sales and transactions (B2B, B2C, and B2G) through the MyInvois Portal, direct API, or IRBM-accredited middleware providers.

For Phase 5, a six-month relaxation period from 1 July to 31 December 2026 provides simplified compliance such as consolidated monthly e-invoicing, flexible product descriptions, and no penalties for initial non-compliance. This grace period allows companies to test systems, train staff, and resolve issues before full enforcement. After the relaxation period, every transaction must have its own validated e-invoice, and penalties will apply for non-compliance.