How To Determine Revenue For E-Invoicing Applicability in Malaysia?

Malaysia’s e-Invoicing mandate is being rolled out in five phases between with first phase implemented since 1^st August 2024. The phased implementation is structured according to a business’s annual turnover or revenue, meaning larger businesses must comply first, while smaller and micro-enterprises are given more time to prepare. 

Determining your company’s revenue is crucial because it decides which phase you fall under, but also whether you are exempt from e-Invoicing (turnover less than RM500,000). 

Revenue for e-Invoicing applicability in Malaysia is calculated using the annual turnover or revenue stated in your audited financial statements or tax returns for the relevant year of assessment either YA2022 or the first available year for newer businesses. This figure is the key reference point used by IRBM to determine both your e-Invoicing start date and your exemption status. 

Determining Revenue For e-Invoicing: Summary Table

Implementation Timeline Based on Turnover

The e-invoicing implementation in Malaysia is rolled out in phases, based on a business's annual turnover or revenue. The phased timeline is as follows:

Understanding Year of Assessment

The Year of Assessment, commonly abbreviated as YA, is a key concept in Malaysian taxation. It refers to the calendar year in which a business’s income is assessed for tax purposes by the Inland Revenue Board of Malaysia (IRBM). For example, income earned between 1 January 2022 and 31 December 2022 will be assessed in YA2022.

When determining your revenue for e-invoicing compliance, you’ll often be asked to refer to a specific YA, such as YA2022, YA2023, or YA2024. The revenue figure for that year is what is used to decide which e-invoicing implementation phase your business falls under or whether you qualify for an exemption. 

If your business was newly set up, your first completed financial year becomes your reference YA. It is important to always use the figures reported in your audited financial statements or tax filings for the relevant YA when assessing your obligations under the e-invoicing mandate.

How to Determine Annual Revenue for E-Invoicing?

To comply with Malaysia’s e-Invoicing requirements, it’s important to determine your annual revenue using the correct year of assessment and business circumstances. This helps you identify your e-Invoicing phase or exemption eligibility.

Businesses Operating as of Year of Assessment (YA) 2022

• If revenue is below RM500,000 in YA2022 and the business meets e-invoicing exemption criteria (e.g., independent, no corporate shareholders), it is exempt from e-Invoicing until revenue exceeds RM500,000 in future years.
• If revenue exceeds RM500,000 in YA2023, YA2024, or YA2025, e-Invoicing becomes mandatory starting 1 July 2026.
• If revenue exceeds RM500,000 in YA2026 or later, implementation starts on 1 January of the second year after crossing the threshold.
• If revenue is above RM500,000 in YA2022, the business must follow the phased timeline (e.g., if revenue exceeds RM100 million, implementation begins 1 August 2024).

Businesses Starting Operations Between YA2023 and YA2025

• If revenue is RM500,000 or more in YA2023, YA2024, or YA2025, e-Invoicing starts from 1 July 2026.
• If revenue is below RM500,000 in these years and exemption criteria are met, the business is exempt until revenue exceeds RM500,000.
• If revenue exceeds RM500,000 in subsequent years, implementation begins on 1 January of the second year after the threshold is crossed.

Businesses Starting Operations from YA2026 Onwards

• If revenue is RM500,000 or more in the first YA (for example, YA2026), e-Invoicing implementation starts on 1 January of the second year after the threshold is crossed (e.g., revenue exceeds RM500,000 in YA2026, so implementation is 1 January 2028).
• If revenue is below RM500,000 in the first YA, the business is exempt until it exceeds the threshold in subsequent years. Implementation then begins on 1 January of the second year after the threshold is crossed.

Step-by-Step Guide: How to Determine Your Turnover for e-Invoicing

Before you can comply with Malaysia’s e-Invoicing schedule, you need to accurately identify your business’s annual turnover. 

1. Find your relevant financial year (usually YA2022; use your first complete year if started after 2022).
2. Obtain your audited financial statements.
3. Go to the “Statement of Comprehensive Income” or “Income Statement.”
4. Identify the “Revenue,” “Turnover,” or “Total Sales” figure (not profit or receipts).
5. Compare this revenue with the LHDN turnover threshold table.
6. If you are part of a group of companies, check if consolidated revenue applies.
7. For new businesses, use the first complete year after starting operations.
8. If turnover is below RM500,000 and you meet exemption criteria, note your exempt status but review each year.
9. Monitor your revenue every year to see if you cross a new threshold for e-Invoicing.

Scenario Examples: Determining Your Revenue Phase for E-Invoicing

To make the rules easier to understand, here are practical examples showing how different businesses determine their annual revenue and what e-invoicing phase or exemption applies.

Scenario 1: Existing Business with Low Revenue and Exemption

Example: Lim Trading has been operating since 2020. In YA2022, their audited annual revenue was RM420,000.

Outcome: Lim Trading meets the MSME exemption criteria, so they are exempt from e-invoicing unless their revenue exceeds RM500,000 in a future year.

If their  turnover increases above exemption limit: If in YA2024 their revenue increases to RM610,000, they must implement e-invoicing starting from 1 July 2026.

Scenario 2: Existing Business with Higher Revenue

Example: Seri Maju Sdn Bhd reported RM6 million in annual revenue for YA2022.

Outcome: The company must implement e-invoicing from 1 July 2025, in line with the RM5 million to RM25 million threshold.

When turnover decreases below exemption limit: If Seri Maju had started e-invoicing after previously exceeding the threshold, they must continue e-invoicing even if revenue later falls below RM500,000.

Scenario 3: New Business 

Example: D Fresh Mart started operations on 1 April 2023. For YA2024, its revenue is RM530,000.

Outcome: Since the business commenced between YA2023 and YA2025 and exceeded RM500,000 revenue in YA2024, e-invoicing must begin from 1 July 2026.

Scenario 4: Sole Proprietor with Multiple Businesses

Example: Encik Azman owns three sole proprietorships with revenues of RM200,000, RM150,000, and RM180,000.

Outcome: Aggregated, his total revenue is RM530,000, above the RM500,000 threshold, so Encik Azman must implement e-invoicing from 1 January of the second year after crossing the threshold (for example, 1 January 2028 if exceeded in YA2026).

Scenario 5: New Business After 2026

Example: Bright Ideas Studio starts operations in January 2027. In its first YA (2027), revenue is RM520,000.

Outcome: The business will implement e-invoicing from 1 January 2029, which is the second year after the threshold was crossed.

Conclusion

Determining your revenue for e-Invoicing in Malaysia is all about identifying the annual turnover or revenue in your latest audited accounts (typically YA2022). This figure sets your implementation phase and start date. Always refer to your official audited statements and check regularly if your status changes especially if your turnover is growing. Failing to implement e-Invoicing on time can lead to non-compliance penalties.