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In short: if your annual turnover is below RM3,000,000 you are not required to issue e-invoices — self-billed e-invoices included — and your ordinary invoices and receipts remain valid proof of income and expense. The test runs on your latest completed financial year, not on a frozen 2022 figure. But the exemption is lost if your business sits inside a group.
1Which year's turnover counts
This is where most businesses go wrong, because two different tests use almost the same words — and only one of them is frozen on 2022.
Test A — Am I exempt?
Measured on your relevant year, i.e. the latest completed financial year. It is re-tested every year:
- With audited accounts — the turnover in the statement of comprehensive income for that financial year.
- Without — the revenue reported in the tax return for that year of assessment.
- Sole proprietors — add up every sole proprietorship registered in your own name. Three businesses at RM1.1m each is RM3.3m, not three exempt businesses.
Test B — If I am in scope, when do I start?
Only this test is frozen: it uses the FY2022 audited accounts, or the YA2022 tax return where there are none, pro-rated to 12 months if the year end changed. Once fixed, later changes in turnover do not move it.
Do not use your 2022 figure to claim the RM3 million exemption, and do not use this year's figure to work out your start date. Test A rolls with you; Test B is a one-off 2022 test that only applies to taxpayers already above the threshold.
When you cross RM3 million
You are not thrown into e-invoicing overnight. You start on 1 January of the second year following the year of assessment in which turnover reached RM3 million. Cross in FY2026 and you begin 1 January 2028 — a full year of preparation, not a scramble.
2When the exemption does not apply
Guideline v4.8 s.1.6.10 withdraws the exemption from small businesses inside a larger group, however modest their own turnover. You are not exempt if any of these is true:
- A non-individual shareholder (or equivalent) has annual turnover of at least RM3 million.
- You are a subsidiary of a holding company with annual turnover of at least RM3 million.
- You have a related company or joint venture with annual turnover of at least RM3 million. A company holding 20% or more of your issued share capital counts as related.
The common trap. A quiet RM400,000 subsidiary of a group that already e-invoices is not exempt — and its concessionary date has already passed. If another company holds your shares, count the group, not the entity.
Sole proprietors and partnerships: this group test is aimed at companies. A sole proprietorship owned by an individual does not engage it — but the aggregation rule in section 1 does.
3What still applies even if you are exempt
- Your suppliers must still issue e-invoices to you. You are exempt from issuing, not from receiving. Give every in-scope supplier your TIN, registered name, address and SST number, or you will be consolidated into a generic monthly e-invoice with no deduction trail.
- Your ordinary invoices and receipts remain valid. Where the supplier is an exempt person, the existing receipt is the proof of expense. A customer cannot insist you issue an e-invoice, and cannot self-bill you simply because you did not.
- Record-keeping is unchanged. Income Tax Act 1967 obligations, seven-year retention and deduction substantiation all continue.
- Keep MyTax and your TIN live. You need them to receive e-invoices, to file, and to switch on quickly the year you cross the threshold.
- The exemption is not backdated. It runs from 1 September 2026. Months before that, when you were in scope, still count.
4Still in scope? The dates that matter
| Annual turnover (FY2022 basis) | Implementation date |
|---|---|
| > RM100m | 1 Aug 2024 |
| > RM25m – RM100m | 1 Jan 2025 |
| > RM5m – RM25m | 1 Jul 2025 |
| Up to RM5m (read with the RM3m exemption) | 1 Jan 2026 |
| New business 2023–2025, turnover ≥ RM3m | 1 Jul 2026 |
Interim relaxation runs to 31 December 2027 for the up-to-RM5 million phase. During it you may issue a consolidated e-invoice for all activities, consolidate self-billed e-invoices, put any text in the description field, and decline a request for an individual e-invoice. No prosecution under s.120 Income Tax Act 1967 while you consolidate as allowed.
Consolidated e-invoices are due within seven calendar days after month end. Self-billed consolidations follow the same timing.
Missed submissions? The e-Invoice Special Voluntary Disclosure Programme runs 7 July 2026 to 31 December 2027 — no penalty and no prosecution on what you disclose in good faith. Back-dated consolidations are filed month by month.
5Why we expect RM3 million to hold
RM3 million is the same line SSM uses for audit exemption: under Practice Directive 10/2024 the final phase — revenue and total assets of RM3 million, and 30 employees — applies to financial years beginning on or after 1 January 2027. Two regulators settling on one figure reads as deliberate alignment.
But the tests are not the same. Audit exemption needs two of three criteria met across three consecutive years; the e-invoice exemption looks at revenue alone, for a single year. Being out of scope for one does not put you out of scope for the other. LHDN also reserves the right to revise its exemptions from time to time (Guideline v4.8 s.1.6.8).
6Do this one thing today
- Pull your latest completed year's revenue — audited accounts, or the figure in your last tax return. That single number decides everything above.
- Check the group test before you celebrate. Any corporate shareholder, holding company, related company or JV at RM3 million or more, and the exemption is gone.
- Sole proprietors: total every business in your own name, not the biggest one.
- Give your suppliers your TIN. You keep receiving e-invoices whether or not you issue them.
- If you have gaps in past submissions, use the SVDP window while it is open.
?Questions people actually ask
Am I exempt from issuing e-invoices?
If your annual turnover is below RM3,000,000 you are not required to issue e-invoices, with effect from 1 September 2026. The exemption covers self-billed e-invoices too. But it is lost if your business sits inside a group with a non-individual shareholder, holding company or related company at RM3 million or more — size alone does not decide it.
Which year's turnover decides it?
Your latest completed financial year, re-tested every year — not a frozen 2022 figure. With audited accounts, use the turnover in the statement of comprehensive income; without them, the revenue reported in that year's tax return. The 2022 figure is used only to fix your implementation date if you are already in scope, which is a different question.
I run three sole proprietorships. Do I add them together?
Yes. A sole proprietor aggregates every business registered in their own name. Three businesses at RM1.1 million each is RM3.3 million, not three separately exempt businesses.
If I am exempt, do I still receive e-invoices from suppliers?
Yes. Being out of scope stops you having to issue; it does not stop suppliers issuing to you. Give them your TIN so what they issue is correct, because those documents are your expense evidence.
When do I start if I cross RM3 million?
Not overnight. You start on 1 January of the second year following the year of assessment in which turnover reached RM3 million. Cross in FY2026 and you begin 1 January 2028 — a full year of preparation.
Are my ordinary invoices and receipts still valid?
Yes. While you are exempt, your existing invoices and receipts remain valid proof of income and expense. What changes is the format the authority requires once you are in scope, not whether your records count.