KUALA LUMPUR, Sept 19 — Malaysia introduced e-invoicing in August 2024 with a promise to stamp out tax fraud and plug revenue leakages.

However, two years on, small and medium-sized enterprises (SMEs) still grapple with administrative burden and compliance costs to switch to e-invoicing. 

Those exempted from the obligation, thanks to the higher threshold for mandatory e-invoicing, also lament about practical problems that still persists in transactions with major corporations. 

The government first pushed up the threshold for mandatory e-invoicing from RM150,000 to RM500,000 in July 2024 before hiking it to RM1 million in December 2025.

Prime Minister Datuk Seri Anwar Ibrahim raised the threshold again to RM3 million effective September, exempting more than 1.1 million businesses from e-invoicing obligation, according to the Inland Revenue Board (IRB).

However, SME Association of Malaysia president Chin Chee Seong pointed out that higher thresholds do not necessarily remove the practical challenges faced by the exempted businesses. 

He said larger companies filing e-invoicing may impose additional layer of requirements for the exempted micro-businesses that could result in payment delays for them. 

“Even a relatively short delay in receiving payment can create pressure, especially for micro and small businesses that need to pay salaries, suppliers, rentals and other operating expenses,” Chin told Malay Mail.

The hotel industry has also been saddled with additional operating costs due to the changing e-invoicing rules.

Malaysia Budget and Business Hotel Association president Sri Ganesh Michiel said many hotels have heavily invested to shift to e-invoicing only to find out that they have been exempted much later. 

“Some hotels may have already spent money on software, system integration, consultancy services and staff training to prepare for e-invoicing.

“These costs may appear relatively small individually, but they add to the increasing operating costs faced by budget hotels,” he said.

Since the hotel industry operates within a wider tourism ecosystem, Sri Ganesh said the government must clearly spell out the terms of transactions between businesses mandated to do e-invoicing and those exempted from it.

“Once a policy direction has been decided, sufficient preparation, consultation and transition arrangements should be provided so that businesses are not repeatedly required to invest in new systems or retrain employees because of changing requirements,” he added. 

Make tax reporting simpler

The businesses want a simpler tax reporting mechanism with more consistent regulations — and more importantly, without any extra costs. 

Chin said the government can adopt a simpler digital reporting system for larger businesses and to either allow smaller businesses to continue with conventional invoices or subject them to simplified digital reporting periodically. 

Likewise, Sri Ganesh said maller hotel operators should be allowed to continue their current tax reporting mechanism if their existing accounts, receipts and invoices are properly maintained. 

However, he stressed invoicing requirements alone would not plug revenue leakages in the hospitality sector if illegal accomodations continue operating without any tax repercussions.

“It is unfair if legitimate hotel operators are continuously required to bear additional compliance costs while illegal or unregulated accommodation providers are allowed to operate without paying the same taxes or fulfilling the same obligations,” he said.

Broader tax review necessary 

Sri Ganesh also urged the government to review the Sales and Service Tax (SST) rate for budget hotels — capped at eight per cent currently — since their cost structure and operating environment differs from other industries.

Meanwhile, Chin said the government should also consider reinstating the Goods and Services Tax (GST) with a reasonable threshold if it wants to review the e-invoicing regulation.

“GST can provide the government with a broader and more transparent tax base. 

“If properly designed and implemented, it can strengthen tax collection while reducing overreliance on more fragmented forms of taxation,” Chin said.