Short answer: probably yes — and what decides it is not your turnover, it is your shareholder and group structure. From 1 September 2026, the e-invoicing exemption threshold was raised from RM1 million to RM3 million in annual turnover. But that exemption has a back door, and most SME owners have not noticed it.

What changed on 1 September 2026

LHDN raised the e-invoicing exemption threshold from RM1 million to RM3 million in annual turnover. The reference is e-Invoice Guideline version 4.8, section 1.6.1(e). More than 1.1 million MSMEs fell out of the mandate immediately.

The exemption applies to every category of taxpayer — individuals carrying on business, partnerships, companies, co-operatives. It is not only for small companies.

So if your annual turnover is RM2 million and you are an Sdn Bhd owned by an individual, you are exempt?

Not necessarily.

The back door: section 1.6.10

The same guideline says the RM3 million exemption does not apply if you have any one of these three things:

  1. A non-individual shareholder (or its equivalent) with annual turnover or revenue of at least RM3 million
  2. A holding company with annual turnover or revenue of at least RM3 million — meaning you are a subsidiary
  3. A related company or joint venture with annual turnover or revenue of at least RM3 million

This is what I call the group test. What is assessed is not your turnover alone — it is assessed at group level.

One important note: “related company” here is not simply a company you are friendly with. It takes its meaning from a specific definition under section 2 of the Promotion of Investments Act 1986. That is why you confirm this with a tax officer, not by guessing.

For taxpayers caught by this group test, the stated implementation date is the 1 July 2026 concessionary date. Confirm the exact date for your company, because it depends on your financial year end.

If you have just started

For businesses that begin operations in year of assessment 2026 or later: if your annual turnover in that first year of assessment reaches or exceeds RM3 million, your e-invoicing implementation date is 1 January of the second year after that year of assessment.

Why this matters now, not in 2028

The relaxation period runs to the end of 2027, with full enforcement from 2028.

2028 sounds distant. It is not. If you have to change an invoicing system, train staff and align suppliers, that is months of work — not weeks.

More importantly, the exemption is not a one-time decision. You must reassess at every financial year end. A business that grows can fall out of the exemption without realising it.

What to do this month

  1. Check your shareholder structure. Any non-individual shareholder — a company, a fund, a co-operative? What is their annual turnover?
  2. Check whether you are a subsidiary of a holding company with turnover of RM3 million or more.
  3. Check your related companies and joint ventures. This is the part most owners miss.
  4. If the group test catches you, start now. Do not wait for full enforcement.
  5. Set one date every year to reassess — not once, whenever a budget is announced.

FAQ

What is the e-invoicing exemption threshold now? RM3 million in annual turnover, from 1 September 2026 (raised from RM1 million).

My turnover is RM2 million. Am I exempt? Yes — unless the group test in section 1.6.10 catches you.

What is the group test? The exemption is disapplied if you have a non-individual shareholder, a holding company, or a related company or joint venture with turnover of at least RM3 million.

When must I start if the group test catches me? The stated concessionary date is 1 July 2026. Confirm with your tax officer, as it depends on your company’s financial year.

Do I need to check again later? Yes. Every financial year end. A growing business can fall out of the exemption.

What if my turnover crossed RM3 million in financial year 2026? Your implementation date is 1 January 2028 — the second year after that year of assessment.

If you are not sure whether your company is caught by this group test, do not guess. It is not a question you can answer from the turnover figure in your bank statement — it is a structural question. I see a good number of MSMEs that should have started last year, still sitting comfortably because the owner was only looking at their own turnover.

If you want to know where your business is actually stuck, message me for a business assessment I do myself.

— Datuk Wira Dr Azizan Osman

Sources: LHDNM e-Invoice Guideline (version 4.8, sections 1.6.1(e) and 1.6.10), LHDN media statement 30 August 2026, Budget 2027 documents (Ministry of Finance). This article is not tax advice — confirm your company’s position with your tax officer or auditor.