The Malaysian Inland Revenue Board (LHDN) is gradually introducing e-Invoicing to enhance tax compliance and boost transparency in business activities. Businesses in Malaysia need to be aware that the deadline to follow this new system is coming up soon. The LHDN's e-Invoicing requirement is designed to make sure that all e-invoices for taxable goods and services are sent electronically. This will cut down on paperwork, boost efficiency, and help businesses clear their penalties. With e-invoicing becoming the industry standard, the LHDN news will be covered here, along with some recommendations that should be followed to stay compliant, and finally, the benefits that businesses can reap by implementing an e-invoicing solution. We will also examine how Covoro Malaysia's e-invoicing software can facilitate easier compliance with regulations.
What is E-Invoicing and Why is it Important?
E-invoicing involves making, sending, receiving, and handling invoices using electronic methods. In Malaysia, nearly every business must follow the new e-Invoicing system set by LHDN. All invoices need to be created and sent electronically using the government-approved platform. This system is designed to make it easier to audit people who don't pay their taxes and cut down on tax evasion.
Businesses get a lot of benefits from using e-invoicing. It speeds up payments, lowers the chance of mistakes, improves cash flow, and makes sure tax rules are followed. It makes operations run more smoothly by automating many manual tasks. However, moving to e-Invoicing can be challenging for businesses that aren't ready for the change.
LHDN's Latest E-Invoicing Update: Key Changes
As of August 2025, LHDN has introduced some of the key updates to its e-Invoicing requirements. These updates improve the system's functionality and help businesses comply with the new regulations more easily.
1. Phased Implementation Dates
The introduction of the e-Invoicing system is staged according to the revenue a company generates. Here is the schedule for when adoption will be required:
- Phase 1 (RM100 million and above): This phase was introduced on August 1, 2024.
- Phase 2 (RM25 million to RM100 million): This phase began on July 1, 2025.
- Phase 3 (RM5 million to RM25 million): This will take effect on July 1, 2025.
- Phase 4 (RM1 million to RM5 million): This phase is scheduled for January 1, 2026.
- Phase 5 (Below RM1 million): The final phase will begin on July 1, 2026.
Larger companies that need to comply first will be aided by the availability of time given to all other businesses to shift to the new system. Companies in the later phases should begin preparing early to prevent any last-minute problems.
2. Software Development Kit (SDK) 1.0 Release
Malaysia’s LHDN announced the new SDK 1.0 on August 1, 2025, for the eInvoicing mandate for its system. It has some critical changes that need to be highlighted as follows:
- Validation for Currency Exchange Rate: From September 1, 2025, invoices paid in languages other than English are mandated to include the exchange rate. For businesses that operate globally, this change is critical update, so that the invoices are correct.
- API Enhancements: The improvement aims to simplify the e-Invoicing process and make it more efficient, which helps lower the chances of mistakes in the invoicing system.
Why E-Invoicing Is Crucial for Businesses in Malaysia
The shift to e-Invoicing in Malaysia isn’t just about compliance; it's also a smart move that can make businesses run much better. Businesses should pay attention to e-invoicing for these reasons:
1. Better Compliance
Businesses are mandated to follow the regulations ascertained by the LHDN. Compliance with the rules is mandatory to avoid hefty fines. e-invoicing ensures all rules are followed and simplifies tax filings and audits.
2. Cost Savings
E-Invoicing eliminates several operational invoices related to paper, including printing, filing, and mailing. It also improves cash flow by accelerating the processing of payments.
3. Transparency
The system increases transparency by enabling real-time tracking and validation of invoices. LHDN can supervise in real time, and they are better positioned to detect discrepancies. This can help fight tax fraud and evasion in the long run.
4. Efficiency and Accuracy
The elimination of paper invoices and the need for personnel to enter data does away with the possibility of human error. This automation leads to quicker processing, fewer errors, and improved accuracy in invoicing, which helps minimize disputes and inconsistencies with clients or tax authorities.
5. Future-Proofing
Countries that have adopted e-Invoicing are ahead of the curve. With e-Invoicing becoming a global standard, companies that rapidly adopt the system stand to gain first-mover advantages in the international market.
How Covoro Malaysia Improves Compliance With E-Invoicing Regulations
The switch to e-Invoicing is a welcome change, but many businesses often encounter problems during the transition phase. This is where Covoro Malaysia stands out as a dependable e-Invoicing solution provider. Covoro Malaysia offers a proprietary e-Invoicing solution to assist businesses in complying with LHDN regulations and optimizing their invoicing processes.
Here’s how Covoro Malaysia’s e-Invoicing solution eases compliance:
1. Real-Time Integration
Covoro Malaysia’s e-Invoicing solution offers integration with over 100 ERP systems, which ensures businesses can adopt e-Invoicing and retain their workflows. Whether it is a simple accounting application, ERP, invoicing, or custom tools, Covoro ensures automated exchanges and LHDN communications work without a hitch.
2. Real-Time Validation
The real-time validation feature of Covoro's solution is, arguably, the most powerful component of the system. Users get immediate feedback on the invoices, and in turn, businesses can evaluate their adherence to LHDN’s validation requirements on the spot. Avoidance of business invoicing errors is a bonus!
3. User-Friendly Interface
Covoro’s platform has an easy-to-use interface that makes invoicing simple. Even businesses with minimal technical knowledge can navigate the platform and create compliant invoices without any difficulty.
4. Time and Cost Savings
Covoro’s e-Invoicing solution assists businesses in saving time by automating tasks that are done repeatedly, like entering data and creating invoices. Businesses can cut operational costs and speed up payment cycles by minimizing manual errors and enhancing the efficiency of invoice processing.
5. Scalability
As businesses expand and their invoicing requirements get more complicated, Covoro’s e-Invoicing solution can adjust to meet those needs. Businesses can count on Covoro to manage higher invoicing volumes and adapt to changes in tax regulations effortlessly.
Guide for Businesses to Maintain Seamless E-Invoicing Compliance
With the LHDN’s e-Invoicing requirement, there are some strategic steps for businesses to take to ease the changeover process:
1. Start Testing in Advance
If your business is at the later stages of changeover, it is still beneficial to start e-Invoicing as early as possible. This way, you have ample time to troubleshoot, integrate it with your existing software, and make all the necessary adjustments.
2. Select an Appropriate E-Invoicing Solution
Make sure that the e-Invoicing solution you opt for serves your business’s requirements and can meet the LHDN’s regulations. Also, the solution must be scalable, intuitive, integrate with your existing systems, and be compliant. For businesses that value dependability, Compliance, and ease of use, Covoro Malaysia’s platform is an excellent option.
3. Train Your Team
Ensure your team is well-trained on how to use the new e-Invoicing system. Familiarizing your staff with the platform will reduce errors and increase efficiency. Training helps prevent compliance mistakes that might lead to penalties.
4. Be Informed of Regulatory Upgrades
Regulations and due dates of LHDN can change, so stay updated with any changes. Monitor LHDN's official releases and make sure your system is up to date as per the current requirements.
5. Test the System
Before a complete switch, properly test the e-Invoicing system for any bugs or technical issues so they can be solved. This will ensure your business is fully prepared when the system becomes operational.
Conclusion
LHDN's e-Invoicing requirement is an important move towards enhancing tax compliance and making operations smoother in Malaysia. As companies of all sizes and types transition to electronic invoicing, the secret to a smooth transition lies in utilizing the right technology and anticipating shifts in rules. Covoro Malaysia's e-Invoicing solution is a sophisticated yet user-friendly platform that assists businesses in meeting LHDN's requirements, enhancing efficiency, and minimizing operational costs. Starting early, choosing the right solution, and being up-to-date can help companies deal with the problem of e-Invoicing and enjoy its many advantages.
If you would like to learn more about e-Invoicing, AP Automation and how Covoro Malaysia is making invoicing easy for you, please refer to the website.
