Malaysia Extends Phase 4 e-Invoicing grace period Until 2028
Malaysia has officially prolonged the penalty-free transition period for Phase 4 e-Invoice implementation by another year.
According to announcements from Lembaga Hasil Dalam Negeri (LHDN) and the Prime Minister’s Office, companies earning between RM1 million and RM5 million annually will now only face enforcement penalties beginning 1 January 2028.
Although the relaxation period has been extended, the official rollout date has not moved. Businesses classified under Phase 4 are still expected to begin generating e-Invoices through the MyInvois platform from 1 January 2026 onward.
Extended Transition Period Confirmed
On 20 April 2026, Prime Minister Anwar Ibrahim announced that the government would grant an additional 12 months before strict enforcement begins for Phase 4 taxpayers.
Coverage by Business Today and The Star reported that the move was intended to help medium-sized businesses that are still preparing their accounting systems and operational processes for full e-Invoice compliance.
The extension formed part of a broader support initiative for SMEs, which also introduced:
- a RM5 billion financing guarantee facility via Syarikat Jaminan Pembiayaan Perniagaan (SJPP),
- financing guarantees covering up to 80%,
- extended guarantee durations of up to 10 years,
- and temporary exemptions involving import duties and sales tax for Malaysian goods brought back into the country.
LHDN later reflected this update in the revised e-Invoice General FAQ document. The revised timeline appears in FAQ 104 of the April 2026 edition available through LHDN Official Portal.
The changes at glance :
| Details | Before (Jan 2026) | After ( Apr 2026) |
| Mandatory implementation start | 1 January 2026 | 1 January 2026 (unchanged) |
| Grace period (relaxation) ends | 31 December 2026 | 31 December 2027 |
| Penalty enforcement begins | 1 January 2027 | 1 January 2028 |
| Consolidated e-invoices permitted | Yes, during grace period | Yes, during extended grace period |
| RM10,000 rule | Enforced from 1 Jan 2026 | Enforced from 1 Jan 2026 (unchanged) |
Important Rules That Remain Unchanged
Despite the additional grace period, several major compliance obligations are still fully in effect. Businesses should not interpret the extension as a postponement of implementation itself.
1. E-Invoicing Still Starts on 1 January 2026
The compliance deadline extension only postpones penalty enforcement.
Phase 4 taxpayers are still required to issue validated e-Invoices beginning 1 January 2026 through the MyInvois system.
This means businesses cannot delay adopting e-Invoicing entirely; they are simply given more time before enforcement action is imposed.
Reference: MyInvois Portal
2. Earlier Phases Are Unaffected
The revised grace period applies exclusively to Phase 4 taxpayers.
Businesses already classified under:
- Phase 1 (annual revenue above RM100 million),
- Phase 2 (RM25 million to RM100 million),
- or Phase 3 (RM5 million to RM25 million)
remain fully subject to enforcement and penalties with no additional relief granted.
3. Transactions Above RM10,000 Cannot Be Consolidated
The existing rule regarding high-value transactions remains strictly applicable.
Any individual transaction worth RM10,000 or more must be issued as a separate e-Invoice immediately. These transactions are not allowed to be grouped into consolidated invoices, even during the extended transition period.
This requirement continues to apply from 1 January 2026 onward for all affected Phase 4 entities.
4. Penalties Will Begin in 2028
Starting 1 January 2028, businesses that fail to comply with e-Invoice obligations may face:
- fines ranging from RM200 to RM20,000 per non-compliant invoice,
- imprisonment of up to six months,
- or both.
These penalties are prescribed under the Income Tax Act 1967.
5. Businesses Below RM1 Million Revenue Still Remain Exempt
The exemption framework for smaller businesses has not changed.
Companies generating less than RM1 million annually continue to be exempt under Phase 5 rules, subject to MSME exemption conditions.
However, subsidiaries or related entities connected to businesses exceeding RM1 million revenue are still not automatically exempt, even if the subsidiary’s standalone revenue falls below the threshold.
Reference documents remain available through LHDN Official Portal.
