Many business owners believe that if their annual revenue is below RM1 million, they are automatically exempt from implementing e-Invoicing.
While this is true for many micro and small businesses, it is not always the case.
The Inland Revenue Board of Malaysia (LHDN) has set specific conditions for the MSME exemption. In certain situations, a company with annual revenue below RM1 million is still required to implement e-Invoicing.
Let’s look at the circumstances.
1. Your Company Has a Corporate Shareholder
One of the key conditions for the exemption is the ownership structure of your company.
If your company is owned, wholly or partly, by another company that does not qualify for the MSME exemption, your company may also lose the exemption.
Example
ABC Sdn. Bhd.
- Annual Revenue: RM650,000
Shareholder:
- XYZ Holdings Sdn. Bhd.
- Annual Revenue: RM15 million
Although ABC Sdn. Bhd. earns less than RM1 million, it forms part of a larger corporate structure. Therefore, it is required to implement e-Invoicing.
2. Your Company Is a Subsidiary
A subsidiary company does not automatically qualify for the MSME exemption simply because its own revenue is below RM1 million.
Example
Holding Company
- Revenue: RM25 million
Subsidiary
- Revenue: RM350,000
Even though the subsidiary is small, it is part of a corporate group and is therefore required to comply with the e-Invoicing requirements.
3. Your Company Is Related to Another Company That Does Not Qualify
Another common misconception is that only your own revenue matters.
In reality, if your company forms part of a corporate group that does not meet the exemption criteria, you may still be required to implement e-Invoicing.
However, it is important to note that having the same director alone does not automatically make two companies “related” for e-Invoicing purposes. The determination depends on the ownership and control criteria set out by LHDN.
4. Your Revenue Later Exceeds RM1 Million
The exemption is not permanent.
If your business grows and your annual revenue reaches or exceeds RM1 million, you will be required to implement e-Invoicing according to LHDN’s implementation timeline.
Businesses should therefore review their annual turnover regularly instead of assuming the exemption will continue indefinitely.
Key Takeaway
Being below the RM1 million revenue threshold does not automatically guarantee an exemption from e-Invoicing.
Your company’s ownership structure and relationship with other entities also play an important role.
Before concluding that your business is exempt, consider the following questions:
- Is your company owned by another company?
- Is your company a subsidiary?
- Does your corporate group qualify for the MSME exemption?
- Has your annual revenue exceeded RM1 million?
If the answer to any of these questions is “Yes”, it is advisable to review your e-Invoicing obligations carefully.
Understanding the rules early can help your business avoid unnecessary compliance issues and ensure a smooth transition to Malaysia’s e-Invoicing system.
Need Assistance?
If your business operates through group structures, paying agents, or collection arrangements, it is important to assess who is legally receiving the supply before determining the self-billing obligation.
Our team can assist in reviewing your transactions and e-Invoicing processes to ensure compliance with the latest requirements.
