Under RM 1 Million, So Exempt from E-Invoicing? Read the Fine Print

When LHDN raised the e-invoice exemption threshold to RM 1 million, a lot of small business owners breathed out and stopped paying attention. Understandable. If your sales are comfortably under a million ringgit, why worry about a mandate built for bigger companies?

Here is the catch. "Exempt" has fine print. And one quietly important date, 1 July 2026, pulls more SMEs into scope than the headline number suggests. So before you file this under "not my problem", it is worth thirty seconds to check whether you are actually as exempt as you think.

First, the genuinely good news

Let us start with what changed in your favour. In late 2025 the Cabinet raised the e-invoice exemption threshold from RM 500,000 to RM 1 million in annual turnover, effective 1 January 2026. The smaller band that had been floated below that (the RM 150,000 to RM 500,000 group) was scrapped altogether.

So as a general rule, if your annual turnover is genuinely under RM 1 million, you are exempt from e-invoicing for now. And to clear up the question that always comes next: that is turnover, your total sales for the year, not your profit.

For a lot of genuinely small businesses, that is the end of the story. For others, it is where the fine print begins.

Where "exempt" quietly stops applying

There are three common situations where a business under RM 1 million is still required to issue e-invoices. None of them are obvious from the headline, which is exactly why they catch people.

1. You have already crossed RM 1 million once

The threshold is not judged only on this year. It looks at your turnover for the 2023, 2024, or 2025 assessment years. If your sales reached or passed RM 1 million in any one of those years, you are in scope, even if business has been quieter since.

And there is a sting in the tail worth knowing: once you are mandated, you stay mandated. You cannot drop back to exempt in a later year just because your revenue dipped below RM 1 million again. It is "once in, always in."

2. You are part of a bigger group

This is the one that surprises people most. Even if your own turnover is well under RM 1 million, the exemption does not apply if you are tied to a larger entity. Specifically, you lose the exemption if you have:

• a non-individual (that is, a corporate) shareholder with annual turnover of RM 1 million or more,
• a holding company with annual turnover of RM 1 million or more,
• a related company with annual turnover of RM 1 million or more, or
• a joint-venture partner with annual turnover of RM 1 million or more.

In plain terms: if a bigger company sits above you or beside you, your own small size does not get you off the hook. A modest subsidiary of a larger group, or a small company part-owned by a bigger one, can absolutely be in scope.

One nuance worth getting right, because it trips people up: this is about corporate relationships, not personal ones. If one person owns two separate businesses, or you and a friend each run your own company, that shared individual owner does not make the companies "related" for e-invoice purposes. Neither does having a director in common. What counts is a corporate shareholder (broadly 20 percent or more of the shares, or one with control), a holding company, a related company, or a joint-venture partner, where that company itself turns over RM 1 million or more.

3. You are a new business

New businesses follow the same logic. If you have genuinely just started, stay under RM 1 million, and are not tied to a larger company, you are exempt for now. But if you are connected to a bigger group, or you cross RM 1 million, you come into scope on 1 July 2026 (or, for businesses that start in 2026 or later, your commencement date if that falls afterwards). Being new does not buy you indefinite breathing room.

So what actually happens on 1 July 2026?

The mandate rolls out in four turnover-based phases, and all four are already in force:

• Phase 1: above RM 100 million, since 1 August 2024
• Phase 2: RM 25 million to RM 100 million, since 1 January 2025
• Phase 3: RM 5 million to RM 25 million, since 1 July 2025
• Phase 4: RM 1 million to RM 5 million, since 1 January 2026, with a penalty-free grace period that now runs to 31 December 2027

1 July 2026 is not one of those numbered phases. It is a separate concessionary start date for the businesses described above: new businesses, and businesses that newly cross the RM 1 million line based on their 2023, 2024, or 2025 figures. If that is you, 1 July 2026 is your line in the sand, not some far-off "everyone else" deadline.

A 30-second self-check

Answer three quick questions and we will tell you whether you are exempt and, if not, the date e-invoicing actually starts for you.

If this catches you, the work is the same as everyone else's

The good news is that being caught by the fine print does not mean a harder road, just an earlier one. The steps are exactly what they are for any business coming into scope: register on the MyInvois portal, get your data clean (the big one is collecting your customers' TINs, which is the number one gap for most SMEs), and pick your path, whether that is switching on e-invoicing in your existing software, adding a standalone tool, or moving to a connected system that does it as a byproduct.

And here is the mindset that matters most: do not read the penalty-free grace period as permission to wait. That buffer is there to help you get onboarded smoothly, not to push the work down the road. The businesses that start during the grace window sort out their data and their workflow in calm conditions and sail through. The ones that treat it as a snooze button end up doing the very same work in a panic when full enforcement lands. Implementing now is simply easier, and cheaper, than implementing at the last minute.

We walked through the whole thing in our guide to the LHDN e-invoice mandate, and laid out a 10-step compliance checklist you can start ticking off today. And if you would rather not bolt on a quick fix, a phased approach lets compliance double as the first step toward a properly systemised business.

One honest caveat: these rules have been revised more than once, and the group and related-entity conditions in particular are the sort of fine print worth confirming against the latest LHDN materials or with your tax advisor before you act on them. The primary sources are below.

Sources (checked mid-2026):

• LHDN e-Invoice implementation timeline for the turnover phases and the RM 1 million exemption threshold.
• LHDN e-Invoice general FAQ (PDF) for the exemption conditions, the related-entity rules, and the concessionary start dates.

Not sure which bucket you fall into? Tell us your situation and we will help you read it.