A five-year rollout, now down to the RM1 million tier

Malaysia’s e-Invoicing mandate has moved in stages since August 2024, working down from the country’s largest taxpayers to progressively smaller ones. Phase 4 — companies with annual turnover between RM1 million and RM5 million — became mandatory on 1 January 2026, which means the great majority of Malaysia’s registered companies are now inside the regime in some form.

Each phase came with an initial relaxation period during which LHDN would accept consolidated e-invoices and hold off on penalties while businesses bedded in their systems. Phase 4’s relaxation period has been extended more than once during 2026, and the reporting on exactly which part of the RM1 million–RM5 million band qualifies for the longer extension, and the precise date it now runs to, has varied between sources. Businesses in this band should confirm their own current relaxation end date directly through the MyInvois portal or with their tax adviser rather than relying on any single guide — including this one — given how often the timeline has moved.

What hasn’t moved is the underlying obligation: LHDN has been clear that the 1 January 2026 mandatory start date for Phase 4 stands regardless of how the grace period around penalties is adjusted. A business in scope needs a way to issue MyInvois-validated e-invoices now, even if enforcement of penalties for early mistakes is still being phased in.

The RM1 million exemption, and the RM10,000 exception inside it

Micro and small businesses under RM1 million in annual turnover currently sit outside the mandate entirely — a threshold LHDN doubled from an original RM500,000 cut-off before the rule took effect. For everyone above that line, the system isn’t all-or-nothing: for retail-style transactions to end consumers, a mandated business can keep issuing an ordinary receipt or invoice at the point of sale, then submit one consolidated e-invoice covering all of that month’s smaller transactions.

The exception is the RM10,000 rule. Whenever a single transaction — business-to-business, business-to-consumer or business-to-government — reaches RM10,000 or more, it can no longer be folded into the monthly consolidation. The seller has to capture the buyer’s Tax Identification Number and submit an individual e-invoice for that transaction to LHDN for real-time validation, the same as it would for any other in-scope B2B sale.

This is easy to miss precisely because it cuts across the consolidated-invoice convenience most retail-facing businesses assume applies uniformly. A furniture retailer or a car workshop that normally consolidates its point-of-sale receipts still needs to flag and itemise the occasional large-ticket sale individually.

What Phase 4 businesses should have in place now

• A MyInvois-connected system, or an accounting/ERP package with e-invoicing built in, able to submit invoices for real-time LHDN validation
• A process for capturing the buyer’s Tax Identification Number whenever a transaction requires an individual e-invoice
• A way to flag any single transaction of RM10,000 or more so it’s itemised rather than folded into the monthly consolidated e-invoice
• Written confirmation of your own current relaxation/grace-period end date from LHDN or your adviser, given how often Phase 4’s timeline has been revised in 2026

A wider net, phased in over 18 months

SST’s current shape came together in three moves. The service tax rate rose from 6% to 8% on 1 March 2024, with food & beverage, telecommunications, parking and logistics carved out and left at 6%. Then, from 1 July 2025, the scope itself expanded: rental and leasing of commercial assets, construction works, fee-based financial services, private healthcare for non-citizens, private education above certain fee levels, and wellness centre treatments all became taxable services for the first time, initially at the 8% rate. Most recently, rental and leasing services were moved down to the 6% rate effective 1 January 2026, the same date the transitional grace period for the whole 2025 expansion ended.

Registration thresholds vary by category rather than applying a single number across the board. Most services register once taxable turnover exceeds RM500,000 over any rolling 12-month period — not a calendar year, and not just from the date a business starts tracking it. Food & beverage, construction, private healthcare and education carry a higher RM1.5 million threshold, leasing/rental and fee-based financial services sit at RM1 million, and credit or charge card services have no threshold at all.

The practical trap is that a business doesn’t need its own revenue to grow to end up newly liable. A company that leases office space, equipment or vehicles to others, or charges fees for financial advisory or arrangement work, may have crossed into scope purely because those activities were added to the tax net in July 2025 — even if its turnover from that activity hasn’t changed at all. Because liability is backdated to the date the threshold was actually crossed rather than the date of registration, waiting to check is the costlier option, not the safer one.

VIVOS (M) Sdn. Bhd. reviews a business’s activities against the current SST categories and thresholds as part of its accounting and tax service, so a newly taxable revenue stream gets flagged and registered before it becomes a backdated liability rather than after.

The increase is real, it’s roughly double, and it applies to renewals too

Malaysia’s Expatriate Services Division (ESD) has announced new minimum salary thresholds for all three Employment Pass categories, effective 1 June 2026. Every category roughly doubles: Category I moves from RM10,000 to RM20,000 and above, Category II from RM5,000–RM9,999 to RM10,000–RM19,999, and Category III from RM3,000–RM4,999 to RM5,000–RM9,999 (RM7,000–RM9,999 for manufacturing-related services).

These thresholds are calculated on basic salary only — allowances, bonuses, commissions and benefits-in-kind aren’t counted toward the minimum, even where they push the total package comfortably above it. A role advertised at RM9,000 basic plus a RM3,000 allowance still needs its basic salary raised to clear a RM10,000 threshold; the allowance doesn’t help.

Categories II and III now also carry a succession plan requirement to reach their maximum validity — broadly, the employer needs to show a plan for developing a Malaysian employee into the role over time, rather than treating the position as permanently held by a foreign hire. Category I, reserved for the most senior roles, carries no such requirement.

The change applies to all new and renewal Employment Pass applications submitted on or after 1 June 2026 — including renewals of passes that were originally granted under the old, lower thresholds. That’s the detail worth planning around: a company renewing an existing Category II employee’s pass in July 2026 needs that role to meet the new RM10,000+ threshold, not the RM5,000 threshold the pass was first issued under.

For roles currently paid below the new minimum, the practical decision is timing: filing a new application or a renewal before 1 June 2026 locks in the current thresholds for that filing, while anything filed on or after that date needs the new minimum regardless of when the person’s employment or previous pass began. VIVOS (M) Sdn. Bhd. handles Employment Pass filings end to end and can flag which of your current or planned EP holders will need a salary review before the deadline.