MTEM flags challenges in e-invoice policy

The Malay Economic Action Council (MTEM) has expressed concerns about the upcoming full implementation of the e-invoice policy, set to digitalise business invoicing by next January.

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While supporting the policy’s goals of improving tax efficiency and compliance, MTEM chief researcher Azlan Awang highlighted several challenges, particularly for micro and bumiputera-owned businesses.

Although the government has deferred the policy’s full rollout to July 1, 2026, with a six-month transition for businesses earning RM150,000–RM500,000 annually, Azlan criticised the exemption’s limitation to physical sales only.

“This exemption only applies to physical sales and does not include online businesses.

“MTEM considers this regulatory disparity to be highly inappropriate, as all small businesses should be protected under the same regulations regardless of where they operate.

“This one-sided deferment holds no meaning or benefit for small traders who run hybrid businesses – both physical and e-commerce – thereby creating injustice in terms of policy and implementation,” he stressed in a statement today.

Small sales

Azlan explained that online traders, even those qualifying for deferment, must still register for a Tax Identification Number (TIN) and are subject to e-invoice rules via platform-issued self-billed invoices. Many risk penalties if they do not comply.

“One of the main reasons is that their sales are too small and inconsistent – with average sales estimated at only around RM750 per month or RM61 per day.

“The compliance burden on this group is extremely high and disproportionate.

“Even if their sales amount to just RM1 a month, they are still required to issue e-invoices, whereas physical traders are not subject to the same requirement,” he added.

Azlan further stated that many micro-entrepreneurs lack the financial and human resources to meet these requirements and that the system’s complexity excludes vulnerable groups, particularly women and the elderly.

MTEM fears that small businesses may be forced to register merely to comply technically, without fully understanding the implications.

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Capital flight

Worse, he warned that some might shift to foreign e-commerce platforms, resulting in capital flight.

“The government should be more concerned if MSME traders who are not registered with IRB lose access to domestic e-commerce platforms and migrate to foreign platforms instead.

“The outflow of funds resulting from this hasty and non-inclusive policy could reach up to RM1.8 billion a year — with the main contributors being bumiputera MSMEs.

“Worse still, many small traders may stop doing online business altogether, leading to even greater economic losses,” he said.

Azlan called on the government to focus on structural reforms, including fair taxation of global digital players like Facebook, instead of burdening local micro-businesses.

“MTEM, therefore, urges the Finance Ministry to extend a similar deferment period to online traders and to exempt those with annual sales below RM150,000, as has been granted to physical traders.

“At the same time, the government must also provide support systems, digital literacy training, financial incentives, and appropriate technological infrastructure to help MSMEs adapt to this system sustainably,” he added. - Mkini