FMM welcomes raised e-invoicing exemption threshold, doubling of tax refund allocation

KUCHING (Dec 9): The federal government’s decision to raise the e-invoicing exemption threshold from RM500,000 to RM1 million and double the allocation for tax refunds from RM2 billion to RM4 billion is timely in providing relief to many small and medium enterprises (SMEs), said the Federation of Malaysian Manufacturing (FMM).

FMM president Jacob Lee said many SMEs continue to operate with thin margins, limited administrative capacity, and ongoing cash-flow pressures due to rising operating costs and tighter financing conditions.

“The increased tax refund allocation will help expedite outstanding payments, offer critical liquidity support, and reduce financial stress across the manufacturing and SME sectors,” he said in a statement.

Based on FMM’s internal assessments and member feedback, Lee said around 85 per cent to 90 per cent of its member companies fall within the phased implementation schedule for e-invoicing.

While medium and larger companies are generally prepared, micro and small enterprises have raised concerns over the significant cost and operational adjustments required to comply with mandatory e-invoicing, he said.

For many SMEs, he said the transition is not just about adopting a new invoicing format, but they are required to upgrade or purchase compatible accounting software, integrate systems with the national e-invoicing platform and ensure that their finance and accounting staff are fully trained to handle new processes.

These upgrades involve upfront investment and recurring costs, commitments that can be challenging for smaller firms already dealing with rising input costs and a highly competitive environment, he added.

“By increasing the exemption threshold to RM1 million, the government has provided crucial breathing space for micro and small businesses to digitalise at a pace that is manageable and sustainable.

“This will help prevent immediate disruptions to operations and avoid additional compliance costs that could further erode their already thin margins.”

With this, Lee said thousands of the smallest SMEs will be able to continue operating without the pressure of sudden system upgrades or mandatory compliance, allowing them to stabilise cash flow and improve internal processes before transitioning.

He said FMM viewed this new threshold as part of a broader and gradual digitalisation pathway rather than a long-term substitute for future adoption.

“Over time, SMEs will still benefit from moving onto digital platforms and integrating with their supply chains.”

As such, Lee encouraged businesses below the new threshold to consider voluntary adoption when ready, as e-invoicing will eventually become a key part of Malaysia’s national digital ecosystem.

On the doubling of the tax refund allocation, he said they had consistently underscored the need for efficient, predictable and transparent tax refund mechanisms.

He reiterated FMM’s call for refunds to be processed within a clear statutory timeframe, ideally within 90 days to 120 days after returns are filed and verified.

“Where staggered payments are necessary, the Inland Revenue Board (IRB) should communicate a transparent refund schedule upfront.”

He also urged that interest be paid on refunds not settled within the statutory timeframe, as provided under Section 111D of the Income Tax Act, to strengthen fairness and accountability.

“Timely tax refunds are crucial because many businesses operate on credit terms and often face significant outstanding receivables but have to pay taxes upfront before receiving actual income, often using their own cash reserves or bank borrowings with interest, placing unnecessary strain on already tight cash flow,” he said.

To further streamline processes, Lee said FMM proposes adopting a threshold-based approach, such as granting automatic full refunds for overpayments below RM1 million, to reduce administrative burdens for both taxpayers and the IRB.

He also called for the implementation of an automatic offset mechanism, whereby declared tax overpayments are automatically applied to future tax liabilities.

This would reduce the government’s need for large cash outflows for refunds while easing financing burdens on companies preparing for upcoming tax instalments, he said.

“FMM appreciates the government and the Ministry of Finance for listening to industry concerns and responding with balanced, practical measures that support both national digitalisation goals and the immediate operational realities of SMEs.

“These decisions will help stabilise business cash flow, strengthen compliance readiness and promote a smoother transition into Malaysia’s evolving digital tax ecosystem,” he said.