- You can claim if you are a Malaysian MSME (micro, small or medium enterprise) that paid to implement e-invoicing during YA 2024 to YA 2027. The deduction is up to RM50,000 per year. (Income Tax (Deduction for Expenditure in relation to Environmental Preservation, Social and Governance) Rules 2025, P.U.(A) 193/2025, gazetted 23 June 2025)
- MSME status extends to companies with annual revenue up to RM50 million (manufacturing) or up to RM20 million (services and other sectors), so many mid-sized businesses qualify, not just micro firms. Note the ceiling is lower for services, so a RM50 million services company is above the limit.
- What qualifies: the fees you pay a consultant or vendor to build or customise e-invoice software for your business, and the fees you pay an e-invoice service provider to set up (implement) e-invoicing, for example a vendor’s charge to connect your accounting system to MyInvois. (P.U.(A) 193/2025, Rule 3(1)(c))
- What does not qualify: help with issuing invoices through the free MyInvois Portal, planning or feasibility work done before setup, and recurring monthly or yearly software subscription fees.
- The saving is RM50,000 multiplied by your top tax rate, not RM50,000 in cash. A smaller SME taxed at 17 percent saves up to RM8,500 a year; a company near the RM50 million ceiling, paying 24 percent on chargeable income above RM600,000, saves up to RM12,000.
- The deduction is retrospective to YA 2024, so implementation costs you already paid may still be claimable by amending the return.
- The window closes after YA 2027, the year before Phase 4 e-invoice enforcement begins on 1 January 2028.
Can Your Business Claim This Deduction?
You can claim the ESG tax deduction for e-invoice costs if your business meets all three conditions below. Miss any one and you cannot claim under the e-invoice limb (though you may still qualify under a different category, covered further down).
Condition 1: You are an MSME
An MSME is a micro, small or medium enterprise as defined by SME Corp Malaysia. The medium-enterprise ceiling is higher than many businesses expect, so mid-sized companies often qualify. The full definition:
| Category | Manufacturing | Services and other sectors | ||
|---|---|---|---|---|
| Sales turnover | Full-time employees | Sales turnover | Full-time employees | |
| Micro | Below RM300,000 | Below 5 | Below RM300,000 | Below 5 |
| Small | RM300,000 to below RM15 million | 5 to 74 | RM300,000 to below RM3 million | 5 to 29 |
| Medium | RM15 million to RM50 million | 75 to 200 | RM3 million to RM20 million | 30 to 75 |
In short, a manufacturing company with annual revenue up to RM50 million (or a services company up to RM20 million) can qualify as an MSME.
MSME status is assessed for each separate legal entity, not for your group as a whole, so a group can have each independently qualifying company claim its own deduction, unless an ownership exclusion above applies. (SME Corp Malaysia, Guideline for SME Definition, section 7)
Condition 2: You paid a qualifying e-invoice cost
The Rules cover the consultation fees an MSME incurs for either of these:
- Developing customised software to implement e-invoicing in your business.
- Obtaining the services of an external service provider for that implementation.
The qualifying item is the consultation fee for these activities, so keep the fee documented and itemised.
Condition 3: The cost falls in YA 2024 to YA 2027
The deduction applies to expenditure incurred in years of assessment 2024 through 2027. Because it is retrospective, a cost paid in 2024 or 2025 can still be claimed.
Which of Your e-Invoice Costs Qualify
The qualifying item is defined narrowly: it is the consultation fees for developing customised e-invoice software and for obtaining external service-provider services. Getting this split right is the difference between a valid claim and a disallowed one.
| e-Invoice cost | Deductible? |
|---|---|
| Consultation fees for developing customised software to implement e-invoicing | Yes |
| Consultation fees for obtaining an external service provider’s implementation services | Yes |
| One-off implementation and setup fee (the consultation and implementation portion) | Yes |
| Consultation fees to help you issue e-invoices via the MyInvois Portal | No |
| Planning or preliminary-stage expenditure | No |
| Recurring monthly or annual software subscription | No (see below) |
| Anything already claimed under Section 33 or other Section 154 rules | No (no double claim) |
One-off implementation fee versus recurring subscription
The ESG deduction covers consultation fees for development and implementation, which are one-off costs. It does not cover ongoing software rental. This matters because most e-invoicing tools are sold on subscription.
- One-off implementation and setup fees: the initial onboarding, integration and configuration charge to develop or connect your e-invoice system. Deductible under this ESG deduction.
- Recurring software subscription: the monthly or annual licence fee to keep using the software. This is not deductible under the ESG deduction. It is instead a normal running cost, deductible as an ordinary business expense under Section 33 of the Income Tax Act 1967.
Eligible versus not: two worked examples
- Eligible: A manufacturing MSME pays a provider RM30,000 in consultation and implementation fees to develop and connect a customised e-invoice integration between its ERP (enterprise resource planning) system and MyInvois. These implementation consultation fees are deductible, up to the RM50,000 cap.
- Not eligible: A retail startup pays a consultant RM3,000 to train staff on keying invoices into the free MyInvois Portal, plus RM2,000 for a feasibility study before choosing a system. Neither qualifies: one is portal-issuance consultation, the other is preliminary-stage expenditure.
One more boundary: the deduction cannot overlap with expenditure already deducted under Section 33 of the Income Tax Act 1967 as an ordinary business expense, claimed under any other rules made under Section 154, or incurred by businesses enjoying tax exemption under Section 127(3)(b) or Section 127(3A). Your tax agent should map each invoice to exactly one claiming route.
Not sure which e-invoice costs actually qualify?
JomeInvoice itemises the implementation fee so your deductible amount is clean and claimable.
How Much Tax You Actually Save
The deduction reduces your taxable income; it is not cash back. Your saving equals the deductible amount multiplied by the tax rate that would otherwise apply to that slice of income, in other words your top marginal rate.
Malaysia’s qualifying SME rates are tiered:
| Chargeable income band | Tax rate |
|---|---|
| First RM150,000 | 15% |
| RM150,001 to RM600,000 | 17% |
| Above RM600,000 | 24% |
So the amount you get back depends on the rate applying to the income the deduction offsets:
| Your situation | Deduction | Top rate on that income | Maximum tax saved per year |
|---|---|---|---|
| Smaller SME, income in the 17% band | RM50,000 | 17% | RM8,500 |
| Company near the RM50 million ceiling, income above RM600,000 | RM50,000 | 24% | RM12,000 |
The cap is RM50,000 per year, so across YA 2024 to YA 2027 the maximum total deduction is RM200,000.
How to Claim the ESG Tax Deduction for e-Invoice Costs
Step 1: Confirm your MSME status
Check your business against the SME Corp definition in Condition 1 above. Keep supporting evidence such as audited accounts and your SSM (Suruhanjaya Syarikat Malaysia) profile.
Step 2: Separate qualifying costs from excluded ones
Split your invoices into qualifying fees (customised software development, external provider implementation, one-off setup) and excluded items (planning-stage work, MyInvois Portal issuance help, recurring subscription, hardware). Ask your provider to itemise the implementation fee so the qualifying amount is clean.
Step 3: Match each cost to the correct year of assessment
The deduction follows the year the cost is incurred. Fees incurred in 2024 belong to YA 2024, even if you claim now. If you already filed the affected year without the deduction, your tax agent can amend the return under the error or mistake relief provisions in Section 131 of the Income Tax Act 1967.
Step 4: Claim the deduction in your income tax return
Claim it in your annual return (Form C for companies, Form PT for limited liability partnerships, Form B for sole proprietors with business income) as part of the tax computation. File through LHDN’s official e-filing portal at mytax.hasil.gov.my.
Step 5: Keep the documentation for up to twelve years
Retain contracts, invoices, proof of payment and a short description of the implementation scope, and keep them for up to twelve years. In a review, you will need to show the fee relates to e-invoice implementation, not preliminary planning.
Is It Only for MSMEs? What Other Companies Can Claim
No. The RM50,000 ESG tax deduction is open to three categories of business, but only the e-invoice implementation limb is MSME-specific. The deduction comes from the Income Tax (Deduction for Expenditure in relation to Environmental Preservation, Social and Governance) Rules 2025, made under Section 154 of the Income Tax Act 1967. The full text is published as P.U.(A) 193/2025 in the Federal Government Gazette (Attorney General’s Chambers).
| Your business type | What you can claim (up to RM50,000/year) |
|---|---|
| MSME | e-Invoice implementation: customised software development and external service-provider fees |
| Bursa Malaysia-listed company or financial institution | ESG report validation and verification, ESG data and emissions-tracking software subscriptions, related training and consultancy |
| General company (including Labuan) | Tax Corporate Governance Framework (TCGF) documentation and independent review fees, transfer pricing documentation |
So a listed company cannot claim e-invoice costs under these Rules, and an MSME cannot claim transfer pricing documentation under them. Match your entity type to your row.
Why e-Invoicing Counts as ESG, and Why the Timing Matters
E-invoicing sits under the governance pillar of ESG. Malaysia’s e-invoice regime is a continuous transaction control (CTC) model: every invoice is validated by LHDN (Lembaga Hasil Dalam Negeri Malaysia) through the MyInvois system before it is issued, which strengthens tax transparency and audit trails. Digital tax compliance is treated as a governance upgrade, the same way sustainability reporting is treated as an environmental one.
The timing is deliberate. Which e-invoice phase your business falls under sets when you were required to go live, and therefore when your implementation cost was incurred.
| Phase | Annual revenue | Mandatory e-invoice start |
|---|---|---|
| Phase 1 | Above RM100 million | 1 August 2024 |
| Phase 2 | RM25 million to RM100 million | 1 January 2025 |
| Phase 3 | RM5 million to RM25 million | 1 July 2025 |
| Phase 4 | RM1 million to RM5 million | 1 January 2026 |
| Phase 5 | Below RM1 million | Exempt for now |
To claim on e-invoice costs, your business must be an MSME: revenue up to RM50 million for manufacturing, or up to RM20 million for services. Larger companies, which includes all of Phase 1 and the bigger companies in Phase 2, cannot claim on e-invoice costs.
The deduction runs on its own clock, closing on the same schedule as the Phase 4 relaxation period:
| Deduction milestone | Date |
|---|---|
| Relaxation period ends (Phase 4) | 31 December 2027 |
| Full Phase 4 enforcement begins | 1 January 2028 |
| Final year of assessment for the ESG deduction | YA 2027 |
(Timeline: e-Invoice Specific Guideline v4.7, Table 16.1 and Section 16.2)
Where you sit on this timeline changes how you claim, not whether you can. If your business was mandated in Phase 1 to 3 (2024 to 2025), you have most likely already paid your implementation cost. Because the deduction is retrospective to YA 2024, you can still claim it, amending the affected return if needed, as long as the cost falls in YA 2024 to YA 2027. If you are a Phase 4 business (RM1 million to RM5 million), you can implement during the relaxation period and claim in the same window. Either way the door shuts after YA 2027: spend that lands in 2028, once enforcement begins, earns no deduction.
Businesses below RM1 million in annual revenue stay exempt for now, with caveats around related companies covered in our guide to the e-invoice SME exemption in Malaysia. Once enforcement begins, the penalty for issuing without a valid e-invoice is RM200 to RM20,000 per offence (Section 120(1)(d), Income Tax Act 1967). Background on the extended timeline is in our Phase 4 e-invoice extension guide.
Choosing an Implementation Route That Qualifies
The Rules quietly reshape the build-versus-buy decision, because the three implementation routes are treated differently:
- Manual entry through the MyInvois Portal: free to use, but consultation fees to support it do not qualify, and the manual route does not scale for any real invoice volume.
- Building a custom API (application programming interface) integration: the development cost qualifies for the deduction, but you carry the burden of maintaining the integration every time LHDN updates its specifications.
- Engaging an external e-invoice service provider (such as middleware that connects your existing system to MyInvois): the implementation cost qualifies for the deduction, and the provider maintains the integration for you.
We compare these routes in MyInvois vs e-invoicing software. For most MSMEs, the routes that qualify for the deduction are also the operationally sensible ones.
Where JomeInvoice Fits In
JomeInvoice is Malaysia’s e-invoicing middleware: an external service provider that connects your existing accounting, POS (point of sale) or ERP system to MyInvois without custom development. The Rules cover consultation fees for obtaining the services of an external service provider, so an MSME engaging JomeInvoice during YA 2024 to YA 2027 may be able to claim the deduction on the implementation consultation portion of its fees, subject to confirmation with a qualified tax adviser.
Because JomeInvoice is system-agnostic, your team keeps its current software while validation, TIN (tax identification number) checks and submission run automatically, with LHDN specification updates maintained on our side. If you are weighing implementation routes before the YA 2027 window closes, talk to our team and bring your tax agent into the conversation.
Check the three conditions, then claim before YA 2027 closes
If you are an MSME that pays to implement e-invoicing between YA 2024 and YA 2027, you can deduct up to RM50,000 a year for customised software development and external provider fees, under P.U.(A) 193/2025. Implement during the relaxation period and part of the cost comes back through your tax return; wait for enforcement on 1 January 2028 and the same spend earns nothing.
Turn a compliance cost into a tax deduction
See how JomeInvoice handles e-invoice implementation for MSMEs. Compare your options in one call.
Disclaimer: This article is for general informational purposes only and does not constitute legal or tax advice. LHDN guidelines are subject to updates. Always refer to the latest official LHDN e-Invoice Guidelines at myinvois.hasil.gov.my and consult a qualified tax professional for advice specific to your business.
Frequently Asked Questions
Can my business claim the ESG tax deduction for e-invoice costs?
Yes, if you are a Malaysian MSME and the cost is consultation fees for developing customised e-invoice software or for obtaining an external service provider’s implementation services, incurred in YA 2024 to YA 2027. The deduction is capped at RM50,000 per year [P.U.(A) 193/2025, Rule 3(1)(c)].
Is the RM50,000 ESG tax deduction only for MSMEs?
No. It is open to Bursa Malaysia-listed companies and financial institutions (ESG reporting costs), general and Labuan companies (tax governance and transfer pricing documentation), and MSMEs. Only the e-invoice implementation limb is MSME-only [P.U.(A) 193/2025].
Do MyInvois Portal consultation fees qualify?
No. Consultation fees to help you issue e-invoices through the MyInvois Portal are excluded, as is planning or preliminary-stage expenditure [P.U.(A) 193/2025].
Are monthly e-invoicing software subscription fees deductible under this rule?
No, not under this ESG deduction, which covers only consultation fees for development and implementation [P.U.(A) 193/2025, Rule 3(1)(c)]. A recurring subscription is instead deductible as an ordinary business expense under Section 33 of the Income Tax Act 1967.
How much tax do I actually save?
Your saving equals the deductible amount times your top marginal rate, not RM50,000 in cash. A smaller SME saves up to RM8,500 (17 percent); a company near the RM50 million ceiling, taxed at 24 percent on income above RM600,000, saves up to RM12,000.
Can I still claim for e-invoice costs incurred in 2024?
Yes. The Rules apply retrospectively from YA 2024. If you already filed that year, ask your tax agent to amend the return under Section 131 of the Income Tax Act 1967.
What counts as an MSME here?
A micro, small or medium enterprise under the SME Corp definition: up to RM50 million turnover or 200 employees for manufacturing, and up to RM20 million turnover or 75 employees for services. Main-board-listed companies, and subsidiaries of main-board-listed companies, large firms, MNCs, GLCs, MKDs or state-owned enterprises, are excluded regardless of revenue.
If I run a group of companies, can each one claim RM50,000?
Yes. MSME status is assessed per separate registered entity, not on a group basis, so each company that independently qualifies can claim up to RM50,000 per year on its own e-invoice implementation costs. This excludes any entity that is a subsidiary of a main-board-listed company, large firm, MNC, GLC, MKD or state-owned enterprise.
Last updated: 20 July 2026 | Written by Yinn Sheng Ng, Head of Marketing