As Malaysia embraces digital transformation in the financial sector, Xero Malaysia has emerged as a leading cloud accounting solution for modern businesses. Known for its user-friendly interface and powerful automation features, Xero accounting software Malaysia is helping SMEs streamline their bookkeeping, tax reporting, and invoicing processes. One of the most significant shifts in the accounting landscape is the rollout of mandatory e-invoicing in Malaysia, a government initiative aimed at enhancing transparency, reducing fraud, and improving efficiency. For business owners wondering what e-invoicing in Malaysia is, it’s more than just a digital invoice. It is a game-changer that integrates seamlessly with platforms like Xero to simplify compliance and boost operational productivity.
Content Outline
Key Summary
E-Invoicing in Malaysia is Mandatory and Phased
Starting August 2024, businesses in Malaysia must adopt e-invoicing based on annual revenue brackets, with full implementation by July 2026. It replaces paper invoices with secure digital submissions through the MyInvois Portal.
Xero Integrates Seamlessly with Malaysia’s E-Invoicing System
Xero is Peppol-accredited and partners with Invoici to automate invoice validation and submission directly to LHDN, ensuring compliance for Malaysian SMEs.
Peppol Enhances Efficiency and Compliance
The Peppol network enables standardized, real-time invoice exchange, reducing errors, improving tax transparency, and speeding up payments for businesses.
Xero Provides a Guided Setup for E-Invoicing
Businesses can set up e-invoicing in Xero by registering with MyInvois, connecting to Invoici, setting up tracking categories, and tagging invoices for accurate classification and submission.
Transition Includes a Grace Period and Future Real-Time Compliance
A 6-month grace period allows consolidated invoicing; after that, real-time individual invoice submissions become mandatory. Xero automates this transition with minimal disruption.
What Is E-Invoicing In Malaysia?
E-Invoicing in Malaysia refers to a government-led initiative by the Inland Revenue Board of Malaysia (LHDN) to replace traditional paper-based invoices with secure, real-time digital invoices. This move aims to improve transparency, enhance tax compliance, and modernize the country’s financial ecosystem.
E-invoicing is a system that allows businesses to generate, send, and receive invoices electronically in a structured digital format. This eliminates the need for manual processing and physical document storage.
Malaysia’s e-invoicing framework is built on the Peppol e-invoicing standard—a secure, globally recognized network that ensures interoperability between different accounting systems. Peppol (Pan-European Public Procurement On-Line) allows businesses to exchange electronic documents seamlessly, regardless of the software they use.
The e-invoicing rollout in Malaysia is being implemented in phases:
- August 2024: Voluntary adoption begins for businesses with annual turnover exceeding RM100 million.
- January 2025 onwards: Mandatory compliance kicks in based on business turnover thresholds, with full implementation expected by July 2025.
Businesses in Malaysia must prepare now to stay ahead of the curve and avoid penalties by adopting e-invoicing solutions early.
Peppol e-Invoicing and Its Benefits for Malaysian SMEs
The Peppol e-invoicing network is a secure digital framework that enables real-time transmission of invoices between businesses and government entities. Built on internationally accepted standards, Peppol ensures that invoices are verified, structured, and exchanged within a regulated ecosystem.
For Malaysian SMEs, adopting Peppol e-invoicing offers several key benefits:
- Faster payments: Digital invoices are transmitted instantly, reducing payment delays.
- Reduced administrative workload: Invoice automation lowers manual data entry and paperwork.
- Improved tax compliance: E-Invoices align directly with LHDN’s tax reporting requirements, minimizing audit risks.
- Fewer errors and discrepancies: Standardized formats reduce mistakes associated with manual invoicing.
By embracing e-invoicing through the Peppol network, SMEs in Malaysia can enhance financial efficiency, improve cash flow, and future-proof their operations.
How Xero Accounting Software Supports e-Invoicing in Malaysia
Xero Malaysia is a trusted cloud-based accounting solution tailored for SMEs that want to manage their finances with ease and accuracy. Designed to be user-friendly and accessible from anywhere, Xero accounting software Malaysia enables business owners to handle bookkeeping, invoicing, payroll, and tax compliance from a single digital platform.
When it comes to e-invoicing, Xero accounting Malaysia is already ahead of the curve. Xero is a Peppol-accredited provider through its acquisition of Tickstar, a certified Peppol access point. In Malaysia, Xero has also partnered with Invoici, a local Peppol-certified solution, to ensure seamless e-invoicing integration.
Key benefits of using Xero for e-invoicing are:
- Automated invoice submission to LHDN via Peppol.
- Simple e-invoice classification and real-time validation.
- Robust data security and compliance with Malaysia’s e-invoicing framework.
With Xero, businesses can transition effortlessly into the e-invoicing era, staying compliant while saving time and resources.
Step-by-Step Guide To Set Up E-Invoicing In Xero
With Malaysia’s e-invoicing mandate rolling out in phases, it is essential for businesses using Xero to get prepared early. Whether you are new to e-invoicing or already familiar with the basics, this step-by-step guide will help you integrate Xero accounting software Malaysia seamlessly with the MyInvois Portal using the Peppol e-invoicing network.
Step 1: Register in MyInvois Portal and Add Your Intermediary
To start your journey toward e-invoicing compliance, you first need to set up your business on the MyInvois Portal, which is the official e-invoicing platform managed by the Inland Revenue Board of Malaysia (LHDN). Here’s how to ensure you get it right:
1.1 Create Your MyInvois Portal Account
The MyInvois Portal is where all e-invoices are submitted and validated by LHDN. As a first step, register your business as a taxpayer on the portal. You will need to provide accurate business details, such as your company’s legal name, SSM registration number, and registered address.
1.2 Choose Your Intermediary
During the registration process, you must select an intermediary, also known as a Peppol access point. For Xero users, choose Storecove Malaysia Sdn. Bhd. as your intermediary. Storecove is certified by Peppol and ensures your e-invoices are transmitted securely and validated in real time.
1.3 Double-Check Your Business Information
It is crucial to ensure that the information you provide on the MyInvois Portal matches exactly with the details in your Xero account. Any mismatch—such as differences in your company name, registration number, or address—can cause validation errors when you submit your e-invoices later.
1.4 Recommended Timeline for Setup
To avoid last-minute issues, complete this setup well before your phase’s deadline. For example, if your business enters the e-invoicing mandate in July 2025 (Phase 2), aim to finalize your MyInvois Portal registration by mid-June 2025.
Step 2: Complete Setup in Xero and Connect to Invoici
Once you have successfully registered your business in the MyInvois Portal and designated your intermediary, the next step is to set up and connect your Xero account to Invoici for e-invoicing compliance.
2.1 Verify Your Xero Organisation Settings
Log in to your Xero account and check that your organisation’s details—such as your legal business name, SSM registration number, and address—are accurate and up to date. These details must match the information you provided during your MyInvois Portal registration to avoid submission errors.
2.2 Connect Xero to Invoici
Invoici is the certified Peppol access point that acts as the bridge between Xero and the MyInvois Portal. By connecting Xero to Invoici, you enable your e-invoices to be submitted directly to LHDN for validation.
To establish this connection:
- Follow the step-by-step integration instructions provided by Xero (often found in your Xero dashboard or help center).
- You may be required to import your business QR code from the MyInvois Portal to update your Xero profile during this process.
- Once connected, Invoici will generate a unique Peppol ID for your business. This Peppol ID confirms that your Xero account is now linked to the national e-invoicing framework.
2.3 Why This Step Matters
This integration ensures that e-invoices you create in Xero can be submitted automatically and validated in real time by LHDN. It also allows you to avoid manual data entry and reduces the risk of compliance errors.
2.4 What to Expect Next
After this connection is successfully established, Xero will create two new dedicated contacts for your e-invoice submissions:
- One for consolidated e-invoices
- Another for self-billed e-invoices
These contacts are essential for future e-invoice submissions.
By completing this step, your business is fully integrated with Malaysia’s e-invoicing system, ensuring that you’re ready for secure, compliant e-invoice submissions directly from your Xero dashboard.
Step 3: Set Up New Contacts and Tracking Categories in Xero
With your Xero account now connected to Invoici, you’re ready to configure the essential internal settings in Xero to ensure your e-invoices are correctly structured and submitted to LHDN.
3.1 Automatic Creation of New Contacts
Once the integration is complete, Xero will automatically create two new dedicated contacts in your system:
- Consolidated eInvoice Contact: For all your outgoing e-invoice submissions (to customers or buyers).
- Consolidated Self-Billed eInvoice Contact: For self-billed e-invoice submissions (when your business must issue e-invoices on behalf of suppliers or agents).
Each contact will include a dedicated email address:
- consolidated@invoi.ci for consolidated e-invoices
- consolidated-selfbilled@invoi.ci for self-billed e-invoices
These contacts ensure that when you send your e-invoices from Xero, they are automatically routed to Invoici for validation and submission to LHDN.
3.2 Set Up the MyInvois Tracking Category
Another critical part of this step is the creation of a Tracking Category in Xero. This tracking category is specifically designed for the MyInvois Classification Codes, which categorize the types of transactions in your e-invoices.
Key Details:
- Xero will automatically create this tracking category when you connect to Invoici.
- It’s essential to ensure that there’s an available slot in Xero for this tracking category before you establish the connection.
- The tracking category allows you to tag every line item in your sales invoices and bills with the appropriate MyInvois Classification Code (e.g., code 1 for breastfeeding equipment, code 33 for self-billed betting and gaming).
3.3 Why This Step Matters
Tagging transactions with the correct classification codes is required for LHDN validation. It ensures that your e-invoices are categorized accurately, reducing errors and compliance risks during submissions.
3.4 Action Items for This Step:
- Confirm that the two new contacts (consolidated and self-billed) are present in your Xero contacts list.
- Check that the MyInvois tracking category is created in Xero.
- Review the official MyInvois Classification Codes and plan how your typical transactions will be classified going forward.
By completing this step, you’re ensuring that your Xero account is fully structured and ready to support Malaysia’s e-invoicing framework, paving the way for easy and accurate e-invoice submissions.
Step 4: Update Customer and Supplier Contact Details in Xero
With the essential system and tracking structures in place, the next step is to ensure that all of your customer and supplier records in Xero are complete and accurate. This is critical because LHDN requires specific information to be included in your e-invoices for successful validation and compliance.
4.1 Why This Step Is Important
Incomplete or outdated contact details can lead to errors in your e-invoice submissions, causing them to be rejected or delayed by the MyInvois Portal. Keeping your contact details accurate also supports proper classification and tracking in Xero.
4.2 Key Data to Update
Review and update the following details for each of your customers and suppliers in Xero:
- Registered Business Name
- SSM Registration Number (or Tax ID)
- Business Address
- Official Email Address
- Contact Person (where applicable)
4.3 Best Practices for Data Entry
- Ensure Consistency: Make sure the data in Xero matches exactly with the information provided in your MyInvois Portal. Any mismatch—such as a different business name or an outdated address—can cause validation failures.
- Use the Tracking Category: When updating your contacts, ensure that each one is linked to the appropriate tracking category, reflecting how transactions with this contact will be classified under Malaysia’s e-invoicing framework.
4.4 How to Update Contacts in Xero
- Go to the Contacts section in your Xero dashboard.
- Select each customer or supplier and click Edit.
- Fill in all required fields, such as business registration number, tax ID, and email address.
- Save your updates and ensure that your team follows this practice consistently for new contacts.
4.5 Why This Step Matters for Compliance
Accurate contact data is a fundamental part of e-invoicing compliance in Malaysia. It ensures your e-invoices are recognized by LHDN’s validation system and helps avoid submission errors or penalties.
By completing this step, your Xero contacts will be fully aligned with Malaysia’s e-invoicing requirements, setting the stage for smooth and compliant e-invoice submissions.
Step 5: Manage E-Invoice Submissions for Sales and Self-Billed Bills
During the 6-month relaxation period provided by LHDN, you are allowed to continue issuing normal invoices and receipts to your clients. However, it’s crucial to begin preparing for real-time e-invoicing compliance by ensuring your sales invoices and self-billed bills are properly tagged and structured in Xero.
5.1 E-Invoices for Sales (Consolidated e-Invoices)
- Tag Sales Invoices: For every sales invoice you create in Xero, ensure that each line item is tagged with the correct tracking category that matches the MyInvois Classification Codes.
- Include Required Details: Double-check that the unit price, amount, tax rate (e.g., SST 8%, 6%, or Tax Exempt 0%), and other relevant data fields are accurately completed.
- Best Practice: Tagging transactions with the correct classification code helps ensure that your consolidated e-invoices are complete and ready for validation by LHDN.
5.2 Self-Billed E-Invoices (Bills to Pay)
In certain situations, such as when dealing with non-business individuals or importing goods, your business is responsible for issuing self-billed e-invoices. In Xero, these are managed through the Bills to Pay feature.
- Tag Bills to Pay: Apply the relevant self-billed tracking category to each line item for these transactions.
- Examples of Relevant Codes:
- 033: Self-billed – Betting and gaming
- 034: Self-billed – Importation of goods
- 035: Self-billed – Importation of services
- 036: Self-billed – Others
- 037: Self-billed – Monetary payment to agents, dealers, or distributors
- 033: Self-billed – Betting and gaming
- Review Thoroughly: Carefully review these transactions to ensure proper classification and accurate data entry.
5.3 Key Actions to Take
- Tag every sales invoice and self-billed bill in Xero with the correct tracking category before the 3rd of the following month.
- Verify that all relevant data (e.g., pricing, tax rate) is complete and correct.
- Note: Receipts do not need to be submitted as e-invoices during this period.
5.4 Why This Step Matters
Proper tagging and data entry during this relaxation period will ensure that when the 6-month period ends, you’re fully prepared to transition to real-time, individual e-invoice submissions. It also reduces the risk of validation errors when your consolidated e-invoices are automatically generated for submission.
By completing this step, you’re setting up the foundation for a smooth transition to full e-invoicing compliance with Xero and Malaysia’s e-invoicing framework.
Step 6: Review, Submit, and Transition to Real-Time Compliance
With your invoices and bills properly tagged and prepared in Xero, the final step involves reviewing, submitting, and transitioning to real-time e-invoicing compliance after the 6-month relaxation period.
6.1 Automated Consolidated e-Invoice Generation
On the 4th of the following month, Xero will automatically generate:
- Consolidated e-Invoices (for your sales invoices)
- Consolidated Self-Billed e-Invoices (for your self-billed bills to pay)
These consolidated e-invoices compile all tagged transactions, ensuring that they are correctly formatted for submission to LHDN.
6.2 Review and Validation
- Check Every Line Item: Carefully review the consolidated e-invoices to confirm that all relevant data—such as unit price, tax rates, and classification codes—is accurate.
- Important Notes:
- Manual journals in Xero are not included in consolidated e-invoices.
- Do not approve the consolidated e-invoice or self-billed e-invoice in Xero, as it will be automatically submitted once reviewed.
- Manual journals in Xero are not included in consolidated e-invoices.
6.3 Submit to LHDN for Validation
By the 7th of the following month, submit your consolidated e-invoices via the dedicated email addresses created in Xero (e.g., consolidated@invoi.ci for sales and consolidated-selfbilled@invoi.ci for self-billed).
- In Xero, simply send the consolidated e-invoices the same way you would send a normal invoice to a customer.
- Use the History & Notes section in Xero to monitor submission status and address any errors flagged by LHDN.
6.4 Transition to Real-Time Compliance (Post-Relaxation Period)
Starting from 1 July 2025 onwards, the relaxation period ends for Phase 2 businesses. Consolidated submissions will no longer be accepted, and you will need to submit individual e-invoices in real time through Xero’s integrated system.
- Xero, connected to Invoici and Storecove, is already equipped to handle this real-time validation and submission automatically.
6.5 Key Actions for Ongoing Compliance
- Ensure all future invoices and bills in Xero are properly tagged with the correct classification codes.
- Schedule regular reviews of your submissions in Xero’s dashboard to catch and fix any errors.
- Keep your team updated on any changes to e-invoicing regulations or workflows to stay compliant.
Why This Step Matters
This step ensures that your business smoothly transitions from consolidated submissions to real-time compliance, in line with Malaysia’s phased e-invoicing rollout. It’s the final step in building a secure, compliant, and efficient e-invoicing process using Xero.
Tips for Smooth Submissions and Ongoing Compliance
To avoid disruptions and maintain compliance:
- Schedule regular data syncs between Xero and Invoici.
- Train your finance team on e-invoicing workflows in Xero.
- Monitor submission status and error logs directly in your Xero dashboard.
- Keep abreast of LHDN updates or API changes.
Understanding Classification Codes for E-Invoicing
In Malaysia, e-invoicing submissions must include a classification code that identifies the nature of the transaction. Here’s a quick reference list of these codes for your e-invoice setup in Xero:
| Code | Description |
| 1 | Breastfeeding equipment |
| 2 | Child care centres and kindergartens fees |
| 3 | Computer, smartphone or tablet |
| 4 | Consolidated e-Invoice |
| 5 | Construction materials (as specified under Fourth Schedule of the Lembaga Pembangunan Industri Pembinaan Malaysia Act 1994) |
| 6 | Disbursement |
| 7 | Donation |
| 8 | e-Commerce – e-Invoice to buyer / purchaser |
| 9 | e-Commerce – Self-billed e-Invoice to seller, logistics, etc. |
| 10 | Education fees |
| 11 | Goods on consignment (Consignor) |
| 12 | Goods on consignment (Consignee) |
| 13 | Gym membership |
| 14 | Insurance – Education and medical benefits |
| 15 | Insurance – Takaful or life insurance |
| 16 | Interest and financing expenses |
| 17 | Internet subscription |
| 18 | Land and building |
| 19 | Medical examination for learning disabilities and early intervention or rehabilitation treatments of learning disabilities |
| 20 | Medical examination or vaccination expenses |
| 21 | Medical expenses for serious diseases |
| 22 | Others |
| 23 | Petroleum operations (as defined in Petroleum (Income Tax) Act 1967) |
| 24 | Private retirement scheme or deferred annuity scheme |
| 25 | Motor vehicle |
| 26 | Subscription of books / journals / magazines / newspapers / other similar publications |
| 27 | Reimbursement |
| 28 | Rental of motor vehicle |
| 29 | EV charging facilities (Installation, rental, sale / purchase or subscription fees) |
| 30 | Repair and maintenance |
| 31 | Research and development |
| 32 | Foreign income |
| 33 | Self-billed – Betting and gaming |
| 34 | Self-billed – Importation of goods |
| 35 | Self-billed – Importation of services |
| 36 | Self-billed – Others |
| 37 | Self-billed – Monetary payment to agents, dealers or distributors |
| 38 | Sports equipment, rental / entry fees for sports facilities, registration in sports competition or sports training fees imposed by associations / sports clubs / companies registered with the Sports Commissioner or Companies Commission of Malaysia |
| 39 | Supporting equipment for disabled person |
| 40 | Voluntary contribution to approved provident fund |
| 41 | Dental examination or treatment |
| 42 | Fertility treatment |
| 43 | Treatment and home care nursing, daycare centres and residential care centers |
| 44 | Vouchers, gift cards, loyalty points, etc. |
| 45 | Self-billed – Non-monetary payment to agents, dealers or distributors |
These classification codes help ensure your e-invoices comply with LHDN’s structured format requirements and support accurate tax reporting.
Accessing E-Invoicing Tools With Xero
Accessing e-invoicing features through your Xero login is quick, secure, and user-friendly. Once logged in, businesses can easily navigate the intuitive dashboard to issue, track, and submit e-invoices via Peppol, all in real-time.
The Xero login portal offers:
- A single sign-on dashboard for accounting, invoicing, and compliance tools.
- Seamless integration with Peppol through Invoici and Storecove
- Two-factor authentication (2FA) for enhanced data protection and access security.
Important Compliance Timelines and Relaxation Periods
Understanding the e-invoicing implementation timeline is crucial to stay compliant and avoid penalties. The LHDN has rolled out a phased approach based on business annual turnover:
Revised e-Invoice Timeline & Additional Guidelines (RM500K and below temporarily exempted)
| Revenue Bracket | Previous Deadline/Date | Revised Deadline / Action |
| Above RM100 million | 1 August 2024 | No change |
| RM25 million – RM100 million | 1 January 2025 | No change |
| RM5 million – RM25 million | 1 July 2025 | No change (assumed unaffected by this update) |
| RM1 million – RM5 million | Part of 1 July 2025 group | Postponed to 1 January 2026 |
| RM500,000 – RM1 million | 1 January 2026 | Extended to 1 July 2026 |
| Up to RM500,000 | 1 January 2026 | Temporarily exempt from adopting e-invoicing |
Additional Guidelines and Grace Periods
- Six-Month Grace Period:
A six-month grace period remains in effect for each implementation phase. During this period, businesses can issue unified e-Invoices for all transactions, meaning they can consolidate multiple transactions into a single e-Invoice instead of issuing individual invoices. - Post-2026 Requirement for Large Transactions:
Starting from 1 January 2026, any single transaction exceeding RM10,000 must have its own separate e-Invoice, even during the grace period. This ensures that higher-value transactions are properly tracked and compliant with the new digital invoicing framework.
Why Choose Xero Accounting Software Malaysia for E-Invoicing?
Xero Malaysia isn’t just an accounting platform—it’s a powerful, all-in-one solution that supports your journey into digital compliance. Tailored for SMEs, Xero accounting software Malaysia ensures you’re ready for every stage of the e-invoicing rollout.
Xero stands out for Malaysian businesses because:
- Peppol-accredited via Tickstar and integrated with Invoici
- Automated reporting directly to the Inland Revenue Board (IRBM)
- All-in-one platform for accounting, payroll, inventory, and invoicing
- Trusted by over 4.2 million users worldwide
From effortless onboarding to full e-invoicing compliance, Xero accounting Malaysia empowers you to work smarter and stay ahead of regulatory changes.
Conclusion
The move toward e-invoicing in Malaysia is more than a compliance requirement—it’s an opportunity for SMEs to modernize operations, reduce manual work, and improve financial transparency. Understanding what is e-invoicing in Malaysia and aligning your business with Peppol standards is critical to long-term success.
With Xero Malaysia, you’re not just adopting a tool—you’re investing in a trusted cloud-based platform that simplifies compliance and transforms your financial processes.
FastLane Group, as a Xero Platinum Partner, is here to help your business transition smoothly into e-invoicing. Whether you’re looking to set up Xero, connect to Invoici, or prepare for LHDN requirements, our experts are ready to support you.
Contact FastLane Group today to future-proof your business with Xero e-invoicing solutions in Malaysia.
FAQ
1. What is e-invoicing Malaysia?
E-invoicing in Malaysia is a government-led digital initiative by the Inland Revenue Board (LHDN) that replaces traditional paper-based invoices with structured electronic formats. It enables real-time invoice validation and transmission through an online portal, ensuring greater transparency, tax compliance, and efficiency for businesses.
2. How does Peppol work?
Peppol e-invoicing is an international framework that enables secure and standardised electronic document exchange between businesses. In Malaysia, Peppol facilitates the transmission of e-invoices between Xero (via Invoici and Storecove) and the MyInvois Portal run by LHDN. It ensures each invoice is validated, timestamped, and recorded for tax and compliance purposes.
3. How does Xero ensure compliance with e-invoicing requirements?
Xero Malaysia is Peppol-ready through its integration with Invoici, a certified Peppol access point. Xero can:
- Automate invoice formatting according to LHDN specifications
- Enable secure, real-time invoice submission via Peppol
- Track validation status within the Xero dashboard
- Keep data aligned with your SSM registration for seamless processing
4. What is the difference between consolidated and self-billed e-invoices?
Consolidated e-invoices: During the 6-month relaxation period after your phase begins, you’re allowed to group multiple transactions into a single submission. This eases your transition into the system.
Self-billed e-invoices: These are generated by the buyer rather than the seller, typically used when your vendor doesn’t issue invoices. Xero supports both formats through custom invoice settings and categorisation tools.
5. How do I update contacts and tracking categories in Xero for e-invoicing?
To ensure smooth Peppol e-invoicing, update your contact and category data in Xero:
- Go to Contacts → Edit each customer/supplier
- Add required fields like SSM registration number, tax ID, and email
- Under Advanced Settings, apply tracking categories such as departments, projects, or e-invoicing phases for detailed reporting
Keeping these fields accurate helps Xero transmit the correct data to LHDN, ensuring compliance and faster validation.
