(TAX UPDATE) LHDN’s New e-Invoice Compliance Review Framework: What Every SME Must Know Before the Visit Letter Arrives

Introduction : e-Invoice Is No Longer “Guideline Only”

For many SME owners, e-Invoice started as a compliance project.
Register the system. Issue invoices. Follow the technical guide.

That phase is over.

LHDN has now issued the e-Invoice Compliance Review Framework, effective 15 December 2025. This framework turns e-Invoice from guidance into a structured enforcement regime.

In simple terms, LHDN is no longer asking whether you issue e-Invoices.
They are now checking how, whether the records are clean, and whether your controls can stand scrutiny.

For SMEs, this is a clear signal:
e-Invoice compliance is now part of tax risk management.

Key Summary : What This Framework Really Does

1. Is LHDN really checking e-Invoice compliance now?

Yes.

e-Invoice is no longer treated as a “learning phase”.
With the new framework, LHDN has moved e-Invoice into formal enforcement mode.

This means:

Reviews are structured
Procedures are standardised
Non-compliance is treated as a tax offence

2. How does LHDN choose which companies to review?

LHDN uses computerised risk analysis.

Companies are selected based on data patterns such as:

High transaction volume
Complex invoicing arrangements
Inconsistencies between e-Invoice data, accounts, and tax returns
Weak or unusual reporting trends

It is not random. The system flags risk before officers are assigned.

3. Will LHDN suddenly come to my office?

No.

For e-Invoice compliance reviews:

LHDN does not conduct surprise visits
A formal Visit Notification Letter must be issued
The letter must be sent at least 14 calendar days before the visit

This gives you time to prepare.

4. What information must be stated in the visit notification letter?

The notification letter must clearly state:

The confirmed visit date
The period under review
The list of records required
The name of the PEI (e-Invoice compliance officer)
The estimated duration of the visit

If these details are unclear, you should seek clarification early.

5. Can I ask LHDN to postpone the visit date?

Yes, you have the right to request postponement, but it must be done properly.

You may request a postponement if:

Key personnel (such as the finance manager or accountant) are unavailable, or
There are other unavoidable and reasonable reasons

How to apply:

After receiving the Visit Notification Letter
Contact the relevant e-Invoice and Audit Compliance Unit / LHDN Branch Khas Division
Submit a formal request
Propose alternative dates

Postponement is not automatic, but it is a recognised taxpayer right when justified.

6. Will LHDN do a desk review or on-site visit?

For e-Invoice compliance, only on-site visits are conducted.

LHDN officers will:

Visit your premises or a designated location
Review records on-site
Interview relevant staff
Observe how e-Invoice is implemented in actual operations

This is not just document checking.
It is a practical review of how your business operates.

7. What documents will LHDN check?

LHDN may examine:

Sales invoices and receipts
Purchase invoices and supporting documents
Debit notes, credit notes, and refunds
Bank balances and reconciliations
Links between invoices, accounting records, and tax returns
Any documents supporting invoice accuracy

If records are incomplete or inconsistent, LHDN may expand the scope.

8. Can LHDN check more records if my documents are messy?

Yes.

If LHDN finds:

Poor record keeping
Missing supporting documents
Inconsistent explanations

They may:

Extend the review
Request additional records
Widen the scope of examination

Good documentation limits risk.
Poor documentation increases exposure.

9. What if my records are kept overseas?

This is not an excuse.

If records relate to Malaysian transactions:

They must be made available in Malaysia
Before the on-site review begins

The responsibility lies with the Malaysian taxpayer.

10. How many years will LHDN review?

Normally:

The compliance review scope covers up to two (2) Years of Assessment

However, this is not the most important timeline.

11. How long can LHDN take legal action if non-compliance is found?

This is the real risk.

If non-compliance is discovered, under:

Section 121(1) of the Income Tax Act 1967, and
Section 59(1) of the Petroleum Income Tax Act

LHDN may take legal action within twelve (12) years from the year the offence occurred.

This means:

The review may cover two years
But penalties or prosecution can still arise many years later

e-Invoice compliance is a long-term responsibility, not a one-off exercise.

12. Who can represent my company during the review?

Only registered tax agents are allowed to represent taxpayers.

Unregistered consultants or informal advisers are not recognised and may worsen the situation.

13. Is e-Invoice non-compliance a serious offence?

Yes.

Failure to comply is treated as a tax offence, not a minor administrative issue.

This is why LHDN has appointed dedicated Pegawai Pematuhan e-Invoicing (PEI) officers to conduct these reviews.

SME Implications: What This Means for Your Business

e-Invoice is now a governance issue

This is no longer just an accounting or IT task.
Directors are responsible for ensuring records are accurate, complete, and defensible.

Record discipline matters more than software

Having an e-Invoice system is not enough.
LHDN will assess:

Data consistency
Supporting documents
Internal controls
How errors are corrected

Weak documentation increases audit risk.

“We didn’t know” is not a defence

The framework clearly states taxpayer responsibilities.
Ignorance or reliance on informal advice does not protect against penalties.

Representation must be proper

Only registered tax agents may represent taxpayers during the review.
Unqualified advice can make matters worse, not better.

KTP’s View: Prepare Before You Are Selected

From KTP’s perspective, this framework confirms one thing :e-Invoice compliance is now permanent, visible, and enforceable.

SMEs should not wait for a visit letter to act.

Our practical advice:

Review your e-Invoice workflows now
Align invoices with accounting and tax records
Ensure supporting documents are properly kept
Identify gaps before LHDN does
Assign clear internal responsibility for e-Invoice compliance

This is not about fear.
It is about control and readiness.

Well-prepared companies usually complete reviews smoothly.
Poorly prepared ones face extended reviews, wider scope, and higher exposure.

Call to Action: Talk to KTP Before LHDN Calls You

If you are unsure whether:

Your e-Invoice records are review-ready
Your documentation meets LHDN expectations
Your risk level is low or high
Your team knows what to show and what not to show during a visit

Speak to KTP early.

We help SME owners:

Assess e-Invoice compliance risk
Prepare for LHDN reviews
Structure records properly
Represent clients professionally during compliance reviews

Good tax planning is quiet.
Good compliance preparation is invisible.

Visit Us

Wisma KTP, 53 Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru
Wisma THK, 41, Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru

KTP (Audit, Tax, Advisory)

An approved audit firm and licensed tax firm operating under the KTP group based in Johor Bahru providing audit, tax planning, advisory and compliance services to clients

THK (Secretarial, Bookkeeping, Payroll, Advisory)

A licensed secretarial firm in Johor Bahru providing fast reliable incorporation, secretarial services, corporate compliance services, outsourcing bookkeeping, and payroll services to clients