FMM PRESS STATEMENT: Raised e-Invoicing Exemption Threshold and Doubling of Tax Refund Allocation Are Welcomed Measures To Ease Immediate Burden on SMEs and Support Cash-Flow Stability

December 8, 2025

Head Office, KL

Kuala Lumpur, December 8, 2025 — The Federation of Malaysian Manufacturing (FMM) welcomes the Government’s decision to raise the e-Invoicing exemption threshold from RM500,000 to RM1 million, as well as the Prime Minister’s announcement to double the allocation for tax refunds from RM2 billion to RM4 billion this December. These timely and strategic measures provide meaningful relief to the smallest segment of SMEs, many of whom continue to operate with thin margins, limited administrative capacity, and ongoing cash-flow pressures due to rising operating costs and tighter financing conditions. Announced ahead of the January 1 rollout, the raised threshold gives businesses greater clarity to plan for 2025 while easing immediate compliance-related burdens, while the increased tax refund allocation will help expedite outstanding payments, offer critical liquidity support, and reduce financial stress across the manufacturing and SME sectors.

Based on FMM’s internal assessments and member feedback, around 85%–90% of FMM 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. For many SMEs, the transition is not just about adopting a new invoicing format. It requires upgrading or purchasing compatible accounting software, integrating systems with the national e-Invoicing platform, and ensuring 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.

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. The immediate impact of this raised threshold upon rollout next year is that 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.

While raising the threshold is an important and much-needed transitional measure, FMM views it 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, FMM encourages 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.

With regard to the doubling of the tax refund allocation, FMM has consistently underscored the need for efficient, predictable, and transparent tax refund mechanisms. We reiterate our call for refunds to be processed within a clear statutory timeframe, ideally within 90–120 days after returns are filed and verified. Where staggered payments are necessary, LHDNM should communicate a transparent refund schedule upfront. We further urge 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.

To further streamline processes, 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 LHDNM. We also strongly encourage 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.

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.

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Mr Jacob Lee Chor Kok

President, Federation of Malaysian Manufacturing

FMM Advocates Transparency, Integrity, Accountability and No Corruption

About FMM

The Federation of Malaysian Manufacturing (FMM) (formerly known as Federation of Malaysian Manufacturers) has been the voice of the Malaysian manufacturing sector since 1968, advocating policies and initiatives that drive industrial growth, competitiveness and workforce development. Representing over 13,300 member companies (4,200 direct and 9,100 indirect) from the manufacturing supply chain, FMM is actively engaged with government and its key agencies at Federal, State and local levels. FMM is also well-linked with international organisations, Malaysian businesses and civil society. Apart from benefitting from FMM’s advocacy, FMM members enjoy value-added services including training, business networking and trade opportunities as well as regular information updates.

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