Budget 2025 Incentives Boost e-Invoicing Adoption in Malaysia - Link4 E-invoicing

With the announcement of Malaysia’s Budget 2025, a growing conversation emerged around the importance of rewarding compliance in the nation’s evolving tax ecosystem.

This discussion highlights the shift from punitive measures to positive reinforcement, emphasising how rewarding businesses for timely compliance can build long-term trust.

As part of this approach, tax incentives have been introduced to encourage the implementation of e-Invoicing. Businesses can now benefit from Accelerated Capital Allowance on expenses for information and communication technology (ICT) equipment, computer software packages, and consulting fees, claimable within two years from 2024 to 2025.

Robin Sands, CEO at Link4 said, “The proposed tax incentives that enable businesses to claim up to 60% on ICT investments within just 2 years, signal the government’s commitment to e-Invoicing. This will significantly empower businesses to not only comply with the e-Invoicing mandate but also experience solid business benefits.”

“The proposed tax incentives that enable businesses to claim up to 60% on ICT investments within just 2 years signal the government’s commitment to e-Invoicing. This will significantly empower businesses to adopt e-Invoicing and comply with the mandate.”

Such an approach not only encourages consistent participation but also helps create a more cooperative and transparent relationship between the government and the private sector, particularly as new systems like e-Invoicing are introduced.

“It’s encouraging to see the government accelerating the adoption of e-Invoicing by offering tax incentives to reduce costs for businesses. Previously, many companies opted for manual, basic, and interim solutions rather than fully integrating e-Invoicing into their ERP systems due to cost concerns. With these incentives, more businesses now have the opportunity to fully integrate e-Invoicing into their ERP systems, ensuring compliance while also seeing significant operational and business benefits,” said Sam Hassan, CTO at Link4.

With the phased implementation of e-Invoicing, effective from August 1, 2024, the Malaysian government has taken an opportunity to promote compliance through incentives rather than penalties. By leveraging advancements in big data, the Inland Revenue Board (IRB) can monitor taxpayer behaviour more closely, identifying businesses that consistently meet their obligations. Coupling this with the new e-Invoicing system could encourage more accurate reporting and voluntary disclosures, easing the overall burden on compliant businesses.

International examples demonstrate the success of this approach. Singapore incentivise businesses by offering tax rebates for timely filings, creating a more cooperative tax environment.

In Italy, early adopters of e-Invoicing benefit from faster VAT refunds, which boost cash flow and operational efficiency. These examples show how governments can promote compliance through positive reinforcement while minimising administrative burdens on businesses.

“Rewarding compliance, rather than simply penalising non-compliance, can cultivate a culture of trust among taxpayers. By reducing penalties for early filers, the Malaysian government can motivate businesses to embrace systems like e-Invoicing more proactively,” added Sands.

The Malaysian government has already provided a six-month grace period for businesses that have not yet implemented e-Invoicing, allowing companies to transition smoothly without facing immediate penalties.Sands emphasized, “This is a win-win for everyone as there are true benefits for the business and the government achieves their goal of faster adoption of technology. As a result, Malaysia creates a more efficient and equitable economy.”