Does a Small Company with a Common Shareholder Need to Implement e-Invoice in Malaysia?

Published: 30 June 2026

One of the most common questions raised by business owners is:

"My company's annual revenue is below RM1 million. However, another company owned by the same shareholder has annual revenue exceeding RM1 million. Does my company still need to implement e-Invoice?"

This question has been a source of confusion for many SMEs, especially those operating multiple companies under the same ownership structure.

When LHDN first introduced the related company exemption condition under the e-Invoice framework, many taxpayers were concerned that a small company could lose its exemption status simply because another company within the same group exceeded the prescribed revenue threshold.

The uncertainty increased when LHDN clarified on 9 July 2025 that the term "related company" carries the same meaning as provided under Section 2 of the Promotion of Investments Act 1986 (PIA 1986).

As a result, many taxpayers began reviewing their corporate structures to determine whether companies sharing common shareholders, directors, or management control could potentially be treated as related companies for e-Invoice implementation purposes.

Fortunately, the position is now much clearer.

In the latest e-Invoice General FAQ dated 5 May 2026, LHDN introduced FAQ No. 94 to illustrate how the "related company" concept should be applied specifically for e-Invoice implementation purposes.

The clarification provides welcome certainty for taxpayers and, in certain situations, may allow smaller companies to remain exempt from e-Invoice implementation even though another company within the same ownership group exceeds the RM1 million threshold.

Before we look at the examples, it is important to note that the illustrations provided in FAQ No. 94 are intended specifically for determining e-Invoice implementation obligations. Taxpayers should therefore exercise caution before applying the same interpretation to other tax provisions or incentive legislation that may contain a different definition or application of the term "related company."

Let's explore the five most common business scenarios.

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Scenario 1 – Common Corporate Shareholder

Where a corporate shareholder owns at least 20% of two or more companies, or exercises control over those companies regardless of its shareholding percentage, the companies may be regarded as related companies for e-Invoice implementation purposes.

Consequently, if one of the companies records annual revenue of at least RM1 million, the other related companies may also lose their exemption status and be required to implement e-Invoice.

Example 1:

Patung Sdn Bhd holds:

• 51% in Kain Sdn Bhd
• 25% in Jarum Sdn Bhd

The remaining shares in both companies are held by various individual shareholders.

All 3 companies are treated to be related companies for e-Invoice purposes.

In YA2023:

• Kain Sdn Bhd has annual revenue exceeding RM1 million

According to the implementation timeline issued by the Inland Revenue Board of Malaysia, Kain Sdn Bhd is required to implement e-Invoice starting 1 July 2026.

The Key Question: What About the Other Companies?

Now the important question:

👉 Do Patung Sdn Bhd and Jarum Sdn Bhd also need to implement e-Invoice, even if they are below the RM1 million threshold?

The Answer: YES

Both companies are still required to implement e-Invoice on 1 July 2026

Although Patung Sdn Bhd and Jarum Sdn Bhd do not individually exceed the RM1 million revenue threshold, they fail to meet the exemption conditions.

The key condition that is NOT met:

A company is not eligible for exemption if it has a related company that meets the revenue threshold requirement.

In this case:

• Kain Sdn Bhd is a related company
• It has revenue exceeding RM1 million

Therefore:

Once one related company meets the threshold, all related companies in the group lose exemption eligibility.

Even if the shareholding of the corporate shareholder in a company is below 20%, the companies will still be considered as related companies for e‑Invoice purposes if the corporate shareholder has control over the operations of the companies.

Example 2:

• Atas Sdn Bhd controls Bawah Sdn Bhd (15% shareholding but operational control exists as agreed among shareholders)
• Atas Sdn Bhd also controls Cincin Sdn Bhd (75% shareholding)

Therefore, all three companies are treated as related companies as the operations of Bawah Sdn Bhd and Cincin Sdn Bhd are controlled by the same corporate shareholder, Atas Sdn Bhd.

In YA2024:

• Cincin Sdn Bhd has annual revenue exceeding RM1 million

As a result, Cincin Sdn Bhd is required to implement e-Invoice starting 1 July 2026.

So far, this follows the standard revenue-based requirement.

The Key Question: Do the Other Companies Also Need e-Invoice?

Now the important compliance question:

👉 Do Atas Sdn Bhd and Bawah Sdn Bhd also need to implement e-Invoice even though they do not exceed RM1 million revenue?

The Answer: YES

Both companies are still required to implement e-Invoice on 1 July 2026.

Although Atas Sdn Bhd and Bawah Sdn Bhd do not individually exceed the RM1 million threshold, they do not qualify for exemption due to the related company condition.

The exemption condition that is NOT met:

A company is not eligible for exemption if it has a related company with annual revenue at least RM1 million.

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Scenario 2 – Common Individual Shareholder

This is perhaps the most welcome clarification for SME owners.

Based on the examples currently provided by LHDN in FAQ No. 94, two companies that are commonly owned by the same individual shareholder are generally not regarded as related companies for e-Invoice implementation purposes.

As a result, each company is assessed independently against the RM1 million revenue threshold.

Therefore, a company with annual revenue below RM1 million may continue to enjoy the exemption even if another company owned by the same individual shareholder has already crossed the threshold.

Example 3:

Mr. Yap is the sole shareholder of:

• Leaf Sdn Bhd (100% owned)
• Banana Sdn Bhd (100% owned)

Key Question

Are these two companies considered related companies for e-Invoice purposes?

Answer: NO

Even though Mr. Yap owns 100% in both companies, they are not treated as related companies because:

The common shareholder is an individual, not a corporate shareholder.

In YA2024:

• Leaf Sdn Bhd → RM2.5 million
• Banana Sdn Bhd → RM500,000

e-Invoice Impact

• Leaf Sdn Bhd → Required (revenue exceeds RM1 million)
• Banana Sdn Bhd → Exempted

Why is Banana Sdn Bhd exempt?

Because it:

• Does not meet or exceed RM1 million annual revenue, and
• Has no related company with annual revenue at least RM1 million

✔ Therefore, exemption criteria are met.

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Scenario 3 – Common Director Without Shareholding

Many business owners assume that having the same director in multiple companies automatically creates a related company relationship.

However, based on LHDN's example, a common director alone does not result in companies being regarded as related companies for e-Invoice implementation purposes.

Accordingly, each company will continue to be assessed independently based on its own facts and circumstances.

Example 4:

Rimba Sdn Bhd and Kosas Sdn Bhd are wholly owned by two (2) different individual shareholders (i.e., Ms. Jelly and Mr. Bob), with no corporate shareholders. Sundaram is a common director in both companies but he does not own any shares in either Rimba Sdn Bhd or Kosas Sdn Bhd.

Key Question

Are they related companies for e-Invoice purposes?

Answer: NO

Even with a common director, the companies are not related because:

There is no corporate ownership link or control structure between them.

In YA2025:

• Rimba Sdn Bhd → exceeds RM1 million (YA2025)
• Kosas Sdn Bhd → below RM1 million

e-Invoice Impact

• Rimba Sdn Bhd → Required (1 July 2026)
• Kosas Sdn Bhd → Exempted

Because Kosas Sdn Bhd:

• Does not meet or exceed RM1 million annual revenue, and
• Has no related company with annual revenue at least RM1 million

✔ Therefore, exemption criteria are met.

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Scenario 4 – Common Individual Shareholder and Common Director (Still Not Related)

What if the same person is both a shareholder and a director in multiple companies?

Based on Example 94, this alone is still insufficient to create a related company relationship for e-Invoice implementation purposes where the common ownership is held by individuals rather than a corporate shareholder.

This clarification is particularly beneficial for family-owned businesses and SME groups that operate multiple companies under the same entrepreneur.

Example 5:
Jocelyn:

• Owns 80% in Berry Star Sdn Bhd
• Owns 80% in Berry Power Sdn Bhd
• Remaining 20% held by her husband in both companies
• Jocelyn is also a director in both companies

Key Question

Are Berry Star Sdn Bhd and Berry Power Sdn Bhd related companies?

Answer: NO (for e-Invoice purposes)

Despite:

• Common individual shareholder
• Common directorship

They are still not treated as related companies, because:

The e-Invoice related company concept focuses on corporate shareholder control, not individual ownership structures alone.

In YA2025:

• Berry Power Sdn Bhd → exceeds RM1 million
• Berry Star Sdn Bhd → below RM1 million

e-Invoice Impact

• Berry Power Sdn Bhd → Required (1 July 2026)
• Berry Star Sdn Bhd → Exempted

Because Berry Star:

• Does not meet or exceed RM1 million annual revenue, and
• Has no related company with annual revenue at least RM1 million

✔ Therefore, exemption criteria are met.

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Scenario 5 – Corporate Shareholder (Mixed Corporate Ownership + Control Test)

The existence of a corporate shareholder does not automatically result in companies being treated as related companies.

Control remains a critical factor.

Where a corporate shareholder owns less than 20% and does not have control over a company's operations, the related company relationship may not exist for e-Invoice implementation purposes.

Therefore, taxpayers should carefully analyse both the shareholding percentage and the actual level of control before concluding whether a related company relationship exists.

Example 6:

• Lazat Damai Sdn Bhd owns:
  • 10% in Be Fun Sdn Bhd
  • 70% in Be Nice Sdn Bhd
• Remaining shares are held by individual shareholders
• Lazat Damai Sdn Bhd has no control over Be Fun Sdn Bhd
• Both companies also share a common director (Amir)

Key Question

Are these companies related for e-Invoice purposes?

Answer: PARTIALLY

• Be Fun Sdn Bhd ↔ Be Nice Sdn Bhd → Not related
• No control established over Be Fun
• Lazat Damai Sdn Bhd ↔ Be Nice Sdn Bhd → Related companies
  • Due to ownership/control (70%)

In YA2023:

• Be Nice Sdn Bhd → exceeds RM1 million
• Be Fun Sdn Bhd → below RM1 million

e-Invoice Impact

• Be Nice Sdn Bhd → Required (1 July 2026)
• Lazat Damai Sdn Bhd → Required (due to related company with at least RM1 million revenue)
• Be Fun Sdn Bhd → Exempted

Because Be Fun Sdn Bhd:

• Does not meet or exceed RM1 million annual revenue, and
• Has no related company with annual revenue at least RM1 million

✔ Therefore, exemption criteria are met.

Key Takeaways

The latest clarification issued by LHDN has significantly improved taxpayers' understanding of how the related company rule applies for e-Invoice implementation purposes.

Based on the current FAQ guidance:

✅ A common corporate shareholder may result in companies being regarded as related companies.

✅ Control may trigger a related company relationship even where the shareholding percentage is below 20%.

✅ A common individual shareholder alone generally does not create a related company relationship for e-Invoice implementation purposes.

✅ A common director alone does not create a related company relationship.

✅ Family-owned companies with common individual shareholders may still be assessed separately when determining their e-Invoice obligations.

Most importantly, taxpayers should not assume that a company with annual revenue below RM1 million is automatically exempt from e-Invoice implementation. The ownership structure, control relationship, and existence of related companies should always be reviewed carefully before reaching a conclusion.

Where there is uncertainty, obtaining professional advice may help avoid unnecessary implementation costs or potential non-compliance risks.

Need Assistance with e-Invoice Related Company Analysis?

If you are unsure whether your companies are considered related companies under Malaysia e-Invoice rules, or you are uncertain about your implementation timeline and exemption status, professional guidance can help avoid compliance risks.

👉 Our team can assist you with:

• e-Invoice related company structure review
• Control test and shareholding analysis
• Exemption eligibility assessment
• Implementation planning and timeline preparation

📩 Contact us today for a consultation to ensure your business is fully compliant with Malaysia’s e-Invoice requirements.