Related Company E-Invoice: If my related companies each qualify for the exemption individually, does being related disqualify them?
- Chow Ping
- 3 hours ago
- 5 min read
You run two Sdn Bhds.
Maybe three.
Each one earns less than RM1 million a year. On paper, every single one of your companies should qualify for the e-Invoice exemption.
Then someone — maybe your friend, maybe some rando at the mamak — casually asks: "But wait. Are these companies related?"
And just like that, you're no longer sure about anything.
Here's the good news: this question has a clear answer. Let's work through it together.
Quick recap: What is the e-Invoice exemption?
As of December 2025, LHDN updated its guidelines and raised the exemption threshold from RM500,000 to RM1 million.
In plain language: if your business earns less than RM1 million a year, you generally don't have to issue e-Invoices.
But "generally" is doing a lot of heavy lifting in that sentence.
There are three situations where the exemption doesn't apply, even if your revenue is comfortably below RM1 million:
You have a non-individual shareholder (meaning a company, not a person) that earns RM1 million or more
You're a subsidiary of a holding company that earns RM1 million or more
You have a related company or joint venture that earns RM1 million or more
This article is about that third condition. Because it's the one that catches most Malaysian SME owners off guard.
What is a "related company" anyway?
LHDN points us to Section 2 of the Promotion of Investments Act 1986 for the definition.
There are two ways companies can be considered "related":
Test 1: One company controls the operations of the other
Test 2: Both companies are controlled by the same entity
For most SMEs, the practical shortcut is what's known as the 20% rule:
If a company holds 20% or more of another company's shares, they are automatically considered related; no need to prove anything further about control or management.
There's also one important thing to note about the word "company" here. It refers specifically to entities registered under the Companies Act 2016 — meaning Sdn Bhds and Berhads. Sole proprietorships and partnerships sit outside this definition entirely.
So if your supplier is a sole prop run by your Form 5 classmate, that doesn't make you related companies, even if you share a warehouse, an office, or a surname.
Got a question? No problem!
Back to the real question: does being related kill the exemption?
The answer is drumroll it depends on whether any one of the related companies earns RM1 million or more.
The logic works like this:
If all your related companies earn below RM1 million, you may still qualify for the exemption — as long as the other criteria are met.
But the moment any one related company in your group crosses the RM1 million mark, the exemption is disqualified for all the related companies, including the ones that are still earning well below RM1 million.
Think of it like a chain. One link breaking affects the whole thing.
A simple example:
Company A earns RM400,000. Company B earns RM300,000. Company C earns RM1.2 million. All three are related companies.
Because Company C crosses the RM1 million threshold, Companies A and B lose the exemption too.
Common situations for Malaysian SME owners
Let's make this more concrete with four scenarios you might actually recognise.
Scenario 1: Two companies with the same corporate shareholder, both earning below RM1 million
Right now, both may still be exempt, if the other criteria are met too.
But here's the thing to watch: if either company grows past RM1 million next year, the other one gets pulled into mandatory e-Invoice territory automatically. Your exemption status isn't permanently locked in. It follows your revenue.
Scenario 2: One company in the group crosses RM1 million
The moment it happens, all related companies must implement e-Invoice, regardless of their own revenue figures.
This is the scenario that blindsides people most often. You're minding your own business, revenue sitting comfortably at RM600k, and then a related company — maybe one you're not even actively involved in — tips over the threshold. Suddenly, you're in scope too.
Scenario 3: Your companies share an individual shareholder, not a corporate one
Good news here. Where two companies are owned by the same individual — not a company — they are not considered related companies for e-Invoice purposes.
So if Mr. Lim owns 100% of Syarikat A and 100% of Syarikat B, both through his personal capacity, the two companies are not related under e-Invoice rules. Each is assessed independently. If both earn below RM1 million and meet the other criteria, both may qualify for the exemption.
Scenario 4: Two companies share the same director, but no shared corporate ownership
A common director alone does not make two companies "related" for e-Invoice purposes.
The assessment is done at the shareholder level, not the director level. A director who holds no shares does not create a related company relationship.
So if Encik Razif sits on the board of both Syarikat X and Syarikat Y but owns no shares in either, and both companies are individually owned by different people, they are not related companies. Simple as that.
What should you do now?
Now that you understand the rules, here's a simple action plan to protect your business.
Step 1: Map your company structure
List every company you have a stake in, and every company that has a stake in yours. Note the ownership percentages. This is your starting point.
Step 2: Check the revenue of each entity
Pay special attention to any related company that is approaching RM1 million in annual revenue.
Step 3: Identify any corporate shareholder holding 20% or more
If a company — not an individual — holds 20% or more across your entities, those companies are related. Apply the test to both direct and indirect shareholding.
Step 4: Prepare early if any related company is near or past the threshold
Don't wait until you're already in breach. If any company in your group is close to or has crossed RM1 million, start preparing all related entities for e-Invoice implementation now.
Step 5: Talk to your accountant
This is exactly the kind of structural question that benefits from a professional eye. Company structures can be complex, and the wrong assumption here can cost you.
Related company e-invoice: The bottom line
One related company crossing RM1 million can pull the entire group into mandatory e-Invoice territory, even if everyone else is well below the threshold.
Fortunately, once you know your structure clearly, there's nothing to worry about.
But if you'd rather have someone else handle the paperwork while you focus on actually running your business, that's what we're here for.
Want to focus on your business while we manage the boring paperwork for you?
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