1 September 2025 onwards, the Inland Revenue Board of Malaysia (LHDN/IRBM) will impose interesting e-Invoicing requirements for invoice issuance in foreign currencies. Among these requirements, the issuance of invoices with MYR-equivalent values, using any approved currency exchange rate, is mandatory.
This is beyond an update of existing procedural guidelines and is in line with the larger scheme of e-Invoice compliance, financial transparency, and audit-readiness in Malaysia. Through the imposition of standardized exchange rates, the IRBM assures that whether the business invoices in USD, EUR, GBP, JPY, or any other foreign currency, the tax authority will be able to consistently interpret the obligations in Ringgit Malaysia (RM).
The challenge that many businesses face is the application of these rules: Which exchange rate should I give? What if I have my internal rates for my company? Would they reject me for a mistake? This article completely answers all these questions, providing clarity and next steps.
Why Did IRBM Introduce Foreign Currency Exchange Rate Rules?
Based out of Malaysia, all obligations have to be converted to the MYR, the national currency. However, most businesses transact in foreign currencies, particularly those into import/export, digital services, or multinational contracts.
Without standard rules, businesses could adopt different exchange rates for the same date, leading to:
Inconsistency – Tax reporting would be distorted if different suppliers apply different rates.
Risk of manipulation – Some may choose their “favorable” rate to lower their tax burden.
Auditing problems – Discrepancies would obstruct customs declarations and audits by LHDN.
When businesses are made to use Royal Malaysian Customs Department (RMCD) or Bank Negara Malaysia (BNM) published rates, IRBM ensures:
- The same MYR-equivalent values for all businesses.
- Accurate calculation of GST, income tax, and customs duties.
- Transparency in cross-border invoicing.
At the end of the day, this requirement brings Malaysia closer to global best practices whereby regulators require tax reporting in local currency equivalents for foreign transactions.
When Are Exchange Rates Required in E-Invoices?
Not all e-Invoices require currency conversion. The rules separate invoices based on whether they are in MYR invoices and foreign currency invoices:
The invoices which are in MYR
- No exchange rate entry is needed. The CurrencyExchangeRate field should either be left blank or set to 0.00 to indicate no conversion.
The invoices which are in foreign currency (USD, EUR, GBP, JPY, etc.)
- The CurrencyExchangeRate field is mandatory. You must enter the prescribed daily exchange rate from RMCD/BNM.
The two-step method makes the reporting process easier. Businesses which conduct their business solely in MYR receive automatic compliance. Foreign currency invoicing companies must comply with an additional essential step for compliance.
What Happens If You Miss the Field?
Strict validation is a feature of the IRBM e-Invoice system. The e-invoice will be denied if any required fields are missing or filled out incorrectly.
- The e-Invoice will be rejected.
- The taxpayer needs to file again with the updated information.
- Errors that occur frequently may result in system flags or compliance checks.
For instance,
- The system will automatically prevent acceptance if you provide an invoice in USD 5,000 but omit the MYR equivalent.
- The system will still reject the invoice even if MYR is the invoicing currency and you inadvertently provide a random exchange rate.
Businesses must clearly enter 0.00 in situations where no MYR conversion is required in order to avoid problems, according to IRBM. By doing this, ambiguity in system processing is avoided and clarity is guaranteed.
Exchange Rate Flow for E-Invoices
Although the reasoning is simple, it must be carefully followed.
- Does the invoice have a foreign exchange rate?
- If No, enter 0.00 in CurrencyExchangeRate.
- If Yes, proceed.
- Does it need to be converted to MYR?
- If Yes, retrieve and enter the RMCD/BNM exchange rate in CurrencyExchangeRate.
- If No, enter 0.00
Compliance is guaranteed by this binary decision-making process. In an effort to decrease human error, numerous ERP providers (SAP, Oracle, QuickBooks, etc.) are modernizing their systems to automatically retrieve RMCD/BNM rates.
Effective Dates You Must Know
Companies should take note of these dates:
- Phase of Preproduction: August 9, 2025
During this testing phase, companies can test submissions in a sandbox setting, find mistakes, and improve procedures. - Production Launch Date: September 1, 2025
Compliance is required as of this date. An e-invoice will be rejected if the foreign exchange rate is missing or inaccurate.
Businesses have less than a month to test before going live with this staged deployment. It is essential to prepare early.
Compliance with Currency Exchange Rate Requirements
What the Rules Require
If available, suppliers must use the legally mandated exchange rates when issuing electronic invoices in foreign currencies. It must be used if a specific rate is published by IRBM or RMCD.
Why Compliance Matters
- Consistency – Ensures uniform MYR-equivalent values across taxpayers.
- Accuracy – Prevents under/overstatement of taxes.
- Audit-readiness – Eliminates manipulation and supports transparent record-keeping.
Flexibility
Businesses may use their internal exchange rate policy in the absence of an official instruction. Internal policies, however, cannot take precedence over compliance once IRBM specifies a particular pace.
Which Exchange Rate Should Businesses Use?
Among the most common compliance inquiries is this one. The response is:
- Use the RMCD/BNM daily published rates as the official source first.
- If authorized by IRBM, taxpayers may utilize internal exchange rates for imports and self-billed invoices.
- Constantly keep track of exchange rate proof, such as ERP logs, system snapshots, and daily published rates.
Practical Tip: To prevent manual errors, businesses should integrate their accounting or ERP systems with BNM’s daily feed.
How Do Businesses Report Foreign Currency Transactions?
The reporting framework requires four data points:
- Currency Code – Identifies the foreign currency (e.g., USD, EUR).
- Exchange Rate – Captures the RMCD/BNM rate.
- Foreign Amount – The original invoice amount.
- MYR Equivalent – The converted amount.
By structuring every invoice this way, Malaysia ensures tax officers can verify and audit transactions consistently.
Answering Common Business Questions
Can I invoice in a foreign currency in Malaysia?
Yes. Businesses may invoice in foreign currencies, but they must also provide the MYR equivalent for tax reporting.
What is the applicable exchange rate?
The official RMCD/BNM rate on the invoice date is applicable unless IRBM specifies otherwise.
What happens with daily rate fluctuations?
Businesses must apply the rate on the date of invoicing. Using prior or future rates may result in rejection or audit findings.
Can my company use internal rates?
Only if no official rate is mandated. Internal rates are often used for treasury purposes but cannot override IRBM’s directive.
What about imports or self-billed invoices?
For importation of goods, Malaysian taxpayers may use internal rates but must maintain documentation for audit purposes.
Are foreign exchange gains taxable?
Yes. If the settlement exchange rate differs from the invoicing rate, the difference is treated as foreign exchange gain/loss, subject to tax reporting.
Implications for Businesses
The IRBM exchange rate guidelines will impact several areas:
- Finance & Accounting Teams – Must ensure ERP systems automatically fetch daily RMCD rates.
- Tax Departments – Need to review compliance controls to prevent invoice rejection.
- Internal Auditors – Must validate consistency of MYR-equivalent reporting.
- Cross-border Suppliers – Should align invoicing policies with Malaysia’s new rules.
Failure to comply could lead to:
- Increased rejection rates.
- Audit scrutiny.
- Potential penalties if non-compliance persists.
Key Takeaways
- From Sept 2025, foreign currency invoices require MYR equivalents.
- The CurrencyExchangeRate field is mandatory for non-MYR invoices.
- Use official RMCD/BNM rates unless IRBM provides exceptions.
- Internal policies are only valid when no official directive exists.
- Non-compliance = automatic rejection + audit risks.
Conclusion
The IRBM foreign currency exchange rate requirement is a cornerstone of Malaysia’s upcoming e-Invoicing framework. It ensures that tax reporting is consistent, transparent, and audit-ready. While businesses may see this as another compliance hurdle, it actually simplifies cross-border trade by eliminating ambiguity.
The key for businesses is early preparation updating ERP systems, training finance teams, and integrating daily exchange rate feeds. By doing so, companies can avoid costly rejections and ensure smooth compliance when the mandate goes live in September 2025.
Advintek supports Malaysian companies in navigating this regulatory change with robust, compliant e-Invoicing solutions ensuring you stay ahead of tax requirements while focusing on business growth.
