Introduction: Construction Industry Enters the E-Invoice Era
Starting in 2024, Malaysia’s Inland Revenue Board (IRBM) mandates e-Invoicing for all businesses — including the construction sector, which faces one of the most detailed compliance obligations.
For contractors governed under the Income Tax (Construction Contracts) Regulations 2007 [P.U. (A) 276/2007], e-Invoicing isn’t just digital — it’s contract-specific, transaction-bound, and tied to every progress claim.
This article provides a complete walkthrough for construction businesses to understand how to issue compliant e-Invoices, correctly treat retention sums, and identify which activities fall under construction law — using real-world examples and IRBM standards.
Legal Framework and Scope
Construction Contracts under P.U. (A) 276/2007
The AutoCount Item Batch Module also offers a suite of reports to help you manage your inventory effectively:
These regulations define construction contracts as specifically negotiated agreements to construct an asset or group of interrelated assets, including:
- Buildings
- Infrastructure
- Engineering System
Revenue must be recognized progressively, and invoicing must reflect this reality — per milestone, not in lump sums.
Standard E-Invoicing Is Mandatory
Under IRBM’s 2024 e-Invoice rules:
Customer Identification Requirements
Each e-Invoice must include proper buyer credentials, depending on customer type:
| CUSTOMER TYPE | MANDATORY DETAILS |
|---|---|
| Business Entity (Company, Enterprise) | SSM Registration Number + TIN (Tax Identification Number) |
| Malaysian Individual | Either MyKad/MyTentera IO or TIN |
| Foreign Individual | Passport number + TIN, if available |
If TIN or ID is missing or wrong → The e-Invoice will be rejected by MyInvois.
What Activities Qualify as Construction Contracts?
Covered Activities
| CATEGORY | EXAMPLES |
|---|---|
| Building Construction | Condominiums, hospitals, retail malls |
| Infrastructure Works | Highways, MRT tunnels, airport runways |
| MAE Works | Electrical wiring, HVAC, lift systems, CCTV (if part of BOO) |
| Ceiling & Partitioning | Drywall systems, plaster ceilings |
| Civil & Earthworks | Drainage, sewerage, site excavation |
| Design-and-Build | Turnkey projects with design and construction |
| Foundation Systems | Piling, ground slabs, soil stabilization |
| Façade & Cladding | Glass panels, structural glazing |
| Telecom & Data Cabling | Structured cabling during new construction |
| Security Systems | CCTV, access control in new buildings |
Non-Qualifying Activities (Standard E-Invoice)
| ACTIVITY | REASON |
|---|---|
| Curtain & Blind Installation | Furnishing, not structural |
| Retrofit CCTV (in finished building) | Service, not construction scope |
| Repainting | Maintenance, not construction contract |
| Post-construction Cleaning | Support service |
| Landscape Gardening | Non-essential to structural works |
| Office IT Networking | If done separately, not in BOQ |
E-Invoice Lifecycle in a Construction Project
Progress Claim E-Invoicing
1. Issue one e-Invoice for the full certified value, including retention.
2. Match e-Invoice to certification number and description.
3. Example:
- Certified Value: RM1,000,000
- Retention (5%): RM50,000 withheld
- Net Payment: RM950,000
- SST 6%: RM60,000
- e-Invoice issued: RM1,060,000
Retention Sum Handling
- Retention sums are not a new taxable supply.
- Do not issue a second e-Invoice when paid.
- The original e-Invoice already captured the value.
Only record settlement in your payment ledger; no second e-Invoice.
Variation Orders & Final Account
- If new work is approved after the initial contract.
- If there’s an increase in certified work.
- You must issue a new e-Invoice for that additional scope.
- VO = RM120,000
- SST 6% = RM7,200
- E-Invoice = RM127,200
Common Mistakes to Avoid
| MISTAKE | WHY IT'S A PROBLEM |
|---|---|
| Excluding retention from invoice | Violates full value rule |
| Issuing one invoice for multiple progress claims | Consolidation is not allowed |
| No buyer TIN or IC | Rejected by IRBM system |
| Late invoice issuance | Breaks sequence compliance |
Tips for Seamless Compliance
- Use an IRBM-approved e-Invoice software (e.g., AutoCount, SQL
- Link e-Invoicing process to project certification milestones
- Train QS and PM teams to trigger invoices per work stage
- Keep buyer TIN/SSM/IC data centralized and verified
Conclusion: Build Compliance into Every Claim
As Malaysia transitions into mandatory e-Invoicing, construction businesses must move beyond traditional billing practices to embrace a compliance-first approach. Under the Income Tax (Construction Contracts) Regulations 2007, e-Invoicing is not optional — it’s a structural part of how certified work is recognized, reported, and taxed. From progress claims to variation orders, each certified milestone must trigger its own standard e-Invoice, supported by valid buyer information and aligned with IRBM’s real-time validation system.
By understanding which activities qualify as construction contracts, why consolidated e-Invoices are prohibited, and how to properly handle retention sums and VO adjustments, your firm can avoid costly errors, enhance transparency, and secure faster payment cycles. E-Invoicing isn’t just about compliance — it’s about building a stronger, more accountable financial foundation for your projects.
FAQs
Yes. Any construction business that falls under the Income Tax (Construction Contracts) Regulations 2007 [P.U. (A) 276/2007] is required to issue e-Invoices in compliance with IRBM’s 2024 guidelines, according to the applicable revenue phase-in dates.
Construction companies must issue a standard e-Invoice for each certified progress claim or transaction. Consolidated e-Invoices are not allowed under the 2007 Regulations.
No. Retention sums are part of the original certified supply. You must include the full certified value (including retention) in the first e-Invoice. When the retention is later released, it is considered a payment settlement, not a new supply — no new e-Invoice is required.
Depending on the client type, you must include:
- Business (Company/Enterprise) – TIN + SSM Registration Number
- Malaysian Individual – Either MyKad or TIN
- Foreign Individual – Passport Number + Foreign TIN (if available)
Missing or incorrect buyer info will cause the e-Invoice to be rejected by IRBM’s MyInvois portal.
No. Construction companies under the 2007 Regulations must issue a separate e-Invoice for each certified claim. Grouping claims violates the requirement for accurate revenue recognition.
No. These are considered furnishing or services, not construction. You can issue standard e-Invoices (non-progressive) for these, and they do not fall under the 2007 Regulations.
You should:
- Segregate invoices: issue construction e-Invoices for contract-certified works, and
- Issue standard service e-Invoices for non-construction items (e.g., cleaning, furniture, IT setup).
IRBM may:
- Reject your invoice submission.
- Delay validation.
- Trigger a compliance audit.
- Potentially penalize incorrect tax treatment.
It’s crucial to align your invoicing with project certifications and IRBM rules.
Learn E-Invoicing with Our Expert-Led Classes
Ready to master e-invoicing and streamline your business? Join our comprehensive class and get hands-on guidance!
Explore AutoCount solutions that make your business run smoothly
Payroll / HRM Solutions
Paying your workers easy! With AutoCount, you can simplify how you give out salaries and employee benefits.
POS System Solutions
Selling things easy! Use our strong cash register system to handle sales quickly. This is super important for stores!
E-Commerce Solutions
Sell things online easily! With AutoCount, you can handle online sales and process orders smoothly using our e-commerce solutions.
Mobile App Business Solutions
Manage your business data on-the-go with AutoCount's mobile solutions. Handle your information conveniently from your phone.
Accounting Solutions
Money tasks easy! Use AutoCount to write down and see how your money is doing, from the start to the reports.
F&B Solutions
Get special help for food and drinks! We have solutions that take care of orders, keeping track of food, and selling things – perfect for restaurants and cafes!
Customized Accounting Software
Make your own special money program! AutoCount can create customized accounting software just for you, addressing exactly what you need.