Credit Note Malaysia 2026 — When to Issue One and How It Works Under e-Invoice

What Is a Credit Note?

A credit note (also called a credit memo) is a formal document from a seller to a buyer that says: "The amount you owe us just got smaller." It is the commercial correction tool for any situation where you have already issued an invoice but circumstances changed after the fact.

Think of it as the opposite of an invoice. An invoice says "you owe me RM5,000". A credit note says "actually, only RM4,200 — here's the RM800 adjustment."

In Malaysia, credit notes have always been standard accounting practice. But since the MyInvois rollout, there is a new compliance layer: credit notes issued against validated e-Invoices must themselves go through MyInvois. Sending your buyer a PDF is no longer enough.

When Must You Issue a Credit Note?

You issue a credit note whenever an issued invoice needs to be adjusted downward. The most common scenarios in Malaysia:

The last row is important: if your e-Invoice is less than 72 hours old and the buyer has not yet acted on it, you can cancel it directly in MyInvois without needing a credit note. The 72-hour window closes that option. After that, a credit note is your only correction path.

Credit Note vs Debit Note — Which One?

Business owners in KL and Penang often confuse the two. Here is the simplest way to remember it:

A debit note is essentially a supplementary invoice — you missed something or undercharged, and you're asking the buyer to pay the difference. Both document types exist in MyInvois: credit notes use document type code 02, debit notes use document type code 03.

One more distinction: a buyer can also issue a debit note to a supplier (challenging a delivered amount or asserting a claim). In that case, the buyer is the issuer. Credit notes, by contrast, always flow from the seller to the buyer.

How Credit Notes Work Under Malaysia's e-Invoice / MyInvois System

This is where most Malaysian SMEs get caught out.

Under LHDN's e-Invoice mandate (enforced from 2024 in phases, with all businesses required to comply by July 2025), every credit note issued against a validated e-Invoice must also be submitted through MyInvois. It is not enough to send your buyer a Word doc or PDF saying "credit RM500". That PDF has no legal standing as an adjustment document.

Here is what LHDN requires on a MyInvois credit note:

• Document type code: 02 (Credit Note)
• Reference to the original e-Invoice: the UUID (IRBM Unique Identifier Number issued when the original was validated)
• Original e-Invoice date
• Adjustment amount, itemised at line level where possible
• Reason for adjustment (e.g., "returned goods — 10 units defective", "pricing error", "agreed discount")
• Supplier and buyer details matching the original e-Invoice
• SST rate if applicable

Missing the UUID is the most common reason credit notes get rejected in MyInvois. Your accounting software should pull this automatically — but double-check before submitting.

Step-by-Step: How to Issue a Credit Note on MyInvois

If you are using the MyInvois portal directly (not integrated accounting software), here is the process:

1. Log in to MyTax at mytax.hasil.gov.my and navigate to the e-Invoice module.
2. Find the original e-Invoice you need to adjust. Note its UUID — you will need this.
3. Select "Create New Document" and choose document type Credit Note (02).
4. Enter the original invoice reference — paste the UUID and original invoice date.
5. Fill in the adjustment details — the line items being adjusted, quantities returned, unit prices, and reasons.
6. Review the SST fields — if the original was SST-taxable, the credit note must carry the matching SST rate and reduce your output tax accordingly.
7. Submit for validation. LHDN validates within seconds and issues a UUID for the credit note itself.
8. Share the validated credit note with your buyer — they have 72 hours to reject it if there is a discrepancy.

If you are using SQL Account, Autocount, Xero, or QuickBooks with MyInvois integration, steps 1–7 happen inside your software. The software submits to LHDN in the background and updates the original invoice's status automatically.

Time Limit for Issuing a Credit Note

LHDN does not set a single universal deadline for credit note issuance, but there are two time-sensitive rules you need to know:

In practice: issue the credit note as soon as the return or price change is agreed. Don't batch them end-of-month if the adjustment crosses a taxable period boundary.

What Happens If the Buyer Rejects the Credit Note?

Under MyInvois, a buyer has 72 hours to reject a submitted credit note. If they reject it:

• The credit note is marked as rejected in both your and the buyer's MyInvois records.
• You must correct the issue — wrong amount, wrong UUID, wrong reason — and resubmit a new credit note.
• Do not issue a second credit note without first confirming the original was rejected. Two credit notes against the same invoice will double your adjustment in LHDN's records.

If the dispute is commercial — the buyer disagrees with the adjustment itself, not the format — that is a separate negotiation. But whatever the commercial outcome, the MyInvois record must be accurate. A credit note submitted to MyInvois that the buyer rejects must be reissued or voided properly; you cannot just send a different PDF and leave the MyInvois record unresolved.

Accounting Treatment: How to Record a Credit Note

When you issue a credit note to a buyer, two things happen in your books:

1. Reduce the receivable — the buyer owes you less.
2. Reduce revenue — your sales income decreases by the adjusted amount.

The journal entry looks like this:

If goods are physically returned and you accept them back into stock, add:

• Debit Inventory (restores stock value)
• Credit Cost of Goods Sold (reverses the cost that was expensed)

Most Malaysian SME accounting software — SQL Account, Autocount, Xero, QuickBooks — handles these entries automatically when you process a credit note against the original invoice. But your bookkeeper needs to confirm the goods were actually received before hitting post.

The Most Common Mistake: PDF Without MyInvois = Non-Compliant

This is the mistake we see most often in Shah Alam, Johor Bahru, and Ipoh SMEs transitioning to e-Invoice: the team issues a PDF credit note, sends it to the buyer, considers it done, and never submits through MyInvois.

Under LHDN's e-Invoice rules, this means:

• Your accounts show the adjustment. LHDN's records do not.
• The original e-Invoice remains fully validated in the system — no offset, no correction.
• During a tax audit, LHDN's MyInvois data and your internal books will not reconcile.
• Penalties under Section 120 of the Income Tax Act 1967 can reach RM20,000 per violation.

The fix is straightforward: any credit note issued after July 2025 that relates to a validated e-Invoice must go through MyInvois. Treat the MyInvois submission the same way you treat the original invoice submission — it is not optional paperwork.

For more on how e-Invoice works in Malaysia, read our complete e-Invoice Malaysia guide. If you are evaluating software to manage this automatically, see our best e-Invoice software Malaysia comparison.

Frequently Asked Questions

Do I need a credit note if I refund cash without returning goods?

Yes. A cash refund without a credit note leaves a mismatch in your accounts: the receivable is cleared but the revenue is not reversed. Issue the credit note to close the loop properly in both your books and MyInvois.

Can I issue a credit note for a transaction that predates the e-Invoice mandate?

If the original invoice was issued before your e-Invoice compliance date and was a paper or PDF invoice, the credit note can also be a paper or PDF document — MyInvois is only required when the original transaction is already in MyInvois.

What document type code do I use for a credit note in MyInvois?

Document type code 02. Code 01 is a standard invoice, code 02 is a credit note, code 03 is a debit note, code 04 is a refund note. Make sure your software or your MyInvois portal entry uses the correct code.

Is a credit note the same as a refund note in MyInvois?

No. A refund note (code 04) is used when you are refunding money that was collected under a specific payment that has already cleared — common in financial services and subscription billing. A standard credit note (code 02) is used for trade adjustments: returns, price corrections, rebates. Most Malaysian SMEs will use code 02 for nearly all scenarios.

My buyer is overseas — do I still need to submit a credit note through MyInvois?

Yes, if the original invoice was submitted through MyInvois. The e-Invoice mandate covers all commercial transactions regardless of whether the buyer is local or foreign. Export transactions have their own classification but still go through MyInvois.

Does issuing a credit note affect my SST return?

Yes. If the original invoice included SST and you reduce the invoice value via a credit note, your output tax decreases by the SST on the credit note amount. Report this in your SST-02 return for the taxable period in which the credit note was issued. Do not wait for the buyer to confirm receipt before adjusting your SST output.