Learn to issue e-invoices for profit distribution & foreign income in Malaysia. Understand guidelines for domestic & foreign dividends, staying compliant.
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How to Issue e-Invoices for Profit Distribution & Foreign Income?
Understanding Profit Distribution and E-Invoicing in Malaysia
Profit distribution, such as dividend payments, is a key aspect of corporate finance. In Malaysia, the process for distributing profits and related e-invoicing requirements have specific guidelines to follow. This blog will simplify these concepts and explain how e-invoicing affects both domestic and foreign profit distributions.
Domestic Profit Distribution
In Malaysia, companies distributing profits to shareholders traditionally use dividend vouchers or dividend warrants. With the introduction of e-invoicing, there are updates to these processes:
- Exemptions for Certain Taxpayers: Companies listed on Bursa Malaysia and those not eligible for tax deductions under Section 108 of the Income Tax Act 1967 are exempt from issuing self-billed e-invoices for dividend distributions. This means they can continue using their existing processes, like issuing dividend vouchers or warrants.
- Requirements for Other Taxpayers: Taxpayers not covered by the exemption must issue self-billed e-invoices to document the dividend distribution. The self-billed e-invoice serves as proof of income for the recipient.
Steps for Issuing a Self-Billed E-Invoice
- Issuing Dividend Voucher: When a profit, such as a dividend, is paid or credited, the taxpayer making the distribution will issue a dividend voucher to the recipient.
- Self-Billed E-Invoice: The distributor must then act as the Supplier and issue a self-billed e-invoice to the recipient.
- Completing the E-Invoice: Fill out the required fields in the e-invoice as specified in the e-Invoice Guideline, following the process detailed in the MyInvois Portal or via API.
Foreign Profit Distribution
For foreign profits or dividends received in Malaysia:
- E-Invoice Requirement: The recipient must issue an e-invoice to document the income for tax purposes.
- Roles in E-Invoicing: In this scenario, the recipient of the profit or dividend is the Supplier, and the foreign distributor is the Buyer.
- E-Invoicing Process: Follow the detailed e-invoice workflow as outlined in the e-Invoice Guideline for both the MyInvois Portal and API models.
Foreign Income
An e-Invoice is required for all foreign income received in Malaysia from outside the country as proof of income for tax purposes. Here are the steps and roles involved:
- Roles for E-Invoicing:
- Supplier: Recipient of the foreign income (referred to as "Income Recipient").
- Buyer: Person who makes payment to the Income Recipient (referred to as "Payor").
- Issuance Process:
- The process of issuing an e-Invoice for foreign income is similar to the issuance of an e-Invoice involving a Malaysian Supplier and Foreign Buyer.
- The Income Recipient should issue the e-Invoice by the end of the month following the month of receipt of the foreign income.
- Required Information:
- The information required to be included in the e-Invoice should assist the Income Recipient in issuing the e-Invoice accurately.
Conclusion
Understanding profit distribution and the associated e-invoicing requirements ensures compliance with Malaysian regulations and streamlines financial processes. Whether dealing with domestic or foreign distributions, following the correct procedures helps maintain smooth operations and proper documentation.
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Ajith Kumar
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