Introduction
The implementation of e-invoice in Malaysia has been a significant step towards modernizing and streamlining business transactions. However, compliance with this system is not just a matter of convenience; it's a legal obligation with clear penalties for non-compliance.
Penalties for Non-Compliance with E-invoicing Rules
Failure to issue an e-invoice constitutes an offence under Section 120(1)(d) of the Income Tax Act 1967. Penalties include fines ranging from RM200 to RM20,000 or imprisonment for up to 6 months, or both, for each instance of non-compliance
Applicability of E-Invoicing in Malaysia
E-invoicing is applicable to various types of transactions and entities:
- Type of Transactions: E-invoicing is mandatory for all B2B, B2C, and B2G transactions.
- Cross-Border Transactions: E-Invoicing is required for both domestic and international transactions.
- All Industries: No industry exemptions; all businesses must comply, subject to periodic reviews. Government authorities, rulers, ruling chiefs, etc., are exempt from e-invoicing. For details, visit Who is Exempt from Issuing E-Invoices?.
- Phased Implementation: E-invoicing implementation follows a phased timeline based on turnover thresholds:
- Annual Turnover > RM 100 million: From 1 August 2024
- Annual Turnover > RM 25 million and up to RM 100 million: From 1 January 2025
- All taxpayers: From 1 July 2025
Other Consequences of Not Generating E-Invoices
In addition to direct penalties, several other significant consequences can arise from failing to generate an e-invoice:
- Non-recognition of Revenue and Expense: Without e-invoices, sales may not be recognized in the books, and expenses cannot be claimed.
- Revenue Loss: Businesses may refuse traditional invoices, leading to potential revenue losses.
- Unavailability of Bill Discounting: Without e-invoices, businesses may be ineligible for bill discounting facilities.
- Lower Legal Validity: E-invoices carry higher legal validity than traditional invoices, reducing the risk of disputes
Penalty for Not Issuing Tax Invoice
While e-invoicing compliance hasn't started yet, businesses registered under SST must furnish tax invoices to their buyers. Failure to do so may incur a penalty of up to RM30,000, imprisonment for a maximum of 2 years, or both.
Steps to Take for Avoiding Penalties
- Understand the Mandate and Implementation Timeline: Identify the phase applicable to your business and the associated deadlines.
- Assess Your Requirements: Evaluate transaction types, frequency, and delivery channels.
- Choose the Right E-Invoicing Model: Select a suitable e-invoicing model for your business needs, whether it's the MyInvois Portal or API integration.
- Prepare Your System: Update your IT infrastructure to accommodate e-invoicing requirements. Partner with a trusted solution provider like Complyance for seamless integration.
- Train Employees: Ensure comprehensive training on the e-invoicing process and compliance requirements.
Checklist for E-invoicing in Malaysia
- Assess IT Infrastructure: Ensure your systems are ready for e-invoicing.
- Integration: Choose between MyInvois Portal or API integration.
- Compliance: Regularly check for updates from IRBM and ensure continuous compliance.
- Documentation: Maintain thorough records and documentation.
Conclusion
It is crucial for businesses in Malaysia to recognize the importance of e-invoicing and embrace it as a part of modern business practices. Even before it becomes mandatory, adopting e-invoicing voluntarily can offer numerous benefits, including streamlined processes, enhanced efficiency, and improved compliance with tax regulations. Participating in pilot programs and adhering to guidelines set by the Inland Revenue Board of Malaysia (IRBM) ensures a smooth transition and avoids potential penalties for non-compliance.
Frequently Asked Questions
What is the threshold for mandatory e-invoicing in Malaysia?
- E-invoicing is mandatory for all businesses, with implementation phased based on turnover thresholds.
How can I register for e-invoicing in Malaysia?
- Businesses need to register on the MyInvois Portal to facilitate e-invoicing processes.
What happens if an e-invoice is generated late?
- Late generation of e-invoices is considered non-compliance and may result in penalties.
Can we make an e-invoice after the invoice date?
- E-invoices must be generated instantly, except for B2C invoices without an e-invoice request.
What if an e-invoice is generated incorrectly?
- Both the buyer and seller have 72 hours to recall, accept, or reject the invoice after submission.
