e-invoicing malaysia

Introduction

In March 2023, the Inland Revenue Board of Malaysia (IRBM) introduced mandatory electronic invoicing (e-invoicing) through a phased implementation plan. All businesses registered in Malaysia are required to generate e-invoices for B2B, B2G, and B2C transactions. The first phase mandates businesses with an annual turnover exceeding RM100 million to adopt e-invoicing by August 1, 2024. This initiative aims to streamline tax compliance, reduce tax evasion, and support Malaysia's digital economy. In this article, we’ll cover the following:

• The latest updates on e-invoicing in Malaysia
• What exactly is an e-invoice in Malaysia, and how it works
• The e-invoicing implementation timeline in Malaysia
• A step-by-step guide to the e-invoicing process for B2B and B2C transactions
• Different e-invoicing models available to businesses in Malaysia
• Types of e-invoices businesses must issue
• Who needs to comply with e-invoicing, and who is exempt
• The benefits and challenges of e-invoicing for businesses
• How Complyance can help your business with e-invoicing compliance

What is e-invoicing in Malaysia?

An e-invoice in Malaysia is a digital transactional record between a seller (supplier) and a buyer (purchaser), validated in real time by the government through the MyInvois Portal. These e-invoices include essential details such as buyer/seller information, item descriptions, quantities, prices, taxes, total amounts, and payment details. Once validated, the e-invoice receives a Unique Identification Number (UIN) and a QR code, which ensures authenticity and ease of verification.

e-invoicing Malaysia Timeline

The rollout of e-invoicing in Malaysia is occurring in stages to give businesses sufficient time to adapt. Here is the official timeline for e-invoicing implementation:

• August 1, 2024: Businesses with an annual turnover exceeding RM100 million must begin issuing e-invoices.
• January 1, 2025: Businesses with an annual turnover between RM25 million and RM100 million will need to comply with e-invoicing requirements.
• July 1, 2025: All other businesses must adopt e-invoicing by this date.

e-invoicing Malaysia Guidelines

To support businesses in this transition, the IRBM has provided e-invoicing Malaysia guidelines detailing the step-by-step process, compliance requirements, and necessary technical integrations for e-invoicing.

Benefits of e-invoicing for Your Business

The benefits of adopting e-invoicing in Malaysia include:

• Unified Invoicing Process: Reduces manual errors and standardizes invoicing formats across businesses.
• Real-Time Tax Return Integration: Simplifies the tax reporting process, reducing delays and errors.
• Operational Efficiency: Saves time and resources by automating the e-invoicing process.
• Digital Transformation: Encourages businesses to embrace digital practices, aligning with Malaysia's goal to become a digital economy leader.
• Enhanced Transparency: Real-time validation promotes transparency and reduces tax evasion.
• Paperless Transactions: Reduces paperwork and contributes to sustainability effor

How Does e-invoicing Work in Malaysia?

The e-invoicing process involves several steps:

1. Issuance: The supplier creates and submits the e-invoice through the MyInvois Portal or an API-integrated system.
2. Validation: The IRBM validates the e-invoice and issues a UIN and QR code.
3. Notification: Both the supplier and buyer receive notifications once the e-invoice has been validated.
4. Sharing: The supplier provides the buyer with the validated e-invoice and the corresponding QR code for verification.
5. Rejection/Cancellation: The buyer has 72 hours to request a rejection or cancellation of the e-invoice.

Malaysia e-invoicing Flow for B2B and B2C Transactions

For B2B transactions, the e-invoicing process is straightforward, with real-time validation and sharing between the buyer and seller. For B2C transactions, the supplier generates e-invoices based on the buyer's needs. If the buyer doesn't require an e-invoice, suppliers can issue a monthly consolidated e-invoice.

e-invoicing Procedure for B2B Transactions:

Issuance:

The supplier creates and submits the e-invoice to the Inland Revenue Board of Malaysia (IRBM) either through the MyInvois Portal or via an API integration with their business system.

Validation:

The IRBM performs real-time validation of the e-invoice and assigns a Unique Identifier Number (UIN).

Notification:

Both the supplier and buyer are notified by the IRBM once the e-invoice is successfully validated.

Sharing:

The supplier provides the validated e-invoice to the buyer, including a QR code for easy verification.

Rejection/Cancellation:

The buyer has 72 hours to request a rejection or cancellation of the e-invoice, which must be accompanied by a valid justification.

Human-Readable Format Sharing:‍

Suppliers can also offer a human-readable version of the e-invoice, such as in PDF or JPG format, for ease of reference.

e-invoicing Process for B2C Transactions:

Suppliers are required to generate e-invoices for all B2C transactions. However, whether or not an individual end-consumer receives an e-invoice depends on their specific preferences:

• When the Buyer Requests an E-Invoice:
  Suppliers collect the necessary information from the buyer and issue an e-invoice in real-time, following a process similar to B2B transactions.
• When the Buyer Does Not Require an E-Invoice:
  The IRBM allows suppliers to group transactions for buyers who do not need individual e-invoices into a monthly consolidated e-invoice.

Types of e-invoices in Malaysia

Under the e-invoicing Malaysia guidelines, the following documents must be issued electronically:

• Invoices: Recording transactions between suppliers and buyers.
• Credit Notes: Issued to correct errors, apply discounts, or reflect returned goods.
• Debit Notes: Used to record additional charges related to a previous invoice.
• Refund Notes: Issued when a supplier provides a refund to the buyer.

e-invoicing Models in Malaysia

Businesses can adopt different e-invoicing models based on their size and transaction volume:

1. MyInvois Portal: Ideal for smaller businesses, it allows for manual e-invoice creation or bulk uploads.
2. API Integration: Larger businesses can integrate their ERP or accounting systems directly with the MyInvois system for real-time e-invoice generation and transmission.

Challenges of e-invoicing in Malaysia

While e-invoicing provides numerous advantages, it also presents challenges for businesses, such as:

• Compliance: Ensuring adherence to new regulatory requirements.
• Technological Integration: Adapting to automated systems and updating existing infrastructures.
• Data Accuracy: Ensuring smooth data synchronization across systems.

Exemptions from Implementing e-invoicing

‍Certain entities are exempted from issuing e-invoices, including:

• Government bodies
• Consular offices and diplomatic missions
• Individuals not conducting business
• Entities providing goods or services to the above exempt entities

However, suppliers providing goods or services to these exempt entities must still issue e-invoices to ensure proper tax documentation and compliance.

Entities Exempt from e-invoicing malaysia

Data Security and Privacy Monitoring by IRBM

‍IRBM ensures data security and privacy in e-invoicing through various measures, including:

• Network and Security Monitoring Tools: Continuous monitoring to detect and prevent unauthorized access or data breaches.
• Encryption: Securing sensitive financial data during transmission and storage to protect against cyber threats.
• Access Controls: Implementing strict access controls to ensure only authorized personnel can access sensitive data.
• Regular Audits: Conducting regular audits to identify and address potential vulnerabilities in the e-invoicing system.

Challenges of e-invoicing for Businesses in Malaysia

1. Regulatory Compliance: Ensuring all businesses adhere to the new e-invoicing regulations and meet IRBM's validation criteria.
2. Technological Transition: Adapting to automated systems and integrating e-invoicing with existing business processes and ERP systems.
3. Data Security: Protecting sensitive financial data from cyber threats and ensuring compliance with data privacy regulations.
4. Resistance to Change: Overcoming resistance from employees accustomed to traditional invoicing methods and ensuring smooth adoption of e-invoicing.
5. Technological Readiness: Smaller enterprises may face challenges due to limited IT infrastructure and resources.
6. Data Accuracy and Integration: Ensuring seamless data exchange and synchronization between e-invoicing systems and existing business applications.
7. Supplier Onboarding: Aligning all partners and suppliers with e-invoicing procedures and technology to ensure consistent compliance.

Best Practices for e-invoicing in Malaysia

1. Analyze Requirements: Assess the applicability of e-invoicing rules and exemptions for your business. Understand the specific requirements for each type of transaction and ensure compliance with IRBM guidelines.
2. Choose the Right e-Invoicing Model: Select between MyInvois Portal for low transaction volumes and API Integration for higher volumes. Consider the transaction volume, business size, and technical capabilities when choosing the model.
3. Software and Systems Check: Ensure compatibility of existing billing and accounting software with e-invoicing requirements. Upgrade systems if necessary to support e-invoice generation and submission.
4. Select a Reliable E-Invoicing Solution Provider: Choose a provider that offers robust integration solutions, technical support, and compliance with IRBM guidelines. Evaluate providers based on their experience, features, and customer support.
5. Staff Training and Internal Controls: Train employees on compliance standards, e-invoice generation processes, and error handling procedures. Establish internal controls to ensure accurate and timely e-invoice generation and submission.
6. Testing and Quality Assurance: Conduct thorough testing of e-invoicing functionalities, including e-invoice generation, data transfer, and validation processes. Perform User Acceptance Testing (UAT) with representative users to ensure usability and functionality meet expectations. Validate security measures, error response mechanisms, and system performance under various load conditions.

Industry-Specific e-invoicing Implementation Solutions in Malaysia

Each industry will have unique considerations and strategies for adopting e-invoicing to ensure compliance with Malaysia's regulatory framework. The following section outlines various industries and the approaches businesses within them can take to implement e-invoicing:

1. E-commerce Industry

2. Financial Services Industry

3. Construction Industry

4. Petroleum Industry

5. Aviation Industry

6. Healthcare Industry

7. Telecommunication Industry

8. Pharmaceutical Industry

9. Tourism Industry

10. Textile Industry

11. Insurance and Takaful Industry

11. Retail Industry

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This section provides insights into how different industries can adopt e-invoicing, highlighting the key steps businesses should follow to remain compliant and enhance operational efficiency under Malaysia's e-invoicing regulations.

How Complyance Can Help with e-Invoicing in Malaysia

‍Complyance offers comprehensive support for e-invoicing in Malaysia, providing a range of features and services to ensure smooth implementation and compliance with IRBM guidelines:

• Dedicated Account Managers: Each customer is assigned a dedicated account manager who provides expert guidance on compliance and technical aspects of e-invoicing.
• Extensive Data Validations: Complyance conducts over 150 data validations before transmitting information to IRBM, ensuring a high success rate in e-invoice generation.
• Rapid ERP Integration: Complyance offers quick integration with over 50 ERPs, allowing businesses to seamlessly incorporate Complyance web APIs within 4-6 weeks.
• Data Archival: Complyance ensures secure e-invoice data archival for up to seven years on SLA-based cloud servers, guaranteeing data retention and accessibility.
• Value-Added Services: Complyance provides various value-added services to simplify the e-invoicing process for clients, including spend/sales analytics, error reports, QR code generation, and convenient options like WhatsApp/SMS for sending B2C e-invoices and custom print templates for e-invoices.

Issuing e-invoices in Malaysia for different Scenarios and Business Situations

Transactions with Buyers

In transactions with buyers, businesses must issue e-Invoices for all sales, detailing buyer information and transaction specifics. If a buyer requests an e-Invoice, the supplier must obtain the necessary details and issue it. The e-Invoice serves as proof of the transaction for tax purposes. For buyers who do not require an e-Invoice, businesses can issue consolidated e-Invoices.

Statements/Bills on a Periodic Basis

In businesses that issue periodic statements or bills, such as telecommunications or financial services, e-Invoices can consolidate multiple transactions over a set period. These consolidated e-Invoices serve as proof of income for the supplier and proof of expense for the buyer once validated by the tax authority.

Disbursement and Reimbursement

In handling disbursements and reimbursements, disbursements refer to payments made on behalf of another party, while reimbursements cover out-of-pocket expenses. The business must ensure that each step in the transaction chain is clearly documented with separate e-Invoices for each payment.

Employment Perquisites and Benefits

In providing employee benefits, employers must issue e-Invoices for perquisites such as allowances and memberships. These e-Invoices ensure that employee benefits are accurately documented and compliant with tax regulations.

Certain Expenses Incurred by Employees on Behalf of the Employer

In cases where employees incur expenses on behalf of their employer and claim these expenses, e-Invoices must document these expenses accurately, ensuring they are properly recorded as the employer's expenses.

Self-Billed E-Invoice

In self-billed e-Invoices, where the buyer generates the invoice on behalf of the supplier, the business must gather the required information, validation procedures, and compliance requirements to streamline the invoicing process.

Transactions Involving Payments to Agents, Dealers, or Distributors

In transactions involving payments to intermediaries such as agents, dealers, or distributors, the business must ensure that these payments are properly documented with e-Invoices, complying with tax regulations.

Cross-Border Transactions

In international transactions, the business must accurately document cross-border trade for tax purposes.

Profit Distribution (e.g., Dividend Distribution)

In profit distributions such as dividends, businesses must issue e-Invoices to document these transactions accurately, ensuring compliance with relevant tax regulations and providing proof of income for the recipient.

Foreign Income

In handling foreign income, e-Invoices must document this income accurately, capturing specific details related to the foreign source to comply with international tax regulations.

Currency Exchange Rates

In transactions involving foreign currencies, e-Invoices must accurately document currency exchange rates, ensuring compliance by converting and recording transactions in the local currency of the tax authority.

E-Commerce Transactions

In e-commerce transactions, businesses must issue e-Invoices to properly document online sales. This ensures compliance with tax regulations and standardizes the documentation process for online transactions.

Conclusion

The adoption of e-invoicing in Malaysia is a crucial step towards a fully digital economy. Whether you're a small business or a large enterprise, understanding e-invoicing Malaysia guidelines and preparing for the 2024 mandate will ensure a smoother transition. Complyance can provide expert assistance to help businesses meet their compliance obligations effortlessly.