e-invoicing in Malaysia: A Complete Guide for Every Business

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Introduction

In March 2023, the Inland Revenue Board of Malaysia (IRBM) introduced mandatory 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 requires businesses with an annual turnover exceeding RM100 million to adopt e-invoicing by August 1, 2024. The goal of this initiative is to streamline tax compliance, reduce tax evasion, and promote Malaysia's digital economy.

In this article, you'll learn about:

• 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 look at the e-invoicing process for B2B and B2C transactions
• Different e-invoicing models available to businesses in Malaysia
• The various types of e-invoices businesses must issue
• Who needs to comply with e-invoicing, and who is exempt
• The benefits of e-invoicing for your business
• Common challenges businesses may face with e-invoicing
• How Complyance can help your business with e-invoicing compliance

What is an e-Invoice in Malaysia?

An e-invoice is a digital transactional record between a seller (supplier) and a buyer (purchaser), validated and logged by the government portal in real time. E-invoices contain crucial details like buyer/seller information, item descriptions, quantities, prices, taxes, total amounts, and payment details. Validated e-invoices receive a Unique Identification Number (UIN) and a QR code from the MyInvois Portal, ensuring authenticity and easy verification.

e-Invoicing Timeline in Malaysia

The implementation of e-invoicing in Malaysia is being rolled out in phases to give businesses enough time to adapt. Here is the official timeline for e-invoicing in Malaysia:

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 implement e-invoicing by this date.

Important Update: Six-Month Grace Period

To ease the transition, the Malaysian government has introduced a six-month grace period for e-invoicing fines. This grace period begins on August 1, 2024, and extends until February 1, 2025. During this period, businesses can adjust to the e-invoicing requirements without facing any penalties for non-compliance. This extension aims to help businesses, especially SMEs, to fully integrate e-invoicing systems and processes before strict enforcement begins.

Benefits of e-Invoicing in Malaysia

• Unified Invoicing Process: Streamlines the creation and submission of transaction documents, reducing manual work and errors while ensuring a consistent format across all businesses.
• Tax Return Facilitation: Seamless integration with the tax system enables accurate, timely tax reporting.
• Operational Efficiency: Automates e-invoice generation and management, saving time and costs.
• Digital Transformation: Encourages businesses to embrace digital practices, supporting Malaysia’s vision to become a digital economy leader.
• Enhanced Transparency: Real-time validation enhances transparency, reducing opportunities for tax evasion.
• Reduced Paperwork: E-invoicing eliminates the need for physical invoices, contributing to sustainability.

e-Invoicing Process in Malaysia: A Comprehensive Guide

The steps to generate an e-invoice in Malaysia may vary depending on the e-invoicing model (API or MyInvois Portal) and whether the transaction is B2B or B2C. However, the majority of the process remains consistent.

e-Invoicing Process Overview in Malaysia

e-Invoicing Process for B2B Transactions:

Issuance:

The supplier generates and submits the e-invoice to the IRBM via the MyInvois Portal or an integrated business system using API.

Validation:

The IRBM validates the e-invoice in real-time and issues a Unique Identifier Number (UIN).

Notification:

Both the supplier and buyer are notified by the IRBM once the e-invoice has been validated.

Sharing:

The supplier shares the validated e-invoice, along with a QR code, with the buyer for verification.

Rejection/Cancellation:

The buyer has 72 hours to request a rejection or cancellation of the e-invoice. However, any rejection must be justified.

Sharing a Human-Readable Format:

Suppliers can also share a human-readable version of the e-invoice, such as a PDF or JPG format.

e-Invoicing Process for B2C Transactions:

Suppliers must generate e-invoices for all B2C transactions. However, whether an individual end-consumer requires an e-invoice depends on their specific needs:

When the Buyer Requests an E-Invoice:

• Suppliers gather necessary details from the buyer and generate an e-invoice in real-time, much like B2B transactions.

When the Buyer Does Not Require an E-Invoice:

• The IRBM permits suppliers to consolidate transactions for buyers who do not require e-invoices into a monthly consolidated e-invoice.

e-Invoicing Models in Malaysia

Businesses in Malaysia can opt for different transmission methods for reporting e-invoices, as described below:

1. MyInvois Portal:

The MyInvois Portal allows businesses, especially Micro, Small, and Medium-sized Enterprises (MSMEs) or companies with lower transaction volumes, to manually generate e-invoices one at a time or in bulk using spreadsheet uploads. The portal, launched by IRBM on June 28, 2024, offers both a testing environment and a production environment.

2. Application Programming Interface (API):

Larger businesses can integrate their ERP, billing, or accounting systems directly with the MyInvois system via API, enabling real-time e-invoice generation, transmission, and correction. To assist businesses with this integration, the Lembaga Hasil Dalam Negeri (LHDN) has developed an e-invoice Malaysia Software Development Kit (SDK).

Types of e-Invoices in Malaysia

In Malaysia, the following documents must be issued electronically under the e-invoicing mandate:

1. Invoices: Used to record business transactions between suppliers and buyers. It also includes self-billed invoices for expense tracking.
2. Credit Notes: Issued by suppliers to reduce the value of a previously issued e-invoice. Typically used to correct errors, apply discounts, or document returned goods.
3. Debit Notes: Issued to record additional charges related to an earlier invoice, increasing the original amount payable.
4. Refund Notes: A document issued to record refunds provided by the supplier to the buyer.

Entities Required to Comply with e-Invoicing in Malaysia

The LHDN has outlined which entities must comply with e-invoicing rules and those that are exempt.

Benefits of e-Invoicing in Malaysia

The Malaysian government’s e-invoicing initiative is designed to support the country’s digital economy and improve tax compliance. Key benefits include:

• Unified Invoicing: Simplifies invoice creation and submission, reducing errors and manual entry.
• Integrated Tax Filing: Ensures accurate and efficient tax reporting.
• Streamlined Operations: Improves operational efficiency and resource allocation.
• Improved Cash Flow: Reduces payment delays by minimizing disputes and speeding up billing.
• Digitized Reporting: Aligns financial reporting with digital standards, supporting transparent records.
• Paperless Invoicing: Reduces paper usage, preventing tax leakage and contributing to sustainability.
• Ease of Trade: Facilitates international business by simplifying cross-border transactions.

Challenges of e-Invoicing for Businesses in Malaysia

While e-invoicing brings numerous advantages, it also presents challenges for businesses:

1. Compliance: Adapting to new regulatory requirements may require significant technological integration.
2. Technological Transition: Businesses transitioning from manual to automated invoicing need to adapt to new technologies, update existing systems, and train employees.
3. Resistance to Change: Staff used to traditional methods may resist the shift to e-invoicing.
4. Feasibility for SMEs: Small businesses with limited IT infrastructure may face difficulties implementing e-invoicing.
5. Data Accuracy and Integration: Ensuring seamless data synchronization between e-invoicing systems and other business applications can be complex.

How Complyance Can Help with E-Invoicing in Malaysia

Complyance offers comprehensive e-invoicing solutions that include rapid ERP integration, extensive data validation, and secure data storage for up to seven years. Businesses benefit from personalized support, automated data processing, and streamlined compliance with IRBM guidelines.

Features of Complyance:

• ERP Integration: Seamlessly integrate e-invoicing with over 50 ERP systems.
• Data Validation: Conducts over 150 validations, reducing invoice rejection risks.
• Dedicated Account Managers: Personalized support for compliance and technical queries.
• Data Archival: Secure storage of e-invoices for up to seven years.
• Value-Added Services: Spend/sales analytics, error reporting, and custom templates for e-invoices.

Industry-Specific e-Invoicing Implementation in Malaysia

Different industries will have specific considerations and strategies for implementing e-invoicing to comply with Malaysia’s regulatory framework. Below is a list of industries and how businesses within each can approach 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 outlines how e-invoicing can be implemented across different industries, highlighting key integration points for businesses to ensure compliance and operational efficiency under Malaysia’s e-invoicing mandate.

Conclusion

E-invoicing in Malaysia marks a significant step toward a fully digital economy. Whether you’re in e-commerce, healthcare, or construction, transitioning to e-invoicing brings numerous benefits like enhanced compliance, operational efficiency, and cost savings. With proper planning and the right solutions provider, your business can be prepared for the 2024 mandate.

For seamless e-invoicing compliance and expert guidance, Complyance is your go-to solution.