Statements/ Bills on a periodic basis: Malaysia E-invoicing

This blog is a continuations from our previous blog titled "Malaysia E-Invoicing: Transactions with Buyer Scenarios." If you haven't read it yet, please take a moment to read the previous blog before continuing with this one.

In Malaysia, many businesses and industries have adopted the practice of issuing statements or bills on a periodic basis, such as monthly, quarterly, or annually. This approach is particularly prevalent in sectors where multiple transactions with a customer occur over a specific time frame. The industries commonly involved in periodic billing include:

• Digital/Electronic Payments
• Financial Services (including banking and financial institutions)
• Healthcare
• Insurance
• Stockbroking
• Telecommunications

To align with modern technological advancements and regulatory requirements, the Lembaga Hasil Dalam Negeri Malaysia (LHDN) (or)  Inland Revenue Board Malaysia (IRBM) of Malaysia has established guidelines for the issuance of e-invoices. Suppliers can issue these e-invoices in XML or JSON formats, which must be validated by the LHDN. Once validated, these e-invoices can be converted into visual formats that serve as statements or bills, which are then sent to the buyers. This process ensures that the invoices meet regulatory standards while also providing a clear and organized record for the customers.

Suppliers can create and submit e-invoices for validation according to their respective billing frequencies—whether monthly, quarterly, or annually. This flexibility allows businesses to maintain their established billing cycles while adhering to the e-invoicing requirements.

In cases where buyers do not require e-invoices, suppliers can continue to issue traditional statements or bills. However, suppliers must aggregate these traditional statements or bills at the end of the billing period and create a consolidated e-invoice for LHDN validation. This consolidated e-Invoice must be submitted within seven calendar days following the end of the billing period. By doing so, suppliers ensure compliance with the IRB’s regulations, while also accommodating the needs and preferences of their customers.

This streamlined process not only simplifies compliance with tax regulations but also enhances efficiency in managing customer transactions and billing cycles.

Issuance of e-Invoice to Buyer

Currently, businesses (Suppliers) issuing statements or bills to customers (Buyers) typically include the amounts owed by the Buyers, such as transaction charges. These statements or bills may also account for adjustments to previous periods and include payments or credits to Buyers, like rebates.

With the implementation of e-invoicing, Suppliers must issue e-invoices as proof of income and/or expense for items shown in the statements or bills. Suppliers can include the amounts owed by Buyers and any payments or credits to Buyers in the same e-Invoice.

To minimize disruptions, the Inland Revenue Board of Malaysia (LHDN) allows Suppliers who issue periodic statements or bills to submit e-invoices in XML or JSON format for validation. After validation, these e-invoices can be converted into visual formats (statements or bills) to be sent to Buyers.

When transmitting e-Invoices to IRBM in XML or JSON format, the content should be limited to the income and expenses of the Supplier. Suppliers can create and submit e-Invoices for Lembaga Hasil Dalam Negeri Malaysia (LHDN) validation according to their regular issuance frequency (e.g., monthly, bi-monthly, quarterly, bi-annually, annually).

The steps for issuing an e-invoice to a Buyer are as follows:

1. Confirmation: The Supplier seeks confirmation from the Buyer if an e-invoice is required.
2. Information Gathering: If the Buyer confirms that an e-invoice is required, the Buyer must provide the Supplier with the necessary information to facilitate the issuance of the e-invoice.
3. Completion: The Supplier completes the remaining required fields as outlined in the e-invoice guidelines. This process ensures all necessary data is included for Lembaga Hasil Dalam Negeri Malaysia (LHDN) validation.
4. Validation and Use: The validated e-invoice can be used as the Supplier’s proof of income and/or expense. When presented visually as a statement or bill to the Buyer, it can serve as the Buyer’s proof of expense and/or income, substantiating a transaction for tax purposes.

To facilitate a more efficient e-invoice issuance process and ease the burden on individuals providing TIN and identification number details, LHDN offers certain concessions.

The information required in the e-invoice includes the data fields outlined in the e-invoice guidelines. These details assist the Supplier in issuing the e-invoice effectively, ensuring compliance and accurate record-keeping.

Examples of E-Invoice Issuance

Example 1:

Jenish Singh has been a loyal subscriber to Delca Telco Sdn Bhd’s postpaid plan for years. To appreciate Jenish's loyalty, Delca Telco Sdn Bhd has decided to provide a RM10 monthly rebate for a period of 24 months.

Delca Telco Sdn Bhd must include this RM10 monthly rebate in the e-Invoice (in the visual representation format of a statement or bill) issued to Jenish, along with the monthly plan commitment fee payable by him.

Example 2:

Envisage Telco Sdn Bhd (ETSB) issues monthly statements to their customers, billing them for telecommunication charges incurred in the previous month. Priya, one of ETSB’s customers, has requested an e-Invoice as proof of expense for tax purposes.

ETSB created and submitted the e-Invoice to the Inland Revenue Board of Malaysia (IRBM) for validation. Once validated, ETSB converted the e-Invoice into a visual presentation in the form of a statement before sharing it with Priya.

These examples illustrate how businesses can seamlessly integrate e-Invoicing into their existing billing processes, ensuring compliance and providing clear, accurate records for customers.

Issuance of Consolidated e-Invoice for Buyers Who Do Not Require e-Invoice

1. Current Practice: If a Buyer does not require an e-Invoice, the Supplier will issue a regular statement or bill to the Buyer, just as in the current business practice. The information in these statements or bills does not need to be submitted for validation by the Lembaga Hasil Dalam Negeri Malaysia (LHDN).
2. Aggregation of Statements/Bills: Suppliers can aggregate these statements or bills and create a consolidated e-Invoice for LHDN Validation, following the regular issuance period for statements or bills specific to their business.
3. Submission Timeline: After aggregating the statements or bills, the Supplier must create and submit the consolidated e-Invoice to Lembaga Hasil Dalam Negeri Malaysia (LHDN)  for validation within seven calendar days after the end of the billing period.
4. Steps for Issuing a Consolidated e-Invoice:
   • Step 1: The Supplier seeks confirmation from the Buyer if an e-Invoice is required.
   • Step 2: If the Buyer confirms that no e-Invoice is required, the Supplier continues to issue a statement or bill to the Buyer, following current business practices.
   • Step 3: Within seven calendar days after the end of the period (according to the Supplier’s issuance period), the Supplier retrieves all the statements or bills issued for the previous billing period and creates a consolidated e-Invoice as proof of the Supplier’s income and expense.
   • Step 4: The Supplier issues the consolidated e-Invoice, including the required fields outlined in the e-Invoice Guideline appendices.
5. The process of issuing a consolidated e-Invoice is similar to the standard e-Invoice workflow, with the following exceptions:
6. • Once the consolidated e-Invoice is validated, Lembaga Hasil Dalam Negeri Malaysia (LHDN) will send a notification to the Supplier only. No notification will be sent to the Buyer since this e-Invoice is issued to the general public, and there will be no request for rejection from the Buyer.
7. Proof of Income and Expense: The validated e-Invoice serves as the Supplier’s proof of income and expense and does not need to be shared with the Buyer.
8. Required Information: The consolidated e-Invoice must include the required data fields outlined in the e-Invoice Guideline appendices. These details will assist the Supplier in effectively issuing the consolidated e-Invoice

Note: Regulated industries, such as financial institutions, payment systems, and other relevant entities, are not required to disclose the statement or bill reference number in the consolidated e-Invoice.

Conclusion

In conclusion, the periodic issuance of statements or bills is a common practice across various industries such as digital/electronic payments, financial services, healthcare, insurance, stockbroking, and telecommunications. The LHDN's guidelines offer flexibility for businesses to adapt to the e-Invoicing system by allowing the issuance of e-Invoices in XML or JSON formats for validation. This approach ensures compliance while enabling businesses to maintain their existing billing cycles.

For buyers who do not require e-Invoices, suppliers can continue issuing ordinary statements or bills. However, these suppliers must consolidate these transactions into a single e-Invoice for IRB validation, adhering to the same periodic schedule. This method balances regulatory compliance with operational efficiency, supporting businesses in their transition to digital invoicing.

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This blog covered the key aspects of Malaysia's e-Invoicing system, including mandatory fields, transaction handling with Buyers, and issuing consolidated e-Invoices. We hope this guide has been helpful.

Stay tuned for more updates and detailed guides on e-Invoicing. Our upcoming posts will explore specific scenarios, provide examples, and offer tips on optimizing your e-Invoicing practices for compliance and efficiency.

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