e-invoicing Malaysia 2024: Essential Guide for Compliance & Success

What is e-Invoicing?

E-invoicing is a digital invoicing system that the Malaysian government, through the Inland Revenue Board of Malaysia (IRBM), has mandated for businesses starting August 2024. This system replaces paper-based invoicing and requires companies to generate, validate, and submit invoices electronically. This new initiative supports Malaysia's push toward digital transformation, improves tax compliance, and enhances business efficiency.

By digitizing invoicing, businesses benefit from real-time validation, reduced errors, and more streamlined financial processes.

Why e-invoicing is Mandatory in Malaysia

The Malaysian government has introduced e-invoicing to improve tax administration and align with the country's digital economy goals. E-invoicing, once implemented, will:

1. Streamline invoicing processes by eliminating paper and reducing manual data entry.
2. Ensure real-time tax reporting, improving accuracy and reducing tax evasion.
3. Enhance compliance with the tax authorities, as e-invoices are validated by IRBM before being shared with buyers.
4. Improve cash flow by speeding up the invoicing process and minimizing delays.

E-invoices also come with features like QR codes and Unique Identification Numbers (UIN), which facilitate easier verification and tracking.

Key Dates for e-Invoicing Implementation

The transition to e-invoicing will occur in three phases:

• August 1, 2024: Businesses with an annual turnover exceeding RM100 million must comply.
• January 1, 2025: Companies with an annual turnover between RM25 million and RM100 million are required to implement e-invoicing.
• July 1, 2025: All remaining businesses, regardless of turnover, must comply with e-invoicing requirements.

The Malaysian government has also introduced a six-month grace period starting from August 2024, allowing businesses to adapt to the new system without penalties.

Important Update: Six-Month Grace Period

To make the transition smoother, the government is giving businesses six extra months to meet the new invoicing rules without penalties. This grace period starts on August 1, 2024, and ends on February 1, 2025. During this time, companies can adjust to the changes without worrying about fines. This is especially helpful for small and medium businesses (SMEs), giving them time to fully set up the new invoicing systems before the rules are strictly enforced.‍

Types of e-invoices

In Malaysia, these documents need to be issued electronically:

• Invoices: Record transactions between sellers and buyers, including self-billed invoices for tracking expenses.
• Credit Notes: Used by suppliers to reduce the value of an invoice, often for correcting mistakes or handling returns.
• Debit Notes: Add extra charges to a previous invoice, increasing the total amount due.
• Refund Notes: Issued to track refunds from the supplier to the buyer.

How to Issue e-invoicing in Malaysia

There are two main methods to issue e-invoices in Malaysia:

1. MyInvois Portal: Suitable for Micro, Small, and Medium-sized Enterprises (MSMEs). The portal allows businesses to generate e-invoices manually by uploading data in bulk or one at a time.
2. API Integration: Larger businesses or those with a higher transaction volume can integrate their Enterprise Resource Planning (ERP) systems directly with the MyInvois system through API. This option automates the e-invoicing process, providing real-time submission and validation.

Step-by-Step Guide to Issuing an e-Invoicing

For B2B and B2C Transactions:

1. Generate the Invoice: The supplier creates the e-invoice using a specific format (XML or JSON).
2. Submit the Invoice: The invoice is submitted through either the MyInvois portal or an API-enabled ERP system to IRBM.
3. Real-Time Validation: IRBM validates the e-invoice and issues a Unique Identification Number (UIN).
4. Notification: Both the supplier and buyer are notified once the e-invoice is validated.
5. Sharing the E-Invoice: The supplier shares the validated e-invoice, which includes a QR code for easy verification.
6. Cancellation or Rejection: Buyers can reject or cancel the invoice within 72 hours if necessary.

For B2C transactions, if buyers do not need real-time e-invoices, businesses can issue monthly consolidated invoices instead.

Exemptions from Implementing e-Invoicing

The following persons are currently exempted from issuing e-Invoices (including self-billed e-Invoices):

• Foreign diplomatic offices
• Individuals not conducting business
• Statutory bodies and authorities collecting payments or levies
• International organizations for transactions before July 2025
• Taxpayers with revenue under RM150,000

However, suppliers providing goods or services to the entities above must still issue e-Invoices according to the implementation timeline. Additionally, some income types, such as employment income, pensions, and dividends, are also exempt from e-Invoices.

Entities Required to Comply with e-Invoicing and Exemptions

How to Prepare for E-Invoicing

To ensure a smooth transition, businesses must:

• Upgrade IT Infrastructure: Ensure that your business’s ERP or invoicing system is compatible with the MyInvois platform or ready for API integration.
• Train Staff: Provide adequate training for employees on using the e-invoicing system, both manually via the portal and automatically via API.
• Audit Existing Systems: Review your current invoicing process to identify potential gaps in compliance and adapt accordingly.

Industries wise e-Invoicing Implementation solutions 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

This section explains how different industries can adopt e-invoicing, emphasizing important steps businesses need to follow to stay compliant and improve operational efficiency under Malaysia’s e-invoicing requirements.

Benefits of E-Invoicing

Implementing e-invoicing offers a range of advantages for businesses in Malaysia:

• Increased Efficiency: Automating the invoicing process reduces the chances of errors and speeds up financial operations.
• Tax Compliance: E-invoices ensure that businesses comply with tax regulations by validating transactions with IRBM in real-time.
• Improved Cash Flow: Faster invoicing reduces payment delays, leading to better cash flow management.
• Paperless Transactions: E-invoicing eliminates the need for paper, reducing environmental impact and administrative costs.

Overcoming E-Invoicing Challenges

While e-invoicing simplifies many business processes, it also comes with some challenges:

1. Technological Integration: Businesses need to upgrade their IT systems or invest in API integration, which may require significant upfront costs.
2. Compliance: Ensuring all invoices meet IRBM’s validation standards can be challenging for businesses unfamiliar with digital systems.
3. Data Accuracy: The accuracy of data exchange between systems must be ensured, especially for large enterprises that handle high transaction volumes.
4. Resistance to Change: Staff accustomed to manual invoicing processes may resist the transition to a fully digital system.

Conclusion

The introduction of e-invoicing in Malaysia is a significant step towards improving the country’s tax administration and advancing its digital economy. By understanding the compliance requirements, upgrading your IT systems, and training your staff, your business can be fully prepared to meet the August 2024 deadline.

The time to start preparing for e-invoicing is now! By implementing the right strategies, you can ensure that your business is compliant and positioned for success in the future.