The Malaysian Government intends to gradually roll out e-Invoicing in line with the Twelfth Malaysia Plan, which aims to strengthen infrastructure for digital services and digitize tax administration to support the expansion of the digital economy.
The aim is to improve the management efficiency of the Malaysian tax administration. Business-to-Business (B2B), Business-to-Consumer (B2C) and Business-to-Government (B2G) transactions will all be facilitated by electronic invoicing, enabling real-time or near-real-time verification and transaction storage.
1. What is an e-Invoicing in Malaysia?
An e-Invoice in Malaysia replaces paper or electronic documents like invoices, credit notes, and debit notes, serving as a digital representation of a transaction between a supplier and a buyer.
It includes important information, such as supplier’s and buyer’s details, item description, quantity, price excluding tax, tax, and total amount, thereby recording transaction data for daily business operations.
2. What are the transactions/documents covered under e-Invoicing in Malaysia?
The following document/transactions need to be covered under e-Invoicing in Malaysia:
- Invoice: A commercial document itemizing and recording a transaction between a supplier and a buyer, which may involve the issuance of a self-billed e-Invoice to document an expense.
- Credit Note: Suppliers issue credit notes to correct errors, apply discounts, or account for returns in a previously issued e-Invoice. The aim is to reduce the value of the original e-Invoice without involving the return of money to the buyer.
- Debit Note: This is issued to highlight additional chargers on a previous invoice issued.
- Refund: The document is issued by a supplier to acknowledge the refund of the buyer’s payment.
The Inland Revenue Board of Malaysia (IRBM), also recognized as Lembaga Hasil Dalam Negeri (LHDN), plays a pivotal role in managing tax and revenue affairs in Malaysia.
Established on the 1st of March 1996 (previously known as the Department of Inland Revenue Malaysia), IRBM stands as one of Malaysia’s key agencies for revenue collection. The IRBM actively collects revenue on behalf of the Ministry of Finance (MOF).
4. What are the guidelines issued for preparing e-Invoices in Malaysia?
On July 21, 2023, the Inland Revenue Board of Malaysia released the e-Invoice Guideline for the year 2023, encompassing crucial areas, including e-Invoicing implementation concepts, timeline, issuance and submission processes to IRBM, coverage, and required data fields, among others.
Furthermore, the IRBM on 29 September 2023 updated the e-Invoicing Guidance previously issued on 21 July 2023. The e-Invoicing Guideline 2.0 includes additional optional fields and the latest information on e-Invoicing exemptions.
The IRBM has further issued a separate guideline, which, in addition to the E-Invoice Guidance (Version 2.0), offers guidance for a number of use cases, such as cross-border transactions, reimbursements and disbursements and self-billed e-Invoices.
5. What is the timeline for e-Invoice implementation in Malaysia?
For a smooth transition, e-Invoicing in Malaysia will be implemented in phases. After careful consideration and taking business turnover or threshold into account, the e-Invoice mandate will be rolled out, allowing businesses the much-needed time to adapt to the new situation.
Per the latest plan, starting from August 1, 2024, e-Invoicing will be compulsory for taxpayers with an annual turnover or income exceeding RM100 million, instead of June 1, 2024. E-Invoicing for taxpayers falling in the bracket of other income categories will be enforced in two other phases, with an implementation target of 2025.
Here’s the e-Invoicing implementation timeline:
|Taxpayers with an annual turnover or revenue of more than RM100 million
|1 August 2024
|Taxpayers with an annual turnover or revenue of more than RM25 million and up to RM100 million
|1 January 2025
|All other taxpayers
|1 July 2025
6. How to determine the turnover for e-Invoicing implementation?
The annual turnover for taxpayers for e-Invoice implementation will be determined on the basis of the following:
- For taxpayers with audited financial statements: Based on the annual turnover or revenue as stated in the statement of comprehensive income in the audited financial statements for FY 2022.
- For taxpayers without audited financial statements: Based on the annual revenue reported in the tax return for AY 2022.
- If there is a change in the accounting year end for FY 2022: Based on the taxpayer’s turnover or revenue pro-rated to 12 months determine the e-Invoice implementation date.
7. Who is exempted from Implementing e-Invoicing in Malaysia?
The following individuals are exempted from issuing e-Invoice, including self-billed e-Invoices issued:
- Ruler and Ruling Chief
- Former Ruler and Ruling Chief
- Consort of a Ruler of a State having the title of Raja Perempuan, Sultanah, Tengku Ampuan, Raja Permaisuri, Tengku Permaisuri or Permaisuri
- Consort of a Former Ruler of a State previously having the title of Raja Perempuan, Sultanah, Tengku Ampuan, Raja Permaisuri, Tengku Permaisuri or Permaisuri
- State government and state authority
- Government authority
- Local authority
- Statutory authority and statutory body
- Facilities provided by the above government, authority or body (e.g., hospital, clinic, multipurpose hall, etc.)
- Consular offices and diplomatic officers, consular officers and consular employees
8. Which expenses/income do not require an e-Invoice?
The IRBM acknowledged the various complexities in issuing e-Invoices for specific income or expense type. Hence, to simplify e-Invoice adoption, the following type of expense or income need not require an e-Invoice:
- Employment income
- Distribution of dividend in specific circumstances
9. What is Malaysia’s e-Invoice Model?
To allow taxpayers to smoothly transition to e-Invoice, IRBM has developed 2 e-Invoice transmission mechanisms:
- A portal (MyInvois Portal) hosted by IRBM
- Application Programming Interface (API)
Based on the specific requirements and business needs, taxpayers can choose the most apt mechanism to transit e-Invoice to IRBM.
The table below briefly outlines the features and considerations for each e-Invoice transmission mechanism.
|– Enables individual generation through a comprehensive form and the option for batch generation through spreadsheet upload for processing multiple transactions
|– Accessible to all taxpayers
– Businesses that need to issue e-Invoice but API connection is unavailable
|Enables businesses to conveniently transmit high-volume of transactions – Methods to transmit e-Invoice via API include:
- Direct integration of taxpayers’ Enterprise Resource Planning (ERP) system with MyInvois System
- Through Peppol service providers
- Through non-Peppol technology providers
|– Requires upfront investment in technology and adjustments to existing systems. API connection may be made directly to IRBM or through intermediary technology providers
– Ideal for large taxpayers or businesses with substantial transaction volume
The Malaysian Government has additionally proposed to broaden the usage of Tax Identification Numbers (TIN) to reinforce the implementation of e-Invoicing. The aim is to expand the taxpayer base and accordingly bring down the number the fraudulent cases.
10. What are the benefits of adopting e-Invoicing in Malaysia?
Besides providing a seamless experience to taxpayers, e-Invoice implementation enhances the efficiency of business and improves tax compliance.
Here are some benefits of implementing e-Invoicing in Malaysia:
- Reduces human errors and manual efforts: With a unified invoicing process in place, businesses can streamline document creation and data submission electronically to IRBM, significantly reducing manual efforts and human errors.
- Efficient and correct tax reporting: An integrated tax return filing system allows accurate and effective tax reporting.
- Streamlines operations: Larger businesses benefit from adopting e-Invoice by streamlining operations, enhancing efficiency, and achieving significant time and cost savings through automated processes, seamless data integration, and improved invoice management.
- Progressive and manageable transition: Micro, small, and medium-sized businesses (MSMEs) can gradually transition to e-Invoice through phased implementation. This gives them the time to adjust and minimize any interruptions, allowing MSMEs to align their financial reporting and workflow with industry standards.
Impactful Solutions: How IRIS can help with e-Invoicing in Malaysia?
IRIS is a leading global provider of compliance solutions, offering a comprehensive suite that encompasses Tax Compliance, Bank and Regulatory Compliance, and more. Drawing from our successful experience in developing and implementing e-invoicing solutions in India, we are proud to announce the launch of our tailored e-invoicing solution for Malaysia. Positioned as a premier choice in the realm of e-Invoicing, the IRIS E-invoicing solution seamlessly integrates with billing systems, facilitating the generation of e-invoices without disruption to business operations
Key Advantages of the IRIS E-Invoicing Solution Include:
- End-to-end management of e-invoices, covering generation, acceptance, cancellation, and sharing.
- Multiple options for invoice generation, including web-based, desktop applications, and APIs.
- Streamlined processes for handling large volumes of invoices through the provision for bulk operations.
- Capability to archive invoices, providing a valuable resource for future references and audits.
- Customization features allowing businesses to tailor invoice templates according to specific requirements.
- The ability to print and share invoices with both customers and vendors, enhancing communication and transparency.
- Option to seamlessly connect to the Peppol Access Point for e-invoice exchange, showcasing our commitment to industry standards and interoperability.
In summary, the IRIS E-Invoicing Solution stands as a sophisticated choice, offering a suite of features to meet diverse business needs while ensuring compliance and efficiency in managing invoicing processes.