1 August 2024, Shafiq Fathullah Shaharuddin
Highlights
- What is E-Invoicing?
- Example e-invoice
- Example non-e-invoice
- Document Under e-Invoice
- E-invoice Mechanism
- E-invoice Workflow
- What is MSME, SME and ME
- Key Component Businesses Need to Know Before E-Invoice Implementation
- E-Invoice Process
- Method of E-Invoice Issuance
- E-Invoice Process (Web Portal / Mobile Apps)
- E-Invoice Process (Point-of-Sales System)
- E-Invoice Process (MyInvoice Mobile Apps)
- Single E-Invoice VS Consolidated E-Invoice
- E-Invoice for Agents, Dealers, Distributors & Affiliates
- MyInvois Portal
What is E-Invoicing?
E-invoicing is the digital representation of transactions between a supplier and buyer, replacing traditional paper or electronic documents such as invoices, credit notes, and debit notes.
Example e-invoice
Example non-e-invoice
Document Under e-Invoice
- Invoice: A commercial document that itemizes and records a transaction between a Supplier and Buyer, including issuance of self-billed e-Invoice to document an expense.
- Credit note: A credit note is issued by Suppliers to correct errors, apply discounts, or account for returns in a previously issued e-Invoice with the purpose of reducing the value of the original e-Invoice. This is used in situations where the reduction of the original e-Invoice does not involve return of money to the Buyer.
- Debit note: A debit note is issued to indicate additional charges on a previously issued e-Invoice.
- Refund note: A refund note e-Invoice is a document issued by a Supplier to confirm the refund of the Buyer’s payment. This is used in situations where there is a return of money to the Buyer.
All taxpayers engaging in commercial activities in Malaysia must issue e-invoices. This includes:
- Individuals, Group and Entities
- Businesses across all industries (trading and services)
- Business-to-business (B2B)
- Business-to-consumer (B2C)
- Business-to-government (B2G)
Exemptions:
- Rulers and related parties
- Government and related government entities
E-invoice Mechanism
- MyInvois Portal:
- Hosted by IRBM
- Accessible to all taxpayers at no cost (Free)
- Available to taxpayers needing to issue a e-invoices where API connection is unavailable
- Application Programming Interface (API):
- Enables direct data transmission between taxpayers’ systems and the MyInvois system
- Requires upfront investment in technology and adjustments to existing systems
- Ideal for large taxpayers or businesses with substantial transaction volumes
E-Invoice Workflow
What is MSME, SME and ME
Implementation Timeline
| Targeted Taxpayers | Implementation Date |
|---|---|
| Taxpayers with an annual turnover or revenue of more than RM 100 million | 1 August 2024 |
| Taxpayers with an annual turnover or revenue of more than RM 25 million and up to RM 100 million | 1 January 2025 |
| All taxpayers | 1 July 2025 |
- Taxpayers with audited financial statements: Based on annual turnover or revenue stated in the statement of comprehensive income in the audited financial statements for financial year 2022.
- Taxpayers without audited financial statements: Based on annual revenue reported in the tax return for the year of assessment 2022.
- In the event of a change of accounting year end for financial year 2022, the taxpayer’s turnover or revenue will be pro-rated to a 12-month period for purposes of determining the e-Invoice implementation date.
- Transition Period (01 Aug 2024 – 30 June 2025):
- All other taxpayers can use either normal receipts or validated e-invoices.
- Taxpayers can volunteer to implement e-invoicing earlier.
- New businesses/operations commencing from the year 2023 will implement e-invoicing starting 01 July 2025.
Latest Update by the Inland Revenue Board of Malaysia (Published on 2 July 2024 & 26 July 2024):
- SMEs earning below RM 150,000 annually are exempted from the e-invoice regime.
- MSMEs can issue consolidated e-invoices, combining all sales transactions for each month.
- Traders who develop their own systems or use technology providers, including software packages, will receive tax incentives in the form of Capital Allowance claims effective from the year 2024.
- MSMEs can claim a tax deduction of up to RM 50,000 for consulting fee expenses incurred from the assessment year 2024 to 2027.
- Relaxation of 6 months for mandatory e-invoice implementation for 1 batch taxpayer.
Key Component Businesses Need to Know Before E-Invoice Implementation
- Identify your TIN number.
- Determine your revenue threshold (based on 2022 income).
- Identify your business activities.
- Identify your MSIC code (if necessary)
The Number of Data Fields Required For E-Invoice Preparation
- 55 data fields for e-invoice
- 12 additional fields applicable for certain transactions under Annexure
Basic Information Required for E-Invoice (From Buyer)
- Tax Identification Number (TIN Number) (if Applicable)
- Business Registration Number (BRN) / NRIC Number
- SST Registration Number (If Applicable)
- Name of Buyer as per Company Registration, NRIC No, or Passport
- Address
- Phone Number
- Email Address
- MSIC Code (If Applicable)
E-Invoice Process
Method of E-Invoice Issuance
E-Invoice Process (Web Portal / Mobile Apps)
E-Invoice Process (Point-of-Sales System)
E-Invoice Process (MyInvoice Mobile Apps)
Single E-Invoice VS Consolidated E-Invoice
| Single E-Invoice | Consolidated E-Invoice |
|---|---|
| An invoice issued to a customer for a single transaction. | Combines multiple transactions or sales into a single document. |
Example:
Sales for January 2024 from 01.01.2024 to 31.01.2024 can be consolidated into one invoice for e-invoice validation and submission.
(Note: Submissions must be made within 7 days after the month ends)
Activities That Do Not Allow Consolidated E-Invoices
- Automotive
- Aviation
- Luxury goods & jewellery
- Construction
- Wholesalers & retailers of construction materials (e.g., hardware shops)
- Licensed betting and gaming
- Payments to agents/dealers/distributors
Statement / Bills on a Periodic Basis
- Suppliers are required to issue e-Invoice as proof of income and/or proof of expense for items that are shown in the statement / bill.
- In other words, Suppliers are allowed to include the amount owed by Buyers to the Supplier as well as payment / credit to Buyers in the same e-Invoice.
- IRBM allows Suppliers that issue statements / bills on a periodic basis to issue e-Invoice in the format of XML or JSON for IRBM’s validation and convert the validated e-Invoice into visual presentation in the form of statements / bills, to be sent to Buyers.
- Supplier is allowed to create and submit e-Invoice for IRBM’s validation in accordance with their respective issuance frequency (e.g., monthly, bi-monthly, quarterly, bi-annually, annually)
- These industries / sectors include but not limited to:
- Digital / Electronic payment
- Financial services, including banking and financial institutions
- Healthcare
- Insurance
- Stockbroking
- Telecommunications
Rejection and Cancellation of e-invoice
- Once the e-invoice is validated by the LHDN, the seller and buyer are allowed to cancel and reject the e-invoice within the stipulated time of 72 hours, provided they have valid reasons.
- Any amendments to the e-invoice after 72 hours of validation must be made through a credit note, debit note, or refund note.
E-Invoice for Agents, Dealers, Distributors & Affiliates
Employers must issue a self-billed e-invoice on behalf of agents, dealers, and distributors to document commission or fee payments.
Example Scenario:
- Foo (Agent) works as a sales agent at AAA Auto Sdn Bhd (Seller).
- Foo is entitled to a 10% commission for every car sold.
- Foo sells a RM 450,000 EV car to Roslan (Buyer).
Steps:
Step 1: AAA Auto Sdn Bhd issues an e-invoice to Roslan (Buyer) (mandatory for the automotive industry).
Step 2: AAA Auto Sdn Bhd issues a self-billed e-invoice to Foo (Agent) for the commission earned.
e-Commerce Transactions
- E-commerce transaction means any sale or purchase of goods or services, conducted over any networks by methods specifically designed for the purpose of receiving or placing of orders.
- An e-commerce transaction can be between various parties, such as enterprises, households, individuals, governments, and other public or private organizations.
- Upon implementation of e-Invoice, e-commerce platform providers are responsible to assume the role of Supplier in facilitating the issuance of:
- E-Invoice (upon Purchaser’s request); or
- Receipt (if no e-Invoice is requested by the Purchaser) to the Purchaser for the transaction.
Cross-Border Transactions
Cross-border transactions involve goods sold or services provided by a foreign seller to a Malaysian buyer or vice versa.
| Imported Goods and Services | Exported Goods and Services |
|---|---|
| Foreign sellers are not required to implement Malaysia’s e-invoice. | Malaysian sellers must implement Malaysia’s e-invoice. |
| Malaysia-based buyers must issue self-billed e-invoices. | A generic TIN number is provided for foreign buyers. If not available, the local seller will use the general TIN number. |
Self-Billed e-invoice
- When a sale or transaction is concluded, an e-Invoice is issued by Supplier to recognize income of the Supplier (proof of income) and as a record for purchases made / spending by Buyer (proof of expense).
- However, there are certain circumstances where another party (other than the Supplier) (Buyer) will be required to issue a self-billed e-Invoice.
- For e-Invoice purposes, Buyer shall issue self-billed e-Invoices for the following transactions:
- Payment to agents, dealers, distributors, etc.
- Goods sold or services rendered by foreign suppliers
- Profit distribution (e.g., dividend distribution)
- Electronic commerce (“e-commerce”)
- Pay-out to all betting and gaming winners
- Transactions with individuals (who are not conducting a business)
- Interest payment, except:
- Businesses (e.g., financial institutions, etc.) that charge interest to public at large (regardless of whether they are businesses or individuals);
- Interest payment made by employee to employer; and Interest payment made by foreign payor to Malaysian taxpayers.
- Claim, compensation or benefit payments from the insurance business of an insurer
Employee’s Benefits / Claims & Reimbursement
- Employees are required to request a validated e-invoice from the supplier for claiming purposes (whenever possible).
- The e-invoice can be issued any the situation as follows:
- E-invoice issued under the employee’s name
- Using the existing document issued by the supplier
- In the situation when the bills/invoice issued by the foreign supplier:
- Employee can use the existing bills/invoice issued by the foreign supplier
- No requirement for the employee to issue self-billed e-invoice
General Tax Identification Number (TIN)
| General TIN Number | Situation of Usage |
|---|---|
| “EI00000000010” as General Public’s TIN | – Individual’s (i.e., Supplier, Buyer, Shipping Recipient) TIN in the e-Invoice for Malaysian individual where the individual only provides MyKad / MyTentera identification number – Buyer’s TIN in the consolidated e-Invoice – Supplier’s TIN in the consolidated self-billed e-Invoice |
| “EI00000000020” as Foreign Buyer’s / Foreign Shipping Recipient’s TIN | – Buyer’s TIN in the e-Invoice for non-Malaysian individual where the individual buyer only provides passport number / MyPR / MyKAS identification number – Buyer’s TIN for export transactions where foreign buyer’s TIN is not available or not provided – Shipping Recipient’s TIN for where foreign shipping recipient’s TIN is not available or not provided |
| “EI00000000030” as Foreign Supplier’s TIN | – Supplier’s TIN in the e-Invoice for non-Malaysian individual where the individual supplier only provides passport number/ MyPR/ MyKAS identification number (applicable for self-billed e-Invoice) – Supplier’s TIN for import transactions where foreign supplier’s TIN is not available or not provided (applicable for self-billed e-Invoice) |
| “EI00000000040” as Buyer’s TIN | – Buyer’s TIN for transactions involving the following persons: > Government > State government and state authority Government authority > Local authority > Statutory authority and statutory body > Exempt institutions that are not assigned with TIN |
MyInvois Portal
The MyInvois portal is a platform developed by the LHDN to facilitate the implementation of the electronic invoicing (e-invoicing) system in Malaysia. This portal aims to streamline and digitize the invoicing process for businesses, enabling them to generate, send, receive, and store invoices electronically.
Key Features included
- E-invoice Generation and Submission: Businesses can create and submit invoices electronically through the portal.
- Compliance: Ensures that invoices meet the regulatory requirements set by the LHDN.
- Data Security: Implements measures to secure invoicing data and protect sensitive business information.
- Integration: Allows integration with existing accounting and invoicing software used by businesses.
- Real-time Processing: Facilitates real-time processing and validation of invoices.
- Record Keeping: Provides a digital repository for storing and accessing historical invoices.
First Time Login
- For the application of ‘Company Director’ role and the appointment of ‘Company Representative’ role by the Director.
- First Time Login must be login from the Mytax Portal of the appointed Company Director.
- Applications for the role of ‘Company Director’ for sole proprietorship businesses and Labuan Entities are not yet available.
- Appointments of ‘Company Representative’ are also required through Company Director MyTax Portal.
Impact of E-Invoice Implementation
| Positive Impacts | Challenges |
|---|---|
| All business transaction reporting is expected to be digitized | Initial costs related to software adoption and training. |
| Enhanced tax compliance and collection | Ensuring the security of digital transactions and safeguarding sensitive information is crucial. |
| Increased operational efficiency | Integration of e-invoicing systems with existing accounting and ERP systems may require technical adjustments. |
| Improved transparency and accountability |
What to Expect from E-Invoice Implementation:
- The invoice is final once created and verified by LHDN. No edits are allowed after creation.
- Adjustments must be made through additional debit notes, credit notes, or refund notes.
- No more backdated or post-dated transactions.
- Manual invoices (e.g., Excel/Word) are no longer permitted.
Failing to issue an e-invoice will be penalized under section 120(1) of the Income Tax Act, 1967, with a minimum penalty of RM 200 and a maximum of RM 20,000-, or 6-months imprisonment, or both.