Malaysia is moving towards implementing e-invoicing to streamline invoicing processes, enhance tax compliance, and support the digital economy. This article provides a comprehensive overview of e-invoicing FAQs, exemptions, and technical aspects, helping Small and Medium Enterprises (SMEs) and Multinational Corporations (MNCs) prepare for this significant transition.
Table of Contents
Key FAQs About Implementation of e-invoicing in Malaysia 2024
What is e-invoicing?
e-invoicing involves the electronic exchange of invoice data between suppliers and buyers, validated in near real-time by the Inland Revenue Board of Malaysia (HASiL). Malaysia will adopt the Continuous Transaction Control (CTC) model, ensuring that all e-Invoices meet regulatory standards before they are accepted.
What Is The e-invoicing Implementation Timeline?
The implementation will occur in phases:
- 1 August 2024: Mandatory for businesses with an annual turnover exceeding RM100 million.
- 1 January 2025: Mandatory for businesses with an annual turnover of more than RM25 million and up to RM100 million.
- 1 July 2025: Mandatory for all other taxpayers.
What are the Laws and Regulations on e-invoicing?
Section 82C of the Income Tax Act 1967 outlines the duty to issue electronic invoice, ensuring compliance with Malaysia’s e-Invoice system.
Is e-invoicing Mandatory? To Whom Will e-invoicing Apply?
e-Invoice is applicable to all persons in Malaysia and is required for all types of income and expenses. However, there are exemptions as outlined in the e-Invoice General Guideline and e-Invoice Specific Guideline. Kindly note that the exemptions are subject to periodic review and updates.
How Does the Validation Process Work?
The e-Invoice must be generated in the form of XML or JSON file format, in accordance with the requirements outlined by the HASiL for validation purpose.The HASiL will validate the e-Invoice in near real-time, generally in less than two seconds. This process includes a series of checks to ensure the e-Invoice conforms to the format and data structure specified by the HASiL. Upon validation, the HASiL will assign a Unique Identifier Number to each e-Invoice.
Can Businesses Use Non-Peppol Technology Providers?
Yes, businesses in Malaysia can use non-Peppol technology providers to transmit e-Invoices via API mechanisms, offering flexibility in choosing suitable technology solutions. The HASiL provides two primary e-Invoice transmission mechanisms:
- MyInvois Portal – A free portal hosted by the HASiL, suitable for small and medium-sized enterprises (SMEs) with lower transaction volumes.
- API Integration – Direct integration through API into HASiL’s systems or through middleware solutions. This option is ideal for large businesses with substantial transaction volumes, enabling direct data transmission between the business’s ERP system and the HASiL’s MyInvois system.
What Should Businesses Do If They Face Issues With e-Invoice Validation?
If an e-Invoice is returned unvalidated, an error message will be displayed. Businesses should review the error message, correct any mistakes, and resubmit the invoice for validation.
Can Taxpayers Voluntarily Participate in e-invoicing Implementation in Malaysia Before Their Mandated Timeline?
Yes, taxpayers can opt to voluntarily participate in e-invoicing implementation before their mandated timeline, regardless of their annual turnover or revenue.
What Are the Requirements for Rejection or Cancellation of e-Invoice?
e-Invoice can be rejected or cancelled within 72 hours of validation. If this timeframe is exceeded, adjustments must be made through issuing a credit note, debit note, or refund note e-Invoice.
Introducing Consolidated e-Invoice in Malaysia
What is a Consolidated e-Invoice?
A consolidated e-Invoice allows businesses to combine all sales transactions conducted within a month into a single electronic invoice. This approach is especially useful for businesses with high transaction volumes or complex operations, simplifying the invoicing process and easing compliance.
Why is it Being Implemented?
The introduction of consolidated e-Invoices is part of Malaysia’s broader initiative to digitize and streamline the country’s invoicing and tax reporting systems. The main objectives are to enhance transparency, improve tax compliance, and reduce administrative burdens for businesses. By allowing the consolidation of invoices, the government aims to provide businesses with a more manageable and efficient way to handle invoicing, especially during the transition to mandatory e-invoicing.
When and How Will it be Implemented?
The mandatory implementation of e-invoicing began on August 1, 2024, starting with companies having annual revenues exceeding RM100 million. During the initial six-month period, all businesses, regardless of size, have the flexibility to issue consolidated e-Invoices. This relaxation period is intended to help businesses adjust to the new system without facing immediate penalties for non-compliance. Specifically, businesses can consolidate their transactions into a single e-Invoice each month, with the option to include all relevant transaction details in the “Product or Service Description” field. (Malay Mail)
Special Considerations
- Flexibility: The government has provided a six-month relaxation period during which businesses can issue consolidated e-Invoices without fear of prosecution under Section 120 of the Income Tax Act 1967, as long as they comply with the consolidated e-invoicing requirements .
- MSMEs: Micro, small, and medium enterprises (MSMEs) with annual gross takings exceeding RM150,000 for goods sold or for services performed are required to issue serially numbered receipts for all transactions as per section 82(1)(b) of the Income Tax Act 1967. These MSMEs are then required to include the receipt reference number in the consolidated e-Invoice issued for HASiL’s validation. MSMEs below the abovementioned threshold are not required to issue receipts and are not required to issue consolidated e-Invoice to HASiL, recognizing the unique challenges these businesses face in adhering to strict invoicing regulations.
This period of flexibility is crucial for ensuring a smooth transition to the new e-invoicing system, allowing businesses to adjust their processes and systems accordingly. The full implementation is expected to be more effective once this adjustment period concludes. For more detailed information, businesses are encouraged to consult the latest guidelines issued by the HASiL and related professional advisories.
e-invoicing for B2C Transaction
Overview
B2C (Business-to-Consumer) transactions involve the sale of goods or services directly from businesses to individual consumers. These transactions are common in industries like retail, e-commerce, and hospitality, where the end consumer is the primary market. Typically, invoices in B2C transactions are generated using computer systems or POS (Point of Sale) systems and are shared either as hard copies or digitally through email. Unlike B2B invoices, B2C e-Invoices often contain less detailed buyer information, as they do not require extensive documentation.
B2C e-Invoicing in Malaysia
Scope and Requirements
B2C e-invoicing is now mandatory in Malaysia as part of the government’s e-invoicing initiative. This requirement covers all transactions between businesses (suppliers) and end consumers (buyers), including those for consumption supplies like groceries, utility bills, and e-commerce purchases. Suppliers are obligated to issue e-Invoices for all B2C transactions, which serve as proof of income for suppliers and as proof of expense for buyers for claims and reimbursements. Certain end consumers and specific businesses may not require e-Invoices if they don’t need them as proof of expense, but the obligation to issue e-Invoices still lies with the suppliers.
Implementation Timeline
The phased implementation of B2C e-invoicing began on August 1, 2024. The HASiL has set a timeline for full compliance, starting with businesses with specific turnover or revenue and gradually extending to all businesses.
B2C e-Invoicing Process
General Process
Currently, suppliers issue receipts and invoices in hardcopy or softcopy to buyers. With the implementation of e-invoicing, suppliers must issue e-Invoices for all transactions. The HASiL allows suppliers to consolidate monthly transactions with buyers who do not require e-Invoices into a single e-Invoice, easing the administrative burden.
Scenario 1: Buyer Requests an e-Invoice
When a buyer requests an e-Invoice, the supplier must collect the necessary information, including:
- Buyer’s full name (as per official documents)
- Taxpayer Identification Number (TIN) or Buyer’s registration/identification/passport number
- Buyer’s residential address
- Buyer’s contact number
- Buyer’s SST registration number (if applicable)
The supplier then completes the remaining e-Invoice fields and issues the e-Invoice, which is validated through the MyInvois Portal or API integration. The buyer confirms the e-Invoice, which serves as proof of expense for tax purposes.
Scenario 2: Buyer Does Not Require an e-Invoice
If buyers do not require an e-Invoice, suppliers can follow current business practices by issuing normal receipts. These receipts are not submitted to the HASiL for validation. Instead, suppliers can aggregate transactions and generate a consolidated e-Invoice monthly, submitted to the HASiL within seven days after the month’s end. This consolidation must adhere to specific HASiL guidelines, including listing each receipt as separate line items, maintaining a continuous receipt number sequence, and possibly splitting receipts into several consolidated e-Invoices to meet requirements.
Buyer Details Required for e-Invoice Generation
When an e-Invoice is requested, the following details must be provided by the buyer:
- Buyer’s Name: The individual’s name, as per official identification documents.
- Buyer’s TIN or Identification Number: Depending on the buyer’s residency status, this could be a TIN, MyKad/MyTentera number, or passport number.
- Buyer’s Address: The residential address of the buyer.
- Buyer’s Contact Number: A valid telephone number.
- Buyer’s SST Registration Number: If applicable, otherwise marked as “NA.”
FAQs on e-Invoice for B2C Transactions
- Does e-invoicing apply to B2C transactions?
- Yes, e-invoicing is applicable to B2B, B2C and B2G transactions.
- Can a supplier issue a receipt instead of an e-Invoice to a buyer?
- Where buyers do not require an e-Invoice, suppliers may issue receipts to the buyers and aggregate all receipts on a monthly basis. They must then submit a consolidated e-Invoice to HASiL within seven calendar days after the month-end, except for activities / transactions stipulated under section 3.7 of the e-Invoice Specific Guideline.
Self-Billed e-Invoice in Malaysia
Definition
A self-billed e-Invoice is issued by the buyer on behalf of the supplier in specific circumstances where the supplier is unable or not required to issue an invoice. This practice is used for certain transactions, such as payments to agents, foreign suppliers, and individuals not conducting business.
What are the conditions for issuing a self-billed e-Invoice?
The issuance of a self-billed e-Invoice is mandated under the following conditions:
- Payment to Agents, Dealers, and Distributors: When a business pays agents, dealers, or distributors, the business (buyer) must issue a self-billed e-Invoice. This is often required for commissions or other incentives.
- Goods Sold or Services Rendered by Foreign Suppliers: For transactions involving foreign suppliers who do not issue e-Invoices in accordance with Malaysian regulations, the Malaysian purchaser must issue a self-billed e-Invoice to document the expense for tax purposes.
- Profit Distribution: When distributing profits, such as dividends, the distributing entity must issue a self-billed e-Invoice to the recipients.
- E-commerce Transactions: E-commerce platform providers must issue self-billed e-Invoices for transactions conducted on their platforms, covering payments to merchants or service providers.
- Payouts to Betting and Gaming Winners: Licensed betting and gaming providers must issue self-billed e-Invoices for payouts to winners.(Note)
- Transactions with individuals who are not conducting a business (applicable only if the other self-billed circumstances are not applicable): For transactions with individuals not conducting a business, such as purchasing goods from a private seller, the buyer must issue a self-billed e-Invoice.
- Interest Payments: When paying interest, the payer (buyer) issues a self-billed e-Invoice to the recipient. Exceptions include interest payments made by financial institutions to the public, employee payments to employers, and foreign payors to Malaysian taxpayers.
- Insurance Claim, Compensation, or Benefit Payments: Insurers must issue self-billed e-Invoices for claim, compensation, or benefit payments to policyholders or beneficiaries.
Note: Pay-outs to winners in relation to betting and gaming (i) in casino and (ii)
What are the processes and requirements?
- Data Fields: The buyer must input various details, including the supplier’s name, TIN , business registration or identification number, address, and other relevant information.
- Submission: Self-billed e-Invoices must be submitted to the HASiL for validation. Once validated, the buyer uses the e-Invoice as proof of expense.
What are the examples?
- Foreign Supplier Transactions: A Malaysian company purchases goods from a foreign supplier who does not issue an e-invoice. The Malaysian company issues a self-billed e-invoice to document the purchase for tax purposes.
- Transactions with individuals not conducting business: A business buys a product from an individual not engaged in business activities. The business issues a self-billed e-invoice to document the transaction for tax purposes.
e-invoicing Exemptions in Malaysia
What Types of Income and Expenses Are Exempt from e-invoicing Malaysia 2024?
The HASiL acknowledged there are various challenges in issuing e-Invoices for certain types of income or expense. To ease the adoption of e-Invoice, an e-Invoice (including self-billed e-Invoice) is not required for the following:
- Employment income
- Pensions
- Alimony
- Specific dividend distributions
- Zakat
- Contract value for the buying or selling of securities or derivatives traded on a stock exchange or derivatives exchange in Malaysia or elsewhere
- Disposal of shares of a company incorporated in or outside Malaysia and not listed on the stock exchange, except where the disposer is a company, limited liability partnership, trust body or co-operative society
Who is exempted from implementing e-Invoice?
For the purposes of e-Invoice, the following persons are currently exempted from issuing e-Invoice (including issuance of self-billed e-Invoice):
(a) Ruler and Ruling Chief
(b) Former Ruler and Ruling Chief
(c) Consort of a Ruler of a State having the title of Raja Perempuan, Sultanah, Tengku Ampuan, Raja Permaisuri, Tengku Permaisuri or Permaisuri
(d) Consort of a Former Ruler of a State previously having the title of Raja Perempuan, Sultanah, Tengku Ampuan, Raja Permaisuri, Tengku Permaisuri or Permaisuri
(e) Government
(f) State government and state authority
(g) Government authority
(h) Local authority
(i) Statutory authority and statutory body
(j) Facilities provided by the above government, authority or body (e.g., hospital, clinic, multipurpose hall, etc.)
(k) Consular offices and diplomatic officers, consular officers and consular employees
(l) Individual who is not conducting business
(m) Taxpayers with an annual turnover or revenue of less than RM150,000
Hence, the above-mentioned persons are not required to issue an e-Invoice (including self-billed e-Invoice). For tax purposes, the receipts issued by the above-mentioned persons would be used as proof of expense.
For further detailed guidelines, businesses are advised to consult the official documents and updates provided by the HASiL.
Will the e-invoicing Exemptions Be Reviewed and Updated?
Yes, the list of exemptions will be periodically reviewed and updated by the HASiL to ensure they remain relevant and effective.
Are Entities Owned by Exempted Persons Required to Implement e-invoicing?
Yes, even entities owned by exempted persons must comply with the e-invoicing implementation timeline. This ensures all businesses adhere to the same regulatory standards.
Handling Transactions with Exempted Persons
For transactions involving exempted persons, suppliers can use a general TIN number specified in the e-Invoice specific guidelines. This simplifies the invoicing process and ensures compliance with exemption rules.
Additional Queries
Can e-Invoice be Issued for International Transactions?
Yes, e-Invoice in Malaysia are applicable to both local and international transactions. Detailed guidelines on handling these transactions are provided by the HASiL.
How to Handle e-Invoice for Refundable Deposits?
Refundable deposits do not require e-Invoice. Instead, businesses should issue e-Invoice only when the actual supply of goods or services is completed.
Penalties and Exemptions for Non-Compliance to e-invoicing in Malaysia
The HASiL has outlined the penalties related to non-compliance with the new e-invoicing regulations. Starting from August 1, 2024, businesses are expected to adhere to these regulations, with a six-month relaxation period allowing for the issuance of consolidated e-Invoices without penalties. Here are the key details:
Penalties for Non-Compliance
- Fines and Imprisonment: Non-compliance with e-invoicing regulations can lead to fines ranging from RM200 to RM20,000 or imprisonment for up to six months, or both. This is in accordance with the guidelines set forth by the HASiL under the Income Tax Act 1967.
- Relaxation Period Flexibility: During the six-month relaxation period, all activities/industries can issue consolidated e-Invoices, including self-billed e-Invoices.Failure to perform consolidated e-Invoices during the relaxation period will result in penalty.
Exemptions and Special Provisions
- Consolidated e-Invoices: Businesses are allowed to issue consolidated e-Invoices, including self-billed e-Invoices, which can simplify the process by grouping multiple transactions into a single invoice. This is particularly useful for businesses dealing with complex transactions or multiple sales.
- Reduced Capital Allowance Claim Period: As an incentive, businesses that implement e-invoicing within the specified timeline may benefit from a reduced capital allowance claim period from three years to two years for ICT equipment and software purchases. This provision aims to encourage businesses to adopt the new system promptly.
These measures are part of the government’s efforts to facilitate a smooth transition to a fully digital invoicing system, ensuring businesses have adequate time to adapt and comply with the new regulations.
Benefits of e-invoicing for SMEs and MNCs in Malaysia
Increased Efficiency
e-invoicing automates the invoicing process, reducing manual tasks and paperwork. This significantly increases efficiency and productivity for both SMEs and MNCs.
Cost Savings
By eliminating the need for paper invoices and manual processes, e-invoicing Malaysia results in substantial cost savings. This includes savings on printing, mailing, and storage costs, as well as reduced manpower requirements.
Improved Accuracy
e-invoicing implementation minimizes the risk of human error during manual data entry and ensures accurate calculations, preventing mistakes that could lead to disputes or payment delays.
Faster Payment Cycles
e-Invoice are delivered instantly and processed more quickly than paper invoices, leading to faster payment cycles and improved cash flow for businesses.
Enhanced Integration with Digital Systems
e-Invoice can be easily integrated with other digital systems such as accounting software, ERP systems, and tax reporting tools. This integration simplifies financial data management and improves overall business operations.
Improved Traceability and Transparency
e-invoicing Malaysia provides a clear audit trail, making it easier to track invoices and payments, improving transparency and helping prevent fraud and non-compliance.
Regulatory Compliance
e-invoicing helps businesses comply with tax regulations in Malaysia. By adopting e-invoicing in Malaysia, businesses are better prepared to meet these requirements.
Data Analytics and Insights
The structured data from e-Invoice can be used for data analytics, providing businesses with valuable insights into their sales, expenses, and overall financial performance. This helps businesses identify trends, make predictions, and optimize their strategies.
For More Information
To explore the specific e-Invoicing challenges and solutions across various industries, continue reading to discover detailed insights into sectors such as petroleum operations, aviation, telecommunication, and tourism. The FAQs on the IRBM website offer comprehensive guidance tailored to the unique aspects of these industries, helping businesses navigate the new regulatory landscape. For more information, visit the official IRBM e-invoicing FAQs page.
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Conclusion
The introduction of e-invoicing in Malaysia represents a significant step toward modernizing the country’s tax system. By understanding the e-invoicing FAQs and e-invoicing exemptions, SMEs and MNCs can better prepare for compliance and benefit from the efficiencies offered by this digital transformation.
For more detailed information and the latest updates, businesses should refer to the official guidelines provided by the HASiL and other authoritative sources.
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