1. e-Invoice
An e-Invoice is the digital equivalent of a traditional paper invoice. It is an electronic document that outlines the details of a transaction between a buyer and a seller. The primary difference between an e-Invoice and a physical invoice is the format. Key features of an e-Invoice typically include:
- Structured data: Information is organized in a specific format, making it machine-readable.
- Digital format: Typically in XML or JSON format, as mandated by the Inland Revenue Board (IRB).
- Mandatory fields: As per the latest guideline, an e-Invoice has a total of 55 fields, covering various details such as the supplier’s information, buyer’s information, goods or services details, tax details, payment details, etc.
- Near real-time validation: e-Invoices will be validated by the IRB and a validation link will be assigned to the validated e-Invoice.
- Unique identification: A unique reference number will be assigned by the IRB.
- Security: Encrypted to protect sensitive information.
(A sample visual representation of an e-Invoice)
2. Consolidated e-Invoice
A consolidated e-Invoice is a single electronic document that combines multiple individual receipts, invoices, or transactions into one. This is typically used when a business has issued multiple invoices to a customer within a specific period (e.g., monthly) and the customer does not require an e-Invoice. It eliminates the need for issuing separate e-invoices for each transaction.
Consolidated e-Invoices typically apply to certain business-to-consumer (B2C) transactions. In cases where buyers do not require an e-Invoice, suppliers may issue a receipt or invoice to the buyers in line with current business practices. Subsequently, suppliers are required to aggregate these receipts or invoices and issue a consolidated e-Invoice as proof of income. Additionally, the IRB has set a specified timeframe for the submission of consolidated e-Invoices. According to the IRB’s guidelines, suppliers must submit consolidated e-Invoices to IRB within 7 calendar days after the month-end.
Additionally, as of July 26, 2024, the IRB has granted a 6-month relaxation period for the mandatory implementation of e-invoicing in Malaysia. During this time, businesses can issue consolidated e-Invoices for all transactions instead of individual e-Invoices, giving businesses more time to adjust to the new system and implement necessary changes.
(A sample visual representation of a consolidated e-Invoice)
Industries Prohibited from Issuing Consolidated e-Invoices:
According to the IRB’s guidelines, certain industries are prohibited from issuing consolidated e-Invoices. This implies that these industries must issue individual e-Invoices for each transaction. These industries include:
- Automotive
- Aviation
- Luxury goods and jewelry
- Construction
- Wholesalers and retailers of construction materials
- Licensed betting and gaming
- Payments to agents/dealers/distributors
3. Self-billed e-Invoice
A self-billed e-Invoice is an electronic document created and issued by the buyer instead of the seller. This typically occurs under specific circumstances outlined by the IRB. Scenarios where self-billed e-Invoices are applicable include:
- Payments to agents, dealers, distributors, etc.
- Goods sold or services rendered by foreign suppliers
- Profit distribution (e.g., dividend distribution)
- Electronic commerce (“e-commerce”) transactions
- Payouts to all betting and gaming winners
- Acquisition of goods or services from individual taxpayers (who are not conducting a business) (applicable only if the other self-billed circumstances are not applicable)
- Interest payments, except:
- Businesses (e.g., financial institutions, etc.) that charge interest to the public at large (regardless of whether they are businesses or individuals)
- Interest payment made by an employee to an employer
- Interest payment made by a foreign payor to Malaysian taxpayers
- Claim, compensation, or benefit payments from the insurance business of an insurer
Essentially, a self-billed e-Invoice is a deviation from the standard invoicing process, where the buyer assumes the role of the invoice issuer under specific conditions.
(A sample visual representation of a self-billed e-Invoice)
4. Credit Note/Debit Note/Refund Note
- Credit Note: A credit note is a document issued by a seller to a buyer to reduce the amount owed. This is typically done due to returned goods, pricing errors, or other discrepancies on a previous invoice. This can happen if:
- The buyer returns some items.
- There was a mistake in the price.
- The items were damaged or incorrect.
The credit note will list the original invoice’s details, explain why the credit is being given, and show the amount of money being reduced. It helps both the seller and buyer keep their financial records straight.
- Debit Note: A debit note is a document used to indicate that the buyer is requesting an increase in the amount owed to the seller. It’s essentially the opposite of a credit note. This can happen if:
- The buyer received damaged items.
- Incorrect quantities.
- Other issues with the order.
Debit notes include details such as the original invoice number, the reason for the debit, and the amount to be adjusted. The debit note serves as a formal request for a credit adjustment to the buyer’s account.
- Refund Note: A refund note is a document issued by a seller where there is a return of money to the buyer. This document confirms that the buyer will receive money back, often due to returned goods or cancelled services. This can happen if:
- The buyer returned goods because they were defective, damaged, or not as described.
- The order was cancelled before it was fulfilled.
- A service was not provided as expected.
Refund notes include details such as the original invoice number, the reason for the refund, and the amount to be refunded.
If an e-Invoice contains errors, the buyer may request rejection and the supplier can cancel the e-Invoice within 72 hours from the time of validation via the MyInvois Portal. If the e-Invoice is not rejected or cancelled within 72 hours, no cancellation would be allowed. Any subsequent adjustments would have to be made by issuing a new e-Invoice (e.g., credit note, debit note, or refund note e-Invoice).
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