In recent years, Malaysia has made significant strides in modernizing its tax administration system. One of the pivotal steps in this direction is the introduction of e-invoicing. The implementation of e-invoicing in Malaysia is now required by law, as mandated by the regulations issued by the Inland Revenue Board of Malaysia (IRB), or Lembaga Hasil Dalam Negeri Malaysia (LHDN / HASiL).
This article provides comprehensive guidelines on e-invoicing implementation, aimed at helping businesses navigate this new mandate effectively.
Overview of e-invoicing Implementation in Malaysia
In March 2023, the Inland Revenue Board of Malaysia (IRB), or Lembaga Hasil Dalam Negeri Malaysia (LHDN / HASiL) announced the mandatory adoption of e-invoicing. This phased implementation plan aims to make all companies compliant by 2027. However, in the Budget 2024 tabled by the government in October 2023, the implementation timeline was revised, moving the mandatory adoption of e-invoicing for all businesses forward by 18 months to July 2025.
Who Needs to Comply?
e-invoicing Malaysia applies to all persons in Malaysia. All individuals and legal entities are required to comply with e-Invoice requirement, including:
- Associations
- Body of persons
- Branch
- Corporations
- Business trusts
- Property trust
- Property trust fund
- Partnerships
- Co-operative societies
- Limited liability partnerships
- Real estate investment trusts
- Representative offices and regional offices
- Trust bodies and unit trusts
Initially, businesses with an annual turnover exceeding RM 100 million are required to comply starting from 1 August 2024. By July 2025, all businesses registered in Malaysia must comply with e-invoicing for all B2B, B2G, and B2C transactions.
Key Updates for e-invoicing Implementation in Malaysia 2024
The LHDN / HASiL has provided e-Invoice Guideline (Version 3.1 published on 19 July 2024), e-Invoice Specific Guideline (Version 2.2 published on 28 June 2024), General FAQ , Software Development Kit (SDK) and SDK FAQ to assist businesses in the transition. Key updates in the e-invoicing Malaysia guidelines include:
- Reduction of Data Entry Points: Micro-businesses now need to fill only 6 out of the previously required 55 data entry points for e-Invoices. This change significantly reduces the burden on businesses and simplifies the invoicing process.
- Monthly Consolidated Invoices: Based on the latest FAQ published by the LHDN / HASiL, businesses that do not exceed RM150,000 for goods sold or for services performed are not required to issue receipts and are not required to issue consolidated e-Invoice to LHDN / HASiL. This change aims to ease implementation for small businesses.
- Enhanced Security Measures: The guidelines emphasize data security and address concerns about data safety from potential hackers. Businesses must ensure their systems comply with these enhanced security protocols.
Performance of e-invoicing Pilot Project 2024
As of July 2024, the pilot project has expanded to include 90 companies, up from the initial 50. The aim is to identify and resolve any arising issues promptly. Companies participating in the pilot project have reported improvements in efficiency and a reduction in invoice processing errors. The LHDN / HASiL is continuously updating the e-invoicing guidelines and technical documentation to support smooth implementation.
Latest e-invoicing Implementation Timeline 2024
The latest updates from the Inland Revenue Board of Malaysia (IRB), or Lembaga Hasil Dalam Negeri Malaysia (LHDN / HASiL) have revised the e-invoicing implementation timeline:
- 1 August 2024: Mandatory for taxpayers with annual turnover of more than RM100 million.
- 1 January 2025: Mandatory for taxpayers with annual turnover of more than RM 25 million and up to RM 100 million.
- 1 July 2025: Mandatory for all other taxpayers.
Understanding the e-invoicing Workflow
The e-invoicing process involves several key steps:
- Creation / Submission: The supplier generates and submits an e-Invoice to the LHDN / HASiL for validation.
- Validation: Near real-time validation is performed by the LHDN / HASiL, ensuring implementation with required standards.
- Notification: Both the supplier and buyer are notified of the validated e-Invoice.
- Sharing: The validated e-Invoice embedded with a QR code / visual representation of the validated e-Invoice is shared with the buyer.
- Rejection/Cancellation: e-invoicing can be rejected or canceled with justification within 72 hours.
- Storing: All validated e-Invoices will be stored in LHDN / HASiL’s database
- Reporting and Dashboard Services: Both Supplier and Buyer will have the option to request and retrieve e-Invoice
The 2 e-Invoice Models
Malaysia offers two mechanisms for transmitting e-invoicing to the LHDN / HASiL:
- MyInvois Portal: A web-based platform provided at no cost, suitable for small and medium-sized enterprises (SMEs).
Application Programming Interface (API): This allows for direct integration between the taxpayer’s system and LHDN / HASiL’s systems, ideal for larger businesses with substantial transaction volumes. It requires an initial investment in technology and system adjustments.
Scenarios Requiring e-invoicing
e-invoicing are required in various scenarios, including:
- Proof of Income: For all sales or transactions to recognize taxpayer income.
- Proof of Expense: For documenting purchases, returns, and discounts.
Preparing for e-invoicing
- Identify Requirements: Determine your implementation timeline for e-invoicing based on turnover and business activities.
- Choose Transmission Method: Decide between using the MyInvois Portal or API.
- Getting Ready: Ensure your invoicing systems are capable of generating and transmitting e-invoicing.
Educate Staff: Train relevant personnel on the new e-invoicing processes and implementation requirements.
How to Evaluate Options for Data Integration in Your e-invoicing Flow
To ensure seamless data integration for e-invoicing implementation, businesses need to evaluate their options carefully:
- Direct Integration via API
- Pros: Real-time invoice generation, direct submission to LHDN / HASiL without human intervention, suitable for businesses with substantial transaction volumes.
- Cons: Requires frequent updates and significant IT resources, can be costly due to system reconfigurations and maintaining stable connections.
- Integration through Middleware
- Pros: Limited changes required to existing systems, regular updates to meet implementation, various modes available including desktop and cloud applications.
- Cons: May involve dependency on third-party service providers, potential costs for middleware solutions.
When choosing between these options, consider the following factors:
- Volume of Transactions: Higher volumes may benefit more from direct API integration.
- Current System Setup: Evaluate compatibility with existing ERP or accounting systems.
- Resource Availability: Consider the IT resources and budget available for integration and maintenance.
- Scalability: Ensure the chosen solution can adapt to future regulatory changes and business growth.
Conducting an impact assessment and engaging with IT and accounting teams early can help in selecting the most suitable integration method for your business.
Industry-Specific e-invoicing Implementation
The e-invoicing in Malaysia can vary based on industry-specific requirements:
- Telecommunication: Telco service providers can continue their current billing arrangements. They are allowed to make adjustments to the previous bill/ statement by either reflecting the adjustment in the next cycle bill/ statement, or issuing credit note/ debit note/ refund note e-Invoice, in accordance with the current business practice. Prepaid plan invoicing remains unchanged, and the e-Invoice treatment for the rental of premises by the telecommunication service provider depends on whether the landlord is an individual who is not conducting a business or not.
- Oil & Gas: Contractors must use their Tax Identification Number (TIN) for sales transactions. Joint costs and sole costs require different TINs, and current invoicing arrangements would be applicable upon implementation of e-Invoice for transactions involving agents and supplementary payments.
- E-commerce: E-commerce platform providers must issue e-Invoices for charges imposed to merchants for the use of the platform. The e-commerce platform provider is also responsible to issue a self-billed e-Invoice to record the merchant’s income earned from transactions concluded through the e-commerce platform.
Key Resources on e-invoicing Implementation in Malaysia 2024
For more detailed information and updates on e-invoicing, you can exploreYYC taxPOD. YYC taxPOD offers a robust, user-friendly learning platform with comprehensive resources and tools to help you prepare for implementing e-invoicing. You will be able to get the latest insights on e-invoicing in Malaysia through its “e-invoicing Mastery Course”.
Preparing for the Transition
Businesses should start preparing for the transition now. The LHDN / HASiL encourages early adoption to allow businesses familiarize themselves with the system and ensure implementation by the mandatory deadlines. Utilizing free software and resources can help businesses get their books in order ahead of time.
How YYC taxPOD Can Help Businesses in Malaysia
To stay ahead with the latest updates in e-invoicing implementation in Malaysia and ensure a seamless transition, consider enrolling in the YYC taxPOD Masterclass. Get unlimited access to tax-saving knowledge and resources on the latest e-invoicing guidelines in Malaysia.
Visit YYC taxPOD to book a demo session today and transform how your business handles e-invoicing in Malaysia.
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