As Malaysia embraces the digital age, e-Invoicing is poised to revolutionize the way businesses operate. Beyond replacing paper with digital documents, e-Invoicing in Malaysia offers a robust ecosystem for secure and automated data exchange.
From B2B transactions to B2C interactions, e-Invoicing opens a world of possibilities, enabling real-time transaction verification and simplifying tax compliance. Furthermore, e-Invoicing enhances transparency and traceability within the supply chain, minimizing fraud risks and facilitating dispute resolution.
Malaysia is embracing e-Invoicing, a transformative initiative revolutionizing business transaction. But with any significant change, questions arise, particularly concerning who falls under the e-Invoicing umbrella.
In this article, we will discuss everything about e-Invoicing in Malaysia, clarifying who needs to comply and equipping businesses with the knowledge to navigate this digital evolution.
What is E-Invoicing in Malaysia?
E-Invoicing in Malaysia refers to the digitalization of transactional documents between sellers and buyers such as invoices, credit/debit notes, replacing traditional paper or electronic formats like images, PDFs, and excel sheets. The new electronic format, known as an e-Invoice, serves as a digital proof of the transaction.
By embracing e-Invoicing, Malaysia aims to streamline and modernize the invoicing process, reducing reliance on paper documentation and enhancing efficiency in business transactions. This transition to digital invoices facilitates a more seamless and standardized approach to financial transactions within the Malaysian business landscape.
E-Invoicing Authority in Malaysia
The Inland Revenue Board of Malaysia (IRBM) spearheads e-Invoicing in Malaysia, overseeing compliance and ensuring smooth implementation. To provide clear guidance for businesses, IRBM issued comprehensive e-Invoice guidelines in July 2023. These guidelines delve into the key aspects of e-Invoicing, including:
- Implementation methodology: Outlining the phased approach for mandatory adoption based on company turnover.
- Impact on compliance: Clarifying tax reporting requirements and ensuring seamless integration with existing systems.
- Record keeping: Defining appropriate e-Invoice storage and retrieval best practices.
- Common questions and concerns: Addressing anxieties and providing readily available information for informed decision-making.
Furthermore, IRBM has partnered with the Malaysian Digital Economy Corporation (MDEC) through a Memorandum of Understanding (MoU) to strengthen collaboration on the e-Invoicing initiative. This collaboration leverages MDEC’s expertise in digital transformation to promote interoperability and encourage wider adoption by businesses across the country.
Who is covered under E-Invoicing in Malaysia?
The scope of e-Invoicing in Malaysia is broad, encompassing various transaction types and business entities. Here’s a breakdown:
Business-to-Business (B2B): All B2B transactions fall under the mandatory e-Invoicing category.
Business-to-Government (B2G): Similar to B2B, e-Invoicing is mandatory for all B2G transactions.
Business-to-Consumer (B2C): For B2C transactions, issuing e-Invoices to individual consumers isn’t mandatory. However, within seven calendar days after the month-end, sellers are obligated to aggregate all individual invoices or receipts and issue a consolidated e-Invoice. Also, Buyers can request an e-Invoice from the Supplier within a month of receiving the initial receipt. Suppliers have flexibility in implementing methods for Buyers to request e-Invoices conveniently.
Self-billed e-Invoice: In certain circumstances, a party other than the supplier is permitted to issue a self-billed e-Invoice on behalf of the supplier in Malaysia. Self-billed e-Invoices are applicable to specific transactions, including payments to agents, dealers, and distributors, goods or services provided by foreign suppliers, profit distribution (e.g., dividends), e-commerce transactions (with details to be released by the Inland Revenue Board – IRB), payouts to betting and gaming winners, and acquisitions from individuals not conducting a business.
When a buyer (payer) is obligated to issue a self-billed e-Invoice, they assume the role of the supplier (payee) and must submit the self-billed e-Invoice to the IRB for validation. Once validated, the buyer (payer) can use the e-Invoice as proof of expense for tax purposes. This flexibility in e-Invoice issuance facilitates various transactions, ensuring compliance and transparency in tax documentation.
Who is Exempted from E-Invoicing in Malaysia?
In Malaysia, certain individuals are exempt from e-Invoicing, including the issuance of self-billed e-Invoices:
- 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
- Government
- 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
How to Determine the Turnover for e-Invoicing in Malaysia?
As Malaysia gradually rolls out e-Invoicing, businesses need to ascertain their compliance requirements based on turnover thresholds.
- Audited Financial Statements: Businesses need to analyze their audited financial statements for the financial year 2022. Focus on the annual turnover figure stated in the statement of comprehensive income.
- Tax Returns: Businesses need to review tax returns for the year of assessment 2022. Again, pinpoint the annual turnover figure indicated.
Once both the figures are in place, whichever reflects the higher turnover becomes the benchmark for your e-Invoicing compliance timeline.
By comparing your turnover with these thresholds, you can easily determine your compliance timeline and ensure a smooth transition towards e-Invoicing.
E-Invoicing in Malaysia Implementation Timeline:
Malaysia’s e-Invoicing journey is phased, ensuring a smooth transition for businesses. Here are brief details of the key dates:
- August 1, 2024: Businesses with an annual turnover exceeding MYR 100 million became the first to adopt mandatory e-Invoicing.
- January 1, 2025: The threshold drops to MYR 25 million, encompassing more businesses.
- July 1, 2025: E-Invoicing becomes mandatory for all businesses, regardless of turnover.
How Can Businesses Get Started with E-Invoicing in Malaysia?
- E-Invoicing Service Providers: E-Invoicing Service Providers like IRIS offer comprehensive e-Invoicing solutions, including software integration and compliance support. Choosing to work with service providers can ease the entire process and make your transition seamless without disrupting your existing accounting systems. .
- Direct Integration: Businesses with robust IT infrastructure can opt for direct integration with the e-Invoicing platform.
- Middleware Solutions: For businesses without extensive IT resources, middleware solutions bridge the gap between existing accounting systems and the e-Invoicing platform.
Conclusion:
E-Invoicing in Malaysia presents a significant step towards a more efficient and transparent business environment. Understanding who needs to comply and the available options empowers businesses to embrace this digital transformation with confidence. Remember, the earlier you prepare, the smoother your transition will be. So, get informed, choose the right solution, and get ready to ride the e-Invoicing wave alongside Malaysia’s digital journey.
Don’t underestimate the competitive edge that e-Invoicing offers. In today’s dynamic Malaysian market, embracing digital efficiencies can be the difference between staying afloat and surging ahead. Imagine a future where invoices seamlessly zip through the digital airwaves, eliminating mountains of paperwork and manual data entry. This is the reality e-Invoicing brings.
Be a pioneer in Malaysia’s digital future, where e-Invoicing empowers your business to operate with greater agility, make informed decisions, and ultimately, thrive.
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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.
