A comprehensive guide to e-invoicing in Malaysia
Is your business prepared for the next phase of digital transformation in Malaysia? As technology continues to reshape industries, e-invoicing is evolving from an optional upgrade to a critical business function. With the Malaysian government set to roll out its new e-invoicing initiative, it’s time to assess how ready your business is for a seamless transition.
This comprehensive guide will delve into the significance of e-invoicing, the strategic advantages it brings, and the steps your business can take to stay ahead of the curve. Whether you’re an SME or a large enterprise, mastering e-invoicing could be the differentiator that ensures your competitiveness in Malaysia’s rapidly evolving digital economy.
What is e-invoicing?
E-invoicing, also known as electronic invoicing, refers to the exchange of invoices in a digital format. Instead of traditional paper invoices, e-invoices are created and sent electronically through a secure system. This eliminates the need for printing, postage, and manual data entry, streamlining the entire invoicing process.
Revised e-invoicing implementation timeline in Malaysia
The phased rollout of e-invoicing in Malaysia has reached its final stage, with full implementation set for July 2025. The timeline, based on annual turnover, has progressed as follows:
August 1, 2024: Businesses with an annual turnover of MYR 100 million or more successfully adopted the e-invoicing regulations.
January 1, 2025: Businesses with an annual turnover between MYR 25 million and MYR 100 million transitioned to e-invoicing as required.
July 1, 2025: All remaining businesses, regardless of size, must now comply with the e-invoicing regulations.
With these deadlines now in effect, businesses across Malaysia are fully immersed in the new regulatory landscape. Ensuring compliance not only avoids penalties but also allows businesses to capitalise on the operational efficiencies and transparency offered by e-invoicing.
Why is e-invoice being implemented in Malaysia?
The Malaysian government’s electronic invoice initiative isn’t just about ticking boxes. It’s driven by a desire to enhance transparency, efficiency, and competitiveness within the Malaysian economy. Here’s how e-invoicing benefits everyone involved:
For businesses:
Reduced costs: Save money on printing, postage, and document storage! E-invoicing automates manual tasks, streamlines processes, and frees up valuable resources.
Faster payments: Get paid quicker with instant electronic delivery and processing of invoices. No more waiting for cheques to clear!
Improved accuracy: Eliminate manual data entry errors, ensuring accuracy and consistency in your financial records.
Enhanced security: E-invoices offer robust security features, protecting your sensitive financial data from fraud and loss.
Real-time insights: Gain valuable insights into your invoicing data, enabling you to make informed business decisions.
For the Government (E-Filing LHDN):
Increased tax revenue: E-invoicing helps combat tax evasion and ensures accurate tax collection.
Improved compliance: Simplified reporting and filing processes make it easier for businesses to comply with tax regulations.
Transparency and efficiency: E-invoicing streamlines tax administration, saving time and resources for the government.
Foster international trade: Encourage and facilitate businesses to expand their horizons and engage in international trade more effectively.
For Consumers:
Faster refunds: Enjoy quicker processing of refunds and credit notes with e-invoices.
More transparency: Access your invoices easily and securely online, improving transparency and communication with businesses.
Who will be required to comply with the e-invoicing requirements?
As of the latest guideline from IRB, electronic invoices apply to all taxpayers undertaking commercial activities in Malaysia.
All individuals and legal entities are required to comply with e-Invoice requirements, including:
- Association
- Body of persons
- Branch
- Business trust
- Co-operative societies
- Corporations
- Limited liability partnership
- Partnership
- Property trust fund
- Property trust
- Real estate investment trust
- Representative office and regional office
- Trust body
- Unit trust
Transactions covered under Malaysia’s e-invoice
Transactions included:
Business-to-business (B2B): E-invoicing is mandatory for B2B transactions when the supply of goods and services ensures precise tax compliance and revenue collection.
Export transactions: All export-related activities are required to utilise e-invoicing, facilitating accurate tracking and compliance on an international scale.
Exemptions:
Consumer-to-Business (C2B) Transactions: E-invoicing does not apply here, simplifying consumer interactions.
Certain Exempted Supplies: Considering their unique nature, specific categories like financial services and insurance are not required to adopt e-invoicing.
Special Considerations:
For B2C transactions, businesses issue standard invoices or receipts to consumers and later compile these into a single e-invoice for regulatory purposes.
In the case of business-to-government (B2G), the e-invoicing process aligns with B2B protocols, ensuring consistency across different transaction types.
Different types of e-invoices
Here’s the scoop on what documents you need to go digital with under Malaysia’s e-invoice system:
Invoices: These are essential for recording transactions between a supplier and a buyer. They include something known as a self-billed invoice, which helps you keep track of your expenses.
Credit notes: When a seller needs to adjust something on a previously issued invoice, they issue a credit note. It’s a way to correct the invoice amount without actually returning any money. Useful for fixing errors, applying discounts, or handling returns.
Debit notes: These are issued by sellers to add additional charges to an already-issued invoice. It’s like an amendment to the initial billing.
Refund notes: When a seller needs to document that they’ve given a refund to a buyer, they use a refund note.
By understanding and utilising these e-invoice types, businesses in Malaysia can streamline their billing processes, ensuring accuracy, compliance, and efficiency in their financial dealings.
How to report electronic invoice in Malaysia?
Once e-invoicing becomes a requirement for your business, it’s essential to understand the reporting process to the LHDN via e-filing. Here’s how you can do it efficiently:
LHDN’s MYEG portal: This online platform enables you to manually upload e-invoices. The portal supports specific formats, making it a user-friendly option for businesses to comply with reporting requirements.
Approved E-Invoice Service Providers: Opt for seamless integration with service providers approved by Pekeliling Perkara Cukai. These platforms offer integrated reporting functionalities, simplifying the process for your business.
Methods to report e-invoices:
Manual Reporting via MyInvois Portal: Accessible to all business sizes, the MyInvois Portal, hosted by IRBM, is particularly suited for MSMEs with smaller data volumes. This user-friendly portal facilitates manual data entry.
Automated Reporting via API: For larger enterprises handling significant transaction volumes, automated reporting in XML or JSON format through an API is the recommended approach. While this requires an upfront investment in technology and system modification, it streamlines the e-invoice generation process and enhances efficiency.
Remember: Regardless of the chosen method, ensure you maintain proper records of all issued and received e-invoices for a minimum of seven years.
Benefits of e-invoicing in Malaysia
Improved compliance
E-invoicing systems in Malaysia are designed to comply with local tax regulations and standards. This ensures that businesses remain compliant with the Malaysian tax authorities, avoiding potential fines and penalties.
Better security
E-invoicing platforms provide secure channels for transmitting invoice data, protecting sensitive financial information from unauthorised access. Encryption and authentication measures safeguard against fraud and data breaches.
Environmental benefits
By reducing the need for paper, e-invoicing contributes to environmental sustainability. Businesses can significantly reduce their carbon footprint by switching to electronic invoices, promoting eco-friendly practices.
Streamlined workflow
E-invoicing automates many aspects of the invoicing process, from creation to delivery and payment tracking. This streamlines the workflow, allowing staff to focus on more strategic tasks rather than administrative duties.
Enhanced supplier relationships
Timely and accurate invoicing builds trust and reliability with suppliers. E-invoicing ensures that suppliers receive their payments promptly, fostering better business relationships and potential discounts for early payments.
Real-time tracking
E-invoicing systems provide real-time updates on the status of invoices. Businesses can track when an invoice is sent, received, viewed, and paid, giving them better control and visibility over their accounts receivable.
Integration with accounting systems
Many e-invoicing platforms integrate seamlessly with existing accounting software. This allows for automatic data synchronization, reducing manual entry and ensuring that financial records are up-to-date and accurate.
Reduced storage needs
E-invoicing eliminates the need for physical storage of paper invoices. Digital storage is more efficient, accessible, and secure, freeing up office space and reducing storage costs.
Competitive advantage
Adopting e-invoicing can give businesses a competitive edge by showcasing their commitment to innovation and efficiency. It positions them as forward-thinking and customer-centric, attracting more clients and business opportunities.
Conclusion
As Malaysia moves towards a fully digital invoicing system, businesses that prepare early will gain a competitive advantage. Understanding the Malaysian e-invoicing system and regulations is crucial for businesses transitioning to electronic documents and compliance with local tax requirements. The Lembaga Hasil Dalam Negeri Malaysia (Inland Revenue Board of Malaysia) mandates the reporting of e-invoices and e-tax, ensuring accurate tax reporting and compliance. Don’t get left behind – embrace the future of invoicing and unlock the potential of e-invoicing for your Malaysian business.
How Grof can help with accounting and e-invoice in Malaysia?
Grof Malaysia offers comprehensive accounting solutions to ensure your financial records are accurate and up-to-date. Our bookkeeping services help maintain precise financial records, while our financial reporting provides detailed insights into your business’s performance. We handle tax preparation, ensuring timely and accurate filings, and manage payroll processing to guarantee employees are paid correctly and on time. Additionally, we assist with budgeting and forecasting, helping you make informed strategic decisions.
