E-Invoicing in Malaysia: E-Invoice System Guide For Your Business

The Malaysian government noticed many other countries are using e-invoicing, so they decided to do the same. They want to make tax processes easier by going digital. They talked about it in a statement before making the budget for 2023. They planned to start using e-invoices in August 2024.

But later, in October 2023, the Inland Revenue Board of Malaysia (IRBM) said they would start using e-invoicing a bit later than planned. They would start gradually from August 2024.

This article explains what e-invoicing is, why Malaysia wants to use it, what kinds of transactions it will cover, when it will start, and who it will affect.

 

What is an e-invoice in Malaysia?

An e-invoice is a digital document that can be automatically processed by compatible systems, serving as evidence of a transaction between a seller and a buyer formatted according to specifications by the IRBM. This digital format replaces traditional paper invoices as well as other electronic formats like images, PDFs, or Excel files. In Malaysia, a valid e-invoice must contain 53 essential fields, encompassing crucial information such as seller and buyer particulars, item descriptions, quantities, prices, taxes, total amounts, payment details, and more.

 

What is the process flow of e-Invoice in Malaysia? 

1. After the transaction, the seller makes an e-Invoice and sends it to IRBM MyInvoice portal or through e-Invoicing software by way of an API.

2. Then, the IRBM checks the invoice and tells both the seller and the buyer if everything is okay.

3. Once it's approved, the seller needs to give the buyer the e-Invoice with a special code on it.

 

 

Which Transactions that requires e-invoice Malaysia

According to the e-Invoicing guidelines from LHDN (Lembaga Hasil Dalam Negeri), Malaysia, these three transaction types are currently included in the scope of invoicing.

E-invoice covers transactions such as:

• Business to Business (B2B), 
• Business to Customer (B2C), 
• Business to Government (B2G), It's important to note that the e-invoice process for B2G transactions will resemble that of B2B.

 

Type of e-invoices in Malaysia

The following documents are required to be issued in electronic format according to Malaysia's e-Invoice regulations:

1. Invoices 

These documents are typically used to record transactions between a supplier and a buyer. Invoices also encompass self-billed invoices, which are issued to track expenses.

2. Credit notes

 Sellers issue credit notes to amend previously issued e-Invoices, usually to reduce the original invoice's value without refunding money to the buyer. They are commonly used to rectify errors, apply discounts, or account for returned items.

3. Debit notes

Unlike credit notes, debit notes are issued to record additional costs associated with a previously issued e-Invoice.

4. Refund notes

A refund e-Invoice is an official document issued by a seller to document refunds provided to the buyer.

 

Why is e-invoice implemented in Malaysia?

The Malaysian government aims to promote the growth of the digital economy and improve the effectiveness of tax administration in Malaysia through the adoption of e-invoices. This initiative is in line with the goals outlined in the Twelfth Malaysia Plan, which emphasizes bolstering digital infrastructure and modernizing tax administration.

The Malaysian government aims to:

1. Eliminate paper-based invoicing to reduce tax evasion.

2. Assist businesses in reducing the time and resources spent on tax compliance.

3. Facilitate smoother business operations for entities engaged in international trade.

 

e-Invoice authority in Malaysia

The e-invoice activities in Malaysia are overseen by the Inland Revenue Board of Malaysia (IRBM), which issued guidelines in July 2023 outlining the implementation scope of e-invoices. 

The guideline explains the e-invoice concepts, such as 

• Implementation methodology

• Impact on compliance

• Record keeping

• Addresses common questions and concerns

Additionally, IRBM entered into a memorandum of understanding (MoU) with the Malaysian Digital Economy Corporation (MDEC) to foster collaboration on the e-invoice initiative.

 

Here’s the updated e-invoice implementation timeline:

The Malaysian government has unveiled a revised schedule for the compulsory adoption of e-invoicing, outlined in the latest 2024 budget proposals. The previous gradual implementation plan spanning multiple years has been streamlined into an accelerated transition.

Although e-invoicing is mandatory for businesses that meet the designated turnover thresholds, taxpayers are encouraged to voluntarily adopt e-invoicing ahead of their scheduled phase.

 

How to report e-invoice in Malaysia

In Malaysia, companies can choose 2 ways below transmission modes to report e-invoices:

1. MyInvois Portal hosted by IRBM, the MyInvois Portal is only good for handling a little bit of information and works well for Micro, small and medium-sized businesses (MSMEs).

2. Application Programming Interface (API), for large businesses with many transactions, using an API in XML or JSON format is the best way to generate e-invoices.

 

The process to submit e-invoice using MyInvois Portal or API is shown below.

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Frequently Asked Questions 

1. Is e-invoicing mandatory for Malaysia?

Regulatory Compliance: Malaysia is currently working on enforcing mandatory e-Invoicing regulations. They are expected to start in August 2024 for certain businesses and gradually extend to include all tax-registered businesses by 2027.

2. Who is the provider of e-invoice in Malaysia?

This is accomplished by adopting the Peppol e-Invoicing framework, with MDEC serving as the Peppol Authority for Malaysia. LHDNM oversees e-invoicing for tax reporting and compliance purposes

3. What is the solution for e-invoice in Malaysia?

Businesses have the option to manually submit their invoices using the MyInvois portal offered by the IRBM. Alternatively, they can choose to automatically submit invoices through an API in XML or JSON format.

 

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