Announcement of E-Invoicing Initiative by Malaysia Government

The Inland Revenue Board of Malaysia (IRBM) is set to make e-invoicing mandatory for all taxpayers by 2025, starting with businesses that have an annual turnover or revenue exceeding RM100 million by August 2024. The e-invoicing system will offer near real-time validation and can be integrated through an application programming interface (API) linked to enterprise resource planning systems or accessed directly via the MyInvois portal.

Prime Minister Datuk Seri Anwar Ibrahim’s announcement of the Madani Budget 2024 in October underscored efforts to stimulate digital transformation among small and medium enterprises (SMEs) and further propel the digital economy. One of the key measures includes the transition away from paper invoicing towards mandatory e-invoicing, bolstered by the expansion of the Tax Identification Number (TIN) initiative. The pilot project, spearheaded by the IRBM, aims to digitize business operations and curb financial leakages.

Further Update in August, 2024

The e-Invoicing implementation in Malaysia began on August 1, 2024, initially applicable to taxpayers with an annual turnover or revenue exceeding RM100 million. Since Phase 1 implementation started, a market study found that less than 50% of these taxpayers are prepared for the e-invoice transition.

To aid Micro, Small, and Medium Enterprises (MSMEs), the Inland Revenue Board (IRB) is offering a 6-month respite for taxpayers with less than RM 150,000 in annual revenue. Additionally, the IRB is developing MyInvois e-POS (point-of-sale) to ensure a smooth transition to e-invoicing with minimal disruption. All tax-related documents, including e-invoices, are expected to be digitized gradually, enhancing transparency, streamlining tax audits, and improving efficiency in Malaysia’s tax framework.

With the government’s supporting measures, Malaysia aims to fully implement e-invoicing by mid-2025. The Budget 2025 introduces incentives to ease the transition to e-invoicing for businesses by reducing integration costs, thereby making it more affordable.

What is E-Invoicing?

Electronic invoicing, or e-invoicing, involves providing digital copies of payment transactions between a supplier and a buyer. This process enables real-time validation and transparent storage of transaction data. The invoice data typically includes details such as supplier and buyer information, a description of the purchased item or service, quantity, price excluding tax, and the total amount inclusive of tax.

In a pilot project focusing on e-invoicing, the documents targeted for digitization include:

• Invoices: These are payment transaction records between suppliers and buyers and encompass self-billed e-invoices, where customers prepare the supplier’s invoice and send it back to the supplier for payment.
• Credit notes: Issued by sellers, these documents adjust errors or apply discounts and can also be used to note returned items from buyers.
• Debit notes: These are used to log additional costs to a customer who has been previously issued an invoice.
• Refund notes: Documents issued to a buyer to record a refunded transaction.

A consolidated e-invoice can be issued if buyers did not request it or did not need it for tax purposes, regardless of whether the transaction is business-to-business (B2B), business-to-consumer (B2C), or business-to-government (B2G). This exemption is applicable solely during the grace period.

What are the Objectives of E-Invoicing?

E-invoicing enhances business operations by digitalizing the invoicing process, enabling Enterprise Resource Planning (ERP) and accounting systems to transmit transaction documents directly to each other. It aims to improve the efficiency of Malaysia’s tax administration by streamlining tax processes and preventing tax leakages associated with paper invoices.

Additionally, e-invoicing helps businesses save resources and time in meeting tax compliance, reducing the manual effort involved in processing paper invoices. The standardization of formats facilitates ease of business in international trade, ensuring consistency and compatibility across global markets.

Who will be Affected by the New E-Invoicing Policy?

E-invoicing will affect businesses in Malaysia based on their size and the timeline for invoicing implementation as specified by the authorities. By July 1, 2025, this initiative will be mandatory for all businesses operating within the country. In cases of non-compliance, the Inland Revenue Board of Malaysia (IRBM) has the authority to initiate prosecution actions in accordance with the Income Tax Act 1967. Businesses must prepare to adapt to this regulatory shift to avoid potential legal consequences.

How about the E-Invoicing Implementation Schedule?

The Inland Revenue Board of Malaysia (IRBM) has announced a phased rollout for its e-invoicing implementation program. Over 50 companies have confirmed their participation as of January 2024.

Key dates for the e-invoicing implementation are as follows:

• 1 August 2024: Mandatory for taxpayers with revenue or annual turnover above RM100 million.
• 1 January 2025: Required for all taxpayers earning between RM25 million and below RM100 million.
• 1 July 2025: Complete implementation for all other taxpayers.

The IRBM encourages all businesses to adopt e-invoicing ahead of these deadlines.

What are the Advantages of E-Invoicing?

Adopting e-invoicing presents several key benefits for businesses aiming to enhance operational efficiency and maintain compliance with tax regulations.

Reduce human error and manual effort:

E-invoicing systems unify data entry tasks, covering the entire invoicing process from creation to submission. This electronic handling diminishes the likelihood of human error significantly and reduces the manual effort involved in managing transactions.

Efficient tax filing and compliance:

E-invoicing allows for accurate tax reporting through seamless system integrations with existing infrastructures. This feature not only streamlines the tax filing process but also enhances the precision of tax return reporting.

Meet tax regulations and compliance:

These systems ensure compliance with local tax regulations and legal invoicing requirements, mitigating the risk of regulatory penalties.

Digitalise tax and financial reporting:

E-invoicing aligns with industry standards by digitizing financial reporting and related processes, facilitating more efficient data management and retrieval.

How to Start Using E-Invoicing?

E-invoicing represents a digitally driven solution for financial transactions, allowing businesses to create, deliver, and manage invoices electronically. Implementation can occur via two primary methods: the MylNvois Portal and an Application Programming Interface (API).

The Mylnvois Portal offers a browser-based interface for managing invoicing activities. Users can log in to the portal to create, send, and track invoices in a centralized manner. Key features include user-friendly templates, real-time status tracking, and automated reminders for pending payments. This method requires minimal technical knowledge, making it accessible for small to mid-sized businesses.

The API option offers a more integrated and scalable solution for larger enterprises. By incorporating the API, businesses can embed e-invoicing capabilities directly into their existing software systems. This method allows for automatic generation and transmission of invoices, seamless data synchronization, and customizable functionality to better fit specific business workflows. Implementing API requires a higher level of technical expertise, as it involves coding and system configuration.

Selecting the appropriate e-invoicing method depends on various factors, including the size of the business, transaction volume, and the need for customization. Users must assess their technical capabilities, budget, and specific operational needs to make an informed decision.

What is Mylnvois Portal?

The MyInvois Portal, hosted by the Inland Revenue Board of Malaysia (IRBM), locally known as the Lembaga Hasil Dalam Negeri Malaysia (LHDNM), offers a robust solution for e-invoice generation particularly geared towards SMEs. The platform provides a comprehensive individual e-invoice form and supports batch generation through spreadsheet uploads.

Step-by-Step Process:

1. Issuance of an e-invoice: Upon completing a transaction, the supplier generates an e-invoice that includes comprehensive details such as the buyer’s name, TIN, registration identification number, address, and SST registration number.
2. Validation of e-invoice: The IRBM validates the invoice in near real-time and issues a Unique Identifier Number (UIN). This UIN ensures traceability and minimizes tampering.
3. Notification of validated invoice: Both participating parties receive notifications from IRBM confirming the e-invoice validation.
4. Share the e-invoice: Suppliers forward the validated e-invoice to buyers. The e-invoice features a unique QR code, allowing buyers to verify its authenticity.
5. Rejection or cancellation of e-invoice: Buyers have a 72-hour window to request a rejection if errors are found. The request is made through the portal, justifying the reason for rejection. Upon notification, the seller cancels the faulty invoice and issues a new one.
6. Transaction summary: The portal provides a comprehensive summary of e-invoice transactions accessible to both suppliers and buyers.

Further details on these processes are available in the updated e-invoice guidelines on the IRBM website.

Does Multiable Support E-Invoicing by IRBM?

Of course!!!

Multiable’s M18 ERP, aiM18 ERP, and ChillAccount software systems support IRBM (Inland Revenue Board of Malaysia) electronic invoicing. Customers who have purchased or subscribed to the [Malaysia Accounting Pack] module will receive free SaaS services for seamless integration with IRBM’s e-invoicing functionality.

Unlike most solutions in the market, Multiable will not charge setup fees, transaction fees, or annual fees, provided the M18 ERP, aiM18 ERP, or ChillAccount systems are within the system support period or SaaS subscription coverage.

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