E-Invoicing Malaysia: A Comprehensive Guideline for Business

Inspired by the global surge in e-invoicing adoption, the Malaysian government resolved to implement a parallel system within its borders. This decision was underscored in the 2023 Pre-Budget statement, where the Ministry of Finance underscored Malaysia's commitment to integrating e-invoicing for the digitization of tax administration processes.

However, in October 2023, the Inland Revenue Board of Malaysia (IRBM) announced a deferment in the e-invoicing implementation, opting for a phased approach commencing on 1 August 2024.

What is E-Invoice by LHDN?

An e-invoice is a digital version of a transaction between a supplier and a buyer, eliminating the need for paper or electronic documents like invoices, credit notes, and debit notes. Containing all the key details found in traditional documents, such as supplier and buyer information, item descriptions, quantities, prices before tax, tax amounts, and total costs, an e-invoice simplifies transaction recording for everyday business activities

Is E-Invoice mandatory for business?

Yes, it is mandatory to submit an electronic invoice model with specific fields to the IRBM.

The Benefits of E-Invoicing

• Enhanced efficiency: Saves time and resources for both businesses and governmental entities.
• Cost reduction: Eliminates expenses associated with printing, postage, and storage.
• Increased accuracy: Minimizes errors stemming from manual data input.
• Improved transparency: Offers a transparent audit trail for transactions.
• Environmental advantages: Reduces reliance on paper and promotes sustainability.

Types of E-Invoices in Malaysia

The following documents are mandated to be issued in electronic format under Malaysia's e-Invoice system:

1. Invoices: Primarily utilized to document transactions between suppliers and buyers. This category also encompasses self-billed invoices for expense tracking purposes.

2. Credit notes: Issued by sellers to rectify errors in previously issued e-invoices, typically reducing the original invoice's value without refunding money to the buyer. They are commonly utilized for error adjustments, applying discounts, or accounting for returned items.

3. Debit notes: Unlike credit notes, debit notes are generated to record additional costs associated with previously issued e-invoices.

4. Refund notes: Official documents issued by sellers to document refunds issued to buyers.

E-Invoices Implementation Date in Malaysia

Further, the guidelines provide how to determine the annual turnover or revenue to be considered for the implementation of e-invoice:

Transactions Covered under Malaysia E-Invoice

Transactions covered by Malaysia's e-invoice system encompass:

• Business to Business (B2B)
• Business to Customer (B2C)
• Business to Government (B2G) It's noteworthy that the e-invoice flow for B2G transactions mirrors that of B2B.

The e-invoice mandate extends to all commercial activities in Malaysia, spanning the sale of goods and services as well as specified non-business transactions between individuals.

For B2C transactions, sellers aren't obliged to issue e-invoices directly to end consumers; instead, they're required to provide a standard invoice or receipt. Subsequently, within a specified timeframe, sellers must consolidate all standard invoices or receipts and issue a unified e-invoice.

The Process-Flow of E-Invoice in Malaysia

Following the transaction, the supplier generates an e-invoice and submits it to the Inland Revenue Board of Malaysia (IRBM) via the MyInvois portal or using e-invoicing software through an API.

Subsequently, the invoice undergoes validation by the IRBM, and both the supplier and buyer are notified upon completion of this process.

Upon validation, it becomes the responsibility of the supplier to furnish the e-invoice, which includes a QR code, to the buyer.

72-Hour Grace Period:

A pivotal aspect of e-invoicing is the provision of a 72-hour grace period. This feature allows:

• Sellers and buyers alike to reject or request the cancellation of an e-invoice within 72 hours of its issuance.
• Sellers to authorize buyer requests for rejection or personally cancel the e-invoice.
• No alterations to the e-invoice beyond the 72-hour timeframe.

E-Invoice Submission Method

There are two (2) options for the e-invoice transmission mechanisms for taxpayers selection:

MyInvois Portal

• A portal hosted by IRBM.
• Accessible to all taxpayers at no cost.
• Accessible to taxpayers who need to issue e-invoices where an Application Programming Interface (API) connection is unavailable.
• Suitable for Micro, Small, and Medium-sized Enterprises (MSMEs) due to its user-friendly interface.
• It may not be efficient for large volumes of data, as manual input might become cumbersome.
• Businesses cannot connect their existing accounting systems to the MyInvoice Portal.

Application Programming Interface (API)

• An API is a set of programming codes that enables direct data transmission between the taxpayers’ system and the MyInvois system.
• Requires upfront investment in technology and adjustments to taxpayers' existing systems.
• Ideal for large taxpayers or businesses with substantial transaction volume, as it automates the submission process.
• Connects directly to the Inland Revenue Board of Malaysia (IRBM) through Peppol-ready ERP solution Solution Providers (PRSPs) or Peppol Access Point Service Providers (SPs).

The adoption of e-invoicing guidelines in Malaysia represents a pivotal step towards a more efficient and transparent business environment. By embracing digital transformation, businesses stand to benefit from streamlined processes, reduced errors, and improved financial management. With government support and industry collaboration, e-invoicing not only enhances competitiveness but also positions Malaysia as a leader in the digital economy landscape.

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