E-Invoice Efficiency: A Company’s Transition Guide

The landscape of Malaysian business is evolving, and the Inland Revenue Board (IRB) is leading the charge towards a more digital future. Their e-invoicing initiative, rolled out in stages to support the 12th Malaysia Plan and the growth of the digital economy, represents a significant shift for Malaysian companies. But fear not, entrepreneurs and small business owners! This guide will equip you with the knowledge and understanding needed to smoothly transition to e-invoicing and unlock its many benefits. 

What is Electronic Invoicing, and How Does it Work? 

E-invoicing, or electronic invoicing, is the process of sending and receiving invoices in a digital format instead of paper. It replaces paper or other electronic documents such as invoices, credit, and debit notes. 

It involves the automated exchange of invoice data between the buyer’s and seller’s systems, eliminating manual tasks and allowing for faster, more accurate processing of invoices. A valid e-invoice in Malaysia shall contain 53 mandatory fields. It includes important details such as seller and buyer details, item description, quantity, price, tax, total amount, payment details, etc. 

You will need to familiarise yourself with the e-filing LHDN system, the requirements for tax reporting, and the integration of e-tax data within the accounting system. Compliance with local requirements, including the privacy statement, is essential for the smooth transition to e-invoicing and the secure transmission of electronic documents. By understanding the electronic invoice system and regulations, you can ensure the accuracy of tax reporting, streamline compliance, and embrace the digital transformation of their invoicing processes. 

Is E-Invoicing Mandatory in Malaysia? 

E-invoicing becomes mandatory in Malaysia starting 1st August 2024 for taxpayers with an annual turnover or revenue exceeding RM100 million. This marks the initial phase of the e-invoicing implementation. While this requirement targets larger taxpayers, the Inland Revenue Board (IRB) also encourages organisations with revenues below this threshold to participate voluntarily in the e-invoicing initiative. This approach aims to streamline tax compliance and modernise the financial reporting process across the board, offering an inclusive opportunity for all businesses to adapt to digital invoicing practices.

 

The Importance of Implementing E-Invoicing 

As businesses strive to stay competitive in today’s digital landscape, implementing e-invoicing has become increasingly important. In Malaysia, the adoption of electronic invoices is driven by various factors, including tax compliance, the efficiency of Malaysia’s tax administration, and the growth of the digital economy. By transitioning from traditional paper-based invoicing to electronic documents, businesses can experience significant cost savings, improved business efficiency, and enhanced financial statements.

Additionally, e-invoicing allows companies to stay compliant with local tax laws, streamlining their tax administration and ensuring smooth transactions with government entities. The benefits of implementing e-invoicing extend beyond daily business operations, ultimately contributing to the growth and digital transformation of the economy. 

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. 

 

 

Essential Components of an E-Invoice 

The successful implementation of e-invoicing relies on including essential components in the electronic documents. These components ensure accuracy, compliance, and efficiency throughout the electronic invoice process. Key components of an e-invoice include item description, which provides details of the goods or services rendered, and buyer’s details, which include the information of the recipient of the invoice. Invoice data, such as the total amount, tax identification number, and transaction data, must be captured accurately to facilitate compliance with local requirements.  

Additionally, e-invoices should include a serial number, which serves as a unique identifier for each invoice. By incorporating these essential components, businesses can effectively transition from traditional paper-based invoicing to the digital realm, streamlining their business operations and improving efficiency. Essential information is crucial in ensuring the smooth and accurate processing of e-invoices, making it an important aspect to consider for businesses looking to streamline their operations. 

 

Electronic Invoice Implementation Timeline 

The electronic invoice initiative is being implemented in stages, with the first phase targeting specific industries and businesses with high transaction volumes. Here’s a breakdown of who needs to comply and when: 

The annual turnover or revenue for the implementation of e-invoice will be determined based on the following: 

• Taxpayers with audited financial statements: Based on annual turnover or revenue stated in the statement of comprehensive income in the audited financial statements for the financial year 2022. 
• Taxpayers without audited financial statements: Based on annual revenue reported in the tax return for the year of assessment 2022. 
• In the event of a change of accounting year end for financial year 2022, the taxpayer’s turnover or revenue will be pro-rated to a 12-month period for purposes of determining the e-invoice implementation date. 
• It’s crucial to stay informed about the latest developments and compliance requirements. We recommend regularly checking the IRB website and consulting with a tax advisor for personalised guidance. 

 

How to Report Electronic Invoice 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. 

Understanding the Malaysian E-Invoicing System and Regulations 

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. 

Choosing the Right E-Invoicing Software or Service Provider 

Choosing the right e-invoicing software or service provider is critical to the successful implementation of e-invoicing. You will need to consider your accounting system compatibility, the integration of invoices, email addresses, and the privacy statement of the e-invoicing solution. Additionally, evaluating the digital services infrastructure, such as secure transmission and storage of electronic documents, is essential for data security and compliance. 

The right e-invoicing software or service provider will offer seamless integration, a user-friendly interface, and comprehensive support to simplify the e-invoicing process. By partnering with the appropriate e-invoicing solution, you can maximise your invoicing operations’ efficiency, accuracy, and compliance, ultimately improving your overall business performance. 

Conclusion: Embracing the Future with Grof 

Transitioning to e-invoicing can seem daunting, but the benefits are undeniable. With streamlined processes, improved efficiency, and enhanced cost savings, e-invoicing empowers businesses to thrive in the digital age. 

Grof is your one-stop solution for a smooth and hassle-free transition to e-invoicing. Our team of experts, including a dedicated account manager, can guide you through the entire process, from choosing the right e-invoice service provider to ensuring compliance with regulations. We also offer comprehensive accounting and bookkeeping services, allowing you to focus on what you do best – running your business. 



Embrace efficiency, embrace the future, embrace Grof!