e-Invoicing for E-Commerce in Malaysia: Comprehensive Guide for Online Businesses

As Malaysia progresses toward a fully digital economy, the Inland Revenue Board of Malaysia (IRBM) has implemented e-invoicing to enhance tax administration efficiency and promote transparency. While many industries can adopt the standard e-invoicing procedures outlined by IRBM without significant challenges, e-commerce presents unique complexities. These include the involvement of multiple parties (such as merchants, sellers, and platforms), the high volume of B2C transactions, and multiple e-invoices required for single transaction.

This guide explores the intricacies of e-invoicing for e-commerce transactions in Malaysia, offering a comprehensive roadmap to help online businesses adapt and thrive in this new regulatory environment.

Understanding E-Commerce Transactions

E-commerce transactions involve the sale or purchase of goods and services conducted over digital networks using platforms specifically designed for placing or receiving orders. While the ordering process occurs online, the payment and delivery of goods or services can take place either online or offline, depending on the business model.

This broad category includes various types of transactions, such as retail e-commerce, online marketplaces, subscription-based services, B2B e-commerce, and digital products like software, e-books, digital downloads, and online courses. These activities collectively form the backbone of the e-commerce industry.

Three key participants drive e-commerce transactions:

1. Platform: The digital infrastructure or marketplace that facilitates transactions.
2. Merchants/Sellers: Businesses or individuals offering goods and services through the platform.
3. Buyers: Consumers or businesses purchasing goods or services via the platform.

Challenges in Implementing E-Invoicing for E-Commerce

The implementation of e-invoicing in Malaysia for e-commerce transactions presents unique challenges due to the intricate nature of online business operations. 

• Confusion Over Responsibility for E-Invoice Issuance: Multiple parties are involved in fulfilling an order and It can be unclear who is responsible for issuing the e-invoice- for sales, purchases, charged commission, platform fee, refund and more
• Multiple Transactions in a Single Sale: A single e-commerce sale often involves multiple transactions, such as:
  • The merchant selling a product to the buyer.
  • The buyer making a payment to the platform.
  • The platform charging the merchant or service provided as platform fee/commission
• Diverse Consumer Requirements: Some buyers may request individual e-invoices, while others may not require them. 
• Handling Special Cases: Scenarios like refunds, returns, exchanges, coupons, and gift cards further complicate the e-invoicing process. These require adjustments to original invoices, issuance of credit, debit, refund notes, and more.
• Collecting Buyer Data: Collecting the extensive details required for e-invoicing (e.g., buyer name, TIN, address, and contact information) can be overwhelming.

E-Invoicing Process for E-Commerce Transactions

E-invoicing in the e-commerce sector varies based on the roles of the parties involved, including platform providers, buyers, merchants, and service providers. Each transaction type has specific invoicing requirements to ensure compliance and accuracy. Below is a detailed breakdown of the key e-invoice types in e-commerce transactions:

1. E-Invoice by Platform to Buyer: This type of e-invoice captures sales made by the platform to buyers. Depending on the buyer's preference, these can either be issued as individual e-invoices for each transaction or consolidated into a single e-invoice.
2. Self-Billed Invoice by Platform to Merchants: A self-billed invoice documents purchases made by the platform from merchants or service providers. 
3. E-Invoice for Platform Fees: e-Commerce platforms should issue e-invoices to merchants and service providers to document revenue from platform fees and commissions collected.
4. Refund Notes to Buyers: Refund notes are issued to buyers when goods are returned or services are canceled. 

Issuance of e-Invoices by E-Commerce Platforms to Purchasers

E-commerce platforms have traditionally issued invoices, bills, or receipts to purchasers to document transactions such as the sale of goods or services. With the implementation of e-invoicing in Malaysia, buyers now have the option to request an e-invoice or accept a standard receipt for their purchases. 

Note: The e-commerce platform provider, not the merchant, is responsible for issuing the e-invoice. This includes issuing consolidated e-invoices where multiple transactions occur within a period (e.g., monthly) without individual requests for e-invoices by the buyer.

Here's how e-commerce platforms are expected to manage the issuance of e-invoices:

Responsibility

• Supplier: The e-commerce platform provider.
• Buyer: The purchaser.

Scenario 1: Buyer Requests an E-Invoice

When a buyer explicitly requests an e-invoice, the e-commerce platform must collect the buyer’s relevant details and issue the e-invoice as per the regulatory requirements.

Scenario 2: Buyer Does Not Request an E-Invoice

If the buyer does not request an e-invoice, the platform should provide a standard receipt as proof of sale. The platform may aggregate these transactions into a monthly consolidated e-invoice. However, certain activities or industries may not allow consolidation, and individual e-invoices must be issued for such cases.

Self-Billed e-Invoice for Merchants and Service Providers

Self-billed e-invoices are those generated by the buyer instead of the seller. In e-commerce transactions, the buyer (the e-commerce platform provider) creates the self-billed e-invoice on behalf of the supplier (merchant or service provider). This process is essential for recording the income earned by merchants and service providers through transactions conducted on the platform.

Responsibilities:

• Supplier: Merchant/Service Provider
• Buyer: E-Commerce Platform Provider

Note: 

• E-commerce platform providers cannot issue consolidated e-invoices for recording merchant or service provider income. 
• The e-commerce platform can issue this invoice in accordance with its current billing frequency, such as daily, weekly, or monthly.

Issuance of e-Invoices for Platform Charges

E-commerce platform providers typically charge merchants and service providers for using their platforms. These charges must be documented through e-invoices to ensure compliance. Therefore, the e-commerce platform provider should issue e-invoices to merchants and service providers as proof of revenue.

Responsibilities:

• Supplier: E-Commerce Platform Provider
• Buyer: Merchant/Service Provider

Note:: As with self-billed invoices, the platform can issue these invoices according to its standard issuance schedule.

Refund Notes by Platform to Buyers

Refund notes are issued to buyers when goods are returned or services are canceled. These refund notes are mandatory whenever a refund is processed to the buyer. The e-commerce platform provider is responsible for issuing these refund notes to document the transaction and ensure proper tax adjustments. The refund note must include details such as the original sale reference, returned items or canceled services, refund amount, and reason for the refund.

Responsibilities:

• Supplier: E-Commerce Platform Provider
• Buyer: Purchaser

Consolidated E-Invoicing for E-Commerce Transactions 

Consolidated e-invoicing allows e-commerce platform providers to combine multiple transactions into a single monthly e-invoice. This applies mainly to B2C transactions where buyers do not request individual e-invoices. At the end of each month, the platform generates a consolidated e-invoice.

Key Points for Generating a Consolidated E-Invoice:

• Aggregation can be done by listing each receipt as a separate line item or grouping receipts by continuous numbers.
• Businesses with multiple branches may create location-specific consolidated invoices.
• Consolidated e-invoices must be submitted to the IRBM within seven calendar days after the month-end to ensure timely reporting.

How ClearTax Can Assist Your E-Commerce Business

ClearTax is an MDEC-accredited e-invoicing solution provider in Malaysia, offering comprehensive e-invoice automation to ensure your e-commerce business complies with IRBM’s e-invoicing mandates.

• Enterprise Solutions: Seamlessly integrate with your existing ERP or business systems to automate e-invoice generation.
• Multi-Channel Integration: Consolidate e-invoicing across various sales channels, both online and physical.
• Buyer Portal: Provide a user-friendly portal and app for buyers to self generate e-Invoices independently, enhancing customer experience.
• Compliance Assurance: Ensure 100% compliance with IRBM regulations, minimizing the risk of penalties.

Click here to Talk to an e-invoicing Consultant

For detailed guidance on filling out various fields and additional information, refer to the official government resources linked below:

• IRBM e-Invoice Specific Guideline
• Industry-Specific FAQs for E-Commerce

Conclusion

The implementation of e-invoicing in Malaysia places the responsibility on e-commerce platform providers to issue e-invoices for transactions conducted through their platform, either upon the consumer's request or as a receipt when no e-invoice is needed. The platform is also required to issue self-billed e-invoices for merchants and service providers to record their income from these transactions.

It is highly recommended that you use a middleware solution like ClearTax to integrate your e-commerce platform and ERP with the MyInvois System. This ensures smooth and efficient e-invoice generation for e-commerce businesses.