e-Invoicing for Employee Perquisites and Benefits in Malaysia

Starting from August 1, 2024, businesses in Malaysia must comply with e-invoicing requirements for all transactions, with a few exceptions. E-invoices will be necessary for all purchases and expenses to serve as proof when claiming business expenses.

Although, employment income, including salary payments, is exempt from e-invoicing, benefits and perquisites provided to employees are subject to e-invoicing and proper documentation. 

This article highlights the impact of e-invoicing on employee benefits, the compliance steps involved, the challenges businesses may face, and the concessions offered by the IRBM.

What Are Employee Perquisites and Benefits?

Refer to the extra compensation and advantages that employees receive in addition to their regular salary or wages. These can come in both cash or non-cash forms, and they are typically provided by the employer to improve the employee's work experience, support their personal needs, or cover specific costs. In Malaysia, these benefits are often associated with tax implications.

Here’s a breakdown of the most common types of employee perquisites and benefits:

1. Pecuniary Liabilities: This includes payments made by the employer to cover the employee's personal expenses, such as:
2. Club Membership: Employers might offer memberships to recreational or business-related clubs.
3. Gym Membership: Fitness-related benefits may be provided to promote employee health and well-being.
4. Professional Subscriptions: Payment of fees for professional organizations or publications relevant to the employee's job.
5. Allowances: Employers may provide various types of allowances for expenses related to the job, including:

e-Invoicing Mandate for Employee Perquisites and Benefits

Under the e-invoicing mandate, businesses are required to generate and submit digital invoices in real-time through the MyInvois portal or via an integrated API. 

Managing employee perquisites and benefits within e-invoicing adds complexity, as these expenses are often paid by employees but must be attributed to the employer for tax purposes.

Traditionally, employees would submit receipts or bills to their employer for reimbursement. However, with the introduction of e-invoicing, employees now need to request e-invoices from suppliers for any employment-related expenses. Ideally, these e-invoices should be issued in the employer's name as the buyer, ensuring accurate tax reporting and proper documentation of the expense.

In cases where it's not possible to issue the e-invoice to the employer, businesses can still claim the expenses incurred for employee perquisites and benefits using e-invoices generated in the employee's name, as outlined in the e-invoicing guidelines.

Compliance Requirements and Process

Upon implementation of the e-invoicing mandate, employees will be required to obtain e-invoices for expenses related to perquisites and benefits. These e-invoices should ideally be issued in the name of the employer. However, recognizing that this may not always be possible, the IRBM has provided a series of steps to guide the process:

1. Confirmation with the Supplier: Employees must first check with the supplier (e.g., for gym memberships or utility bills) if the e-invoice can be issued in the name of the employer.
2. Issuance of e-Invoice:
3. Payment by Employee: After receiving the validated e-invoice, the employee makes the payment for the service or product.
4. Expense Claim Submission: Employees then submit the validated e-invoice—whether in the employer's or employee's name—along with any other necessary documentation, to claim the expense from their employer.

IRBM Concessions for Perquisite and Benefits e-Invoicing 

Recognizing the practical challenges that could arise in the transition to e-invoicing, the IRBM has introduced several concessions to ease the process:

• e-Invoices in the Name of the Employee: If it is not feasible for suppliers to issue e-invoices directly to the employer, businesses can still rely on e-invoices issued to the employee or other supporting documentation (such as traditional receipts or invoices) for tax purposes. This concession helps businesses avoid disruptions in claims processing.
• Foreign Suppliers: In cases where perquisites and benefits involve foreign suppliers, such as international memberships or purchases, employers and employees are not required to generate self-billed e-invoices. Instead, traditional documentation from foreign suppliers, such as receipts or invoices, will be accepted.

Note: These exceptions are only applicable if the employer has a clear policy regarding employee perquisites and benefits, ensuring consistency in handling claims.

Key Challenges in Implementing e-Invoicing for Employee Benefits

Despite the concessions provided, the shift to e-invoicing for employee benefits still presents several challenges:

• Supplier Readiness: Not all suppliers may be equipped to issue e-invoices in compliance with Malaysia’s new regulations, especially for smaller or foreign vendors.
• Administrative Burden: Employees will need to navigate the process of confirming whether e-invoices can be issued in their employer’s name, which may slow down claims and reimbursement processes.
• Technological Integration: Employers will need to ensure their systems are integrated with the MyInvois platform to handle e-invoices efficiently. This might require updating current accounting and billing systems.
• Training and Adaptation: Both employers and employees will need to be trained on how to request and manage e-invoices for various types of expenses, adding to the learning curve during the transition.

Conclusion

The introduction of e-invoicing for employee perquisites and benefits in Malaysia represents an important step toward digitalizing the country’s tax administration system.

For businesses, complying with the e-invoicing requirements will improve transparency and streamline tax reporting. For employees, the process of claiming perquisites and benefits will become more structured, but potentially more complex. With proper planning, integration, and understanding of the new guidelines, both employers and employees can navigate these changes effectively.