e-Invoicing in Malaysia: A Complete Guide For Your Business

In March 2023, Inland Revenue Board of Malaysia (IRBM) announced that all businesses registered in Malaysia are required to generate e-invoices for B2B, B2G and B2C transactions.

The first phase of the e-invoicing in Malaysia mandate started on August 1, 2024, for businesses with an annual turnover exceeding RM 100 million. These businesses are now submitting e-invoices to the IRBM using the UBL 2.1 format (either XML or JSON) through the MyInvois portal or via direct API integration.

The second phase begins on January 1, 2025. Does your business fall under the current or upcoming phases? If so, how will you ensure e-invoicing compliance? Will you integrate an API or use the MyInvois portal? What are the challenges and penalties for non-compliance?

In this article, you'll learn about:

• The latest updates on e-invoicing in Malaysia
• What exactly is an e-invoice in Malaysia, and how it works
• e-Invoicing implementation timeline in Malaysia
• A step-by-step look at the e-invoicing process 
• Different e-invoicing models in Malaysia
• The various types of e-invoices businesses must issue
• Who needs to comply with e-invoicing in Malaysia, and who is exempt
• The benefits of e-invoicing for your business
• Challenges businesses may face 
• How ClearTax can help your business with e-invoicing compliance
• A FAQ section to address common questions and industry-specific concerns

Latest Updates for Malaysia e-Invoicing

4th October 2024

IRBM has published the updated e-Invoicing Guidelines, e-Invoicing Specific Guidelines and e-Invoicing FAQ. IRBM has updated the exemptions under e-invoicing and provided more clarification on consolidated e-invoicing and transactions with foreign parties.

IRBM Extends e-Invoicing Compliance Deadline by Six Months

This relaxation allows businesses to issue consolidated e-Invoices during this period without facing prosecution for non-compliance. Businesses that adopt e-invoicing by the original deadline will benefit from a reduced capital allowance claim period for ICT equipment and software from three years to two years for Assessment Years 2024 and 2025.

What is an e-Invoice in Malaysia?

An e-invoice is a digital record of a transactional exchange between a seller (supplier) and a purchaser (buyer), which goes through the government portal in real time for validation and recordkeeping.

e-Invoice Malaysia would contain 55 fields with details of the transactions such as seller & buyer details, item description, quantity, price, tax, total amount, payment details, etc. Successfully validated and generated e-invoices would also have a Unique Identification Number (UIN) and QR Code, which is generated by the MyInvois Portal, enabling online validation of the invoice.

e-Invoicing implementation timeline in Malaysia

The e-Invoicing system in Malaysia began on August 1, 2024, for taxpayers with an annual turnover or revenue exceeding RM100 million. The upcoming phases of implementation are as follows:

• January 1, 2025: Taxpayers with an annual turnover or revenue between RM25 million and RM100 million.
• July 1, 2025: All taxpayers.

Below is the Malaysia e-invoice implementation timeline:

e-Invoicing Process in Malaysia

The steps to generate an e-invoice in Malaysia vary depending on the e-invoicing model (API or MyInvois Portal) and whether the transaction is B2B or B2C. However, the majority of the process remains consistent. 

Here is a general overview:

e-Invoicing Process for B2B Transactions

e-Invoicing Process for B2C Transactions

Suppliers must issue e-invoices for all B2C transactions. However, many buyers, particularly end consumers and specific businesses, do not need an e-invoice. Therefore, the generation of e-invoices for B2C transactions varies based on the buyer's requirements:

• When the Buyer Requests an E-Invoice: Suppliers gather details from the buyer/consumer and generate e-invoices in real-time, similar to B2B e-invoices.
• When the Buyer Does Not Require an E-Invoice: The IRBM allows suppliers to consolidate transactions with buyers who do not need an e-invoice into a monthly consolidated e-invoice.

The process is clearly explained in the chart below for Malaysia B2C e-Invoicing.

e-Invoicing Model in Malaysia

In Malaysia, companies can choose from the following transmission modes to report e-invoices known as e-invoicing models

MyInvois Portal

The MyInvois Portal allows users to generate e-invoices manually, either one at a time or in bulk by uploading a spreadsheet in a predetermined format. This portal is ideal for Micro, Small, and Medium-sized Enterprises (MSMEs) or companies with lower transaction volumes due to the need for manual data entry. 

The portal was made live by the IRBM on June 28, 2024, offering both testing and production environments. It can be accessed at preprod-mytax.hasil.gov.my or mytax.hasil.gov.my.

For instructions on how to log in for the first time, visit this MyInvois Portal Login and e-invoice generation guide.

Application Programming Interface (API)

Businesses can integrate their ERP, billing, or accounting systems with the MyInvois system through an API. This integration enables the automatic generation, sending, receiving, and correction of e-invoices directly through their systems, making it possible to handle large volumes of transactions in real-time. 

Recognizing the complexity of this integration, the Lembaga Hasil Dalam Negeri (LHDN) has introduced the e-invoice Malaysia Software Development Kit (SDK).

Type of e-Invoices in Malaysia

The below documents must be issued in electronic format under Malaysia e-Invoice:

• Invoices: It is generally used to record transactions between supplier and buyer. Invoices also include a self-billed invoice issued for tracking expenses.
• Credit notes: A credit note is a document issued by sellers to make corrections to an e-Invoice issued previously mainly to lower the original invoice's value without returning money to the Buyer. It is generally used to adjust errors, apply discounts, or account for returned items. 
• Debit notes: In contrast to credit notes, debit notes are issued to record additional costs related to a previously issued e-Invoice.
• Refund notes: A refund e-Invoice is an official document issued by a Seller to record refund issued to the Buyer.

Who Needs to Comply with e-Invoicing in Malaysia?

LHDN has released guidelines outlining which entities, individuals, and businesses are required to adhere to e-invoicing rules, as well as those exempt from them.

Benefits of e-Invoicing in Malaysia

The Malaysian government aims to boost the digital economy and improve tax administration with e-invoicing in Malaysia. Key benefits include:

1. Unified Invoicing: Streamlines creation and submission of invoices, automating data entry.
2. Integrated Tax Filing: Ensures efficient and accurate tax reporting.
3. Streamlined Operations: Increases efficiency and saves resources on tax compliance
4. Improved Cash Flow: Reduces billing errors, speeds up payment cycles, and minimizes disputes.
5. Digitized Reporting: Aligns financial reporting with digital standards.
6. Paperless Invoicing: Eliminates paper use and prevents tax leakage.
7. Ease of Trade: Simplifies operations for international trade businesses.

Challenges of e-Invoicing for Businesses in Malaysia

The shift to e-invoicing in Malaysia brings several challenges:

1. Compliance: Complying with the e-invoicing regulations for business through technological integrations is extremely challenging.
2. Technological Transition: Moving from manual to automated invoicing systems requires adaptation to new technologies, deep tech integrations and staff training.
3. Resistance to Change: Employees accustomed to traditional methods may resist adopting e-invoicing in Malaysia.
4. Feasibility: Smaller businesses with limited IT infrastructure and lower resources would struggle with the technological demands.
5. Data Accuracy and Integration: Integrating e-invoicing with existing systems and ensuring accurate data exchange is challenging.

How can ClearTax help your business with e-Invoicing in Malaysia?

ClearTax is an MDEC-accredited e-invoicing solution provider in Malaysia. It integrates your business systems with the IRBM e-invoicing system to automate and ensure 100% compliance in e-invoice generation.

• Enterprise Solutions: ClearTax delivers robust solutions for enterprises, integrating seamlessly with any ERP or business system to ensure accurate and efficient e-invoicing.
• Integration of Multiple Sales Channels: ClearTax integrates various sales channels—both online and physical—ensuring 100% accuracy in e-invoicing by consolidating all sales into a single, compliant e-invoice.
• Buyer Portal: ClearTax provides a web portal and app for buyers to generate e-invoices independently, speeding up billing, reducing queue times, and improving the customer experience.

IRBM Industry Specific FAQ’s

The Malaysian government acknowledges that some industries have more complex business practices and billing systems, making e-invoicing more challenging. To address these complexities, the IRBM has published industry-specific FAQs. 

The following FAQs have been released by the IRBM to date:

• Healthcare
• Construction
• Telecommunication
• e-Commerce
• Petroleum Operations
• Insurance and Takaful
• Aviation
• Tourism
• Financial Services, Stockbroking and Unit Trust   

Click here to read more FAQs on Malaysia e-invoice.