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

Updated on: Jul 12th, 2024

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26 min read

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In March 2023, the Inland Revenue Board of Malaysia (IRBM), announced the mandatory adoption of e-invoicing through a phased implementation plan. In the first phase, all businesses with a turnover exceeding RM 100 million must generate e-invoices starting from 1st August 2024 this initiative mandates all businesses registered in Malaysia to generate e-invoices for all B2B, B2G and B2C transactions.

This article provides a comprehensive overview of e-invoicing Malaysia, covering its scope, process, applicability, implementation timeline, models, penalties, and essential information for businesses.

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

IRBM plans to implement e-invoice gradually in phases to ensure a smooth transition. Below is the Malaysia e-invoice implementation timeline:

e-Invoicing implementation timeline in Malaysia

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.

What is the process flow of e-Invoice in Malaysia? 

  • Subsequent to the occurrence of transaction, the supplier creates an e-Invoice and send it to IRBM through MyInvois portal or through e-Invoicing software by way of an API.
  • After that, the invoice gets validated by IRBM and is notified to the supplier and buyer.
  • Once validated, it becomes the duty of the supplier to share the e-Invoice embedded with QR code to the buyer. 

process flow of e-Invoice in Malaysia

e-Invoicing model in Malaysia

In Malaysia, companies can choose any of the below transmission modes to report e-invoices:

  1. MyInvois Portal hosted by IRBM: The MyInvois Portal can be accessed by all businesses. However, this portal is only suitable for a small volume of data and is feasible for Micro, Small, and Medium-sized Enterprises (MSMEs).
  2. Application Programming Interface (API): API in either XML or JSON format. Adoption of API requires an investment in technology and modifications to the current systems. However, this is the ideal e-invoice generation mode for large businesses with a huge volume of transactions.

Click here for more information on how to report e-invoices in Malaysia.

Benefits of e-invoicing in Malaysia

Implementation of e-invoice provides a seamless experience to businesses. Further, it improves business efficiency and enhances tax compliance. Below are a few of the benefits of e-invoice in Malaysia:

  1. Unified invoicing process: Businesses can streamline creating a document and submitting it. Further, they can automate the data entry process.
  2. Integrated tax return filing system: Seamless integration helps in efficient and accurate reporting of tax returns.
  3. Streamlined operations: Improved efficiency and significant resources saved for businesses.
  4. Improved cash flow: E-invoicing significantly reduces calculation and billing errors. This move results in faster payment cycles and reduced disputes.
  5. Digitized financial reporting: e-Invoice aligns financial reporting and processes to be digitalized with the industry standard.

Transactions covered under Malaysia e-invoice

e-Invoice covers transactions such as:
- Business to Business (B2B), 
- Business to Customer (B2C), and 
- Business to Government (B2G). It is to be noted that e-invoice flow for B2G transactions will be similar to B2B.

e-Invoice applies to all commercial activities in Malaysia, including the sale of goods and services and specified non-business transactions between individuals.

In the case of B2C transactions, sellers do not have to issue e-invoices to the end consumers; however, they shall issue a normal invoice or receipt. After a specified timeline, the seller should aggregate all the normal invoices or receipts and issue a consolidated e-invoice.

Click here for more information on transaction types of e-Invoicing in Malaysia.

B2C transactions for e-invoicing in Malaysia
 

B2C transactions for e-invoicing in Malaysia

Currently, Suppliers issue receipts, bills, or invoices to consumers (Buyers) to document B2C transactions for consumption supplies like groceries, telephone bills, etc.

With the implementation of e-Invoice, Suppliers must issue e-Invoices even for all B2C transactions. However, many Buyers, particularly end consumers and specific businesses, would not need an e-invoice. 

In B2C transaction case, the generation of e-invoices will vary depending on the Buyer's requirements:

  • Scenario 1: Suppliers will gather details from the buyer/consumers and generate e-invoices in real-time, like other B2B e-invoices.
  • Scenario 2: When a buyer doesn’t require an e-Invoice to assist Suppliers in meeting e-Invoice requirements and alleviate the burden on both Suppliers and Buyers, the IRBM allows Suppliers to consolidate transactions with Buyers (who do not need an e-Invoice) into a monthly consolidated e-Invoice.

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.

Entities Required to Comply with e-Invoicing in Malaysia

Entities exempt from e-Invoicing

  • Associations
  • Body of persons
  • Branches
  • Business trusts
  • Co-operative societies
  • Corporations
  • Limited liability partnerships
  • Partnerships
  • Property trust funds
  • Property trusts
  • Real estate investment trusts
  • Representative offices and regional offices
  • Trust bodies.
  • Unit trusts
  • Ruler and Ruling Chief
  • Former Ruler and Ruling Chief
  • Consort of a Ruler of a State with specified titles
  • Consort of a Former Ruler of a State with specified titles
    Government
  • State Government and State authority.
  • Government authority
  • Local authority
  • Statutory authority and Statutory Body
  • Facilities provided by the above Government, authority, or Body
    Consular offices and diplomatic officers, Consular officers, and Consular employees.
  • Individual who is not conducting Business

Why is e-invoice implemented in Malaysia?

The government intends to support the digital economy growth and enhance the efficiency of Malaysia’s tax administration through e-invoices. e-Invoice aligns with the objectives of the Twelfth Malaysia Plan to focus on strengthening the digital services infrastructure and digitalizing the tax administration.

The Malaysian government intends to 

  • Avoid paper invoicing and prevent tax leakage
  • Help businesses save time and resources on tax compliance
  • Enhance ease of business for entities in international trade.

e-Invoice authority in Malaysia

The Inland Revenue Board of Malaysia (IRBM) is the authority that oversees the e-invoice activities. Also, it issued e-invoice guidelines in July 2023 detailing the scope of the implementation of e-invoice.

The guideline explains the e-invoice concepts, such as 

  • Implementation methodology
  • Impact on compliance
  • Record keeping
  • Addresses common questions and concerns

Further, IRBM signed an MoU with the Malaysian Digital Economy Corporation (MDEC) to establish collaboration on the e-invoice initiative.

What are the challenges of e-Invoicing for businesses in Malaysia?

The introduction of e-Invoicing has ushered in transformative changes in the Malaysian business landscape, affecting various operational aspects and overall efficiency. As Malaysia embraces e-Invoicing, businesses encounter several challenges on this digital journey:

  1. Regulatory Compliance: Malaysia is in the process of implementing mandatory e-Invoicing regulations, set to commence in August 2024 for select businesses and gradually expanding to cover all tax-registered businesses by 2027. Complying with these regulations, especially for businesses with complex systems, can pose a significant challenge.
  2. Technological Transition: Transitioning to e-Invoicing demands a shift from traditional manual invoicing processes to automated systems. Businesses may face hurdles in adapting to new technologies, integrating e-Invoicing with existing systems, and ensuring that their staff is proficient in this digital transition.
  3. Data Security Concerns: As sensitive financial data flows electronically, companies must address concerns related to data security and privacy
  4. Resistance to Change: Overcoming resistance to change within an organization is another obstacle. Employees accustomed to conventional invoicing methods may be hesitant to embrace e-Invoicing, necessitating effective change management strategies.
  5. Technological Readiness: Not all businesses may be technologically prepared for e-Invoicing, particularly smaller enterprises with limited IT infrastructure. Adapting and upgrading systems to align with e-Invoicing standards can be resource-intensive.
  6. Data Accuracy and Integration: Integrating e-Invoicing technology with existing systems, such as enterprise resource planning (ERP) solutions, requires meticulous planning to ensure seamless data exchange and synchronization. Data accuracy and consistency across departments become vital challenges in this integration process.
  7. Supplier Onboarding: Collaborating with suppliers for e-Invoice adoption can be challenging. Ensuring that all partners are aligned with e-Invoicing procedures and technology can be a time-consuming endeavor. 

Role of e-invoice in Malaysia for different industries

In Malaysia, e-Invoicing implementation is in a phased manner according to the turnover. The Malaysian Government is releasing FAQ’s indicating role of the same for different industries too. It has released FAQ’s for the following:

Software Development Kit for e-invoice in Malaysia

For businesses opting for the API model to generate e-invoices, integration between their enterprise source system and the MyInvois system is necessary. Recognizing the complexity of such integration, the Lembaga Hasil Dalam Negeri (LHDN) has introduced the e-invoice Malaysia Software Development Kit (SDK).

The e-invoicing Malaysia SDK provides detailed information on document types, statuses, codes, APIs, validation rules, and other essential aspects crucial for e-invoicing. This SDK serves as a valuable resource for developers, enabling them to customize their business solutions to meet Malaysian e-invoicing requirements. It facilitates the generation, submission, and management of e-invoices with greater ease and efficiency.
 

How can ClearTax help with e-invoicing in Malaysia?

ClearTax offers one of the the best e-Invoicing solutions in Malaysia. ClearTax offers comprehensive support for e-Invoicing, acting as a middleware to seamlessly connect your ERP/POS system with the IRBM cloud, ensuring 100% IRBM compliance. The key features of ClearTax e-invoicing include:

  1. Dedicated Account Manager: Each customer is assigned a dedicated account manager who provides expert guidance on compliance and technical aspects of e-invoicing with ClearTax.
  2. Extensive Data Validations: ClearTax conducts over 150 data validations before transmitting information to IRBM, ensuring 99.99% success rate in e-invoice generation.
  3. Rapid ERP Integration: ClearTax offers quick integration with over 50 ERPs. You can seamlessly incorporate ClearTax web APIs within 4-6 weeks to achieve compliance efficiently.
  4. Data Archival: ClearTax ensures secure e-invoice data archival for up to seven years on SLA-based cloud servers, guaranteeing data retention and accessibility.
  5. Value-Added Services: ClearTax goes beyond basic e-invoicing support by offering various value-added services to simplify the e-invoicing process for clients. These include features such as Spend/Sales analytics based on e-invoices, error reports for input e-invoices, QR code generation, and convenient options like WhatsApp/SMS for sending B2C e-invoices and custom print templates for e-invoices. 

ClearTax is a reliable partner in your journey towards seamless e-invoicing compliance in Malaysia.

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

Frequently Asked Questions

What is the best e-invoicing solution for Malaysia?

ClearTax stands out as one of the best e-invoicing solution provider in Malaysia. It facilitates seamless integration of your business system with the MyInvois Portal through API for efficient e-invoicing.

Shall I issue e-invoices in Malaysia from 1 June 2024?

The e-invoicing timeline for Malaysia was adjusted in October 2023. The updated schedule is as follows:

  • August 1, 2024: Applicable to taxpayers with annual turnover > RM 100 million
  • January 1, 2024: Relevant for taxpayers with annual turnover between RM 25 million and RM 100 million
  • July 1, 2025: Applicable to all other taxpayers.
     
What will be the e-Invoice model in Malaysia?

In order to ease the transition to e-Invoicing for taxpayers, the IRBM has created two distinct methods for e-Invoice transmission:

MyInvois Portal, hosted by the IRBM.

Application Programming Interface (API).
 

How do I get started with e-Invoicing in Malaysia?

To get started with e-Invoicing in Malaysia, it's essential to evaluate your company's readiness for e-Invoicing. First, determine if e-Invoicing applies to your company or if you wish to opt for it voluntarily. Assess your current ERP system's compatibility with e-Invoicing software and whether it can be seamlessly integrated. Ensure your employees are trained to handle e-Invoicing processes effectively. Lastly, communicate the requirements to all stakeholders and confirm their support for a smooth implementation.

Is e-Invoicing in Malaysia mandatory for all industries?

e-Invoicing is mandatory for businesses across all sizes and industries. However, to facilitate a smoother transition, it's being rolled out gradually in phases, based upon the turnover of each business.

What are the requirements for e-Invoicing in Malaysia?

Digital Certificate is a mandatory requirement for e-Invoicing in Malaysia. A digital certificate will be used for signing. A digital certificate will be issued by IRBM based on the taxpayer's TIN and additional information. It guarantees the e-Invoice's non-repudiation, integrity, and authenticity. It will be valid for three years. 

Is e-invoice applicable only to domestic transactions in Malaysia?

No, e-invoice applies to both domestic and international transactions.

What does IRBM validate in the e-invoice?

IRBM will validate all the details mentioned in the 55 fields and additional fields (if any) in the invoice.

What are the security measures for e-Invoicing in Malaysia?

Every e-invoice will feature a digital signature along with a timestamp to ensure its integrity. Upon submission for verification, the IRBM will assign a Unique Identification Number and QR code, enabling online validation of the invoice. Additionally, the IRBM has established a secure and encrypted channel for the transmission and storage of e-invoices.

How are e-invoices validated and stored?

Once an e-Invoice is created, it is shared to IRBM. IRBM then validates the mandatory fields and other essential details and notifies the supplier and buyer about the same. Further, supplier and buyer can obtain the summary of e-Invoices generated through My Invois Portal.

Has IRBM provided any technical guidance on system integration?

The IRBM has provided general guidelines for e-invoicing, along with specific guidelines and  Software Development Kit (SDK) for e-invoicing API integration. These resources are accessible on the IRBM's official website.

Shall I issue an e-invoice for disbursements and reimbursements?

IRBM has yet to decide whether to generate e-invoices for disbursements and reimbursements. The authority may issue guidance in this regard in due course.

Can I cancel the invoice submitted to IRBM?

Yes, the seller can cancel the e-invoice within 72 hours from generation time.

Are all businesses required to issue e-invoices in Malaysia?

Every business registered in Malaysia will need to issue e-Invoices as per a phased mandatory implementation timeline. This timeline is determined by the business's annual turnover or revenue threshold.

What are the consequences for failure to issue e-Invoice?

Not issuing e-Invoices would be considered an offense under Section 120(1)(d) of the Income Tax Act 1967. This offence would carry a fine ranging from RM200 to RM20,000, or imprisonment for up to 6 months, or both, for each instance of non-compliance.

What file format is mandated for e-invoices in Malaysia to be submitted for validation purposes by IRBM?

E-invoices must be submitted in XML or JSON format. Formats like PDF, JPG, etc., are not accepted.

Is e-Invoice issuance mandatory for MSMEs operating in Malaysia?

Yes, all businesses must implement e-Invoice according to the timeline specified in the e-Invoice Guideline.

Does the MyInvois System have a maximum file size for uploading e-invoices?

Yes, the MyInvois System has the following limits for file sizes:

  • Maximum file size: 5MB per submission
  • Maximum Number of e-invoices per submission: 100
  • Maximum size of each each invoice: 300KB

There are no restrictions on the number of lines in an e-invoice as long as these limits are observed.

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