e-Invoicing in Malaysia for Payments to Agents, Dealers, and Distributors

The implementation of e-invoicing in Malaysia officially started on August 1, 2024, mandating businesses with a turnover exceeding RM 100 million to generate e-invoices.

While the core e-invoicing process remains the same—where the supplier issues the e-invoice, and the buyer confirms it—certain scenarios require different invoicing methods. One such situation involves payments made to agents, dealers, and distributors, which necessitates the generation of self-billed e-invoices and other specialized approaches.

In this blog, we will cover everything you need to know about e-invoicing for payments to agents, dealers, and distributors.

e-Invoicing in Malaysia Overview

e-Invoicing, or electronic invoicing, is a digital method of issuing and managing invoices between suppliers and buyers, replacing traditional paper invoices. It allows for faster processing, improved accuracy, and enhanced compliance with tax regulations. In jurisdictions like Malaysia, e-invoices are validated in real time through a government portal, ensuring transparency and reducing the risk of fraud. Each validated e-invoice is assigned a Unique Identification Number (UIN) and often includes a QR code for easy verification.

The e-invoicing process involves several key steps: issuance of the invoice by the supplier, submission to the tax authority for validation, and notification to both parties upon successful validation.

Who are Agents, Dealers and Distributors?

• Agents: An agent is an individual or entity authorized to act on behalf of another (the principal) in business transactions, facilitating sales and earning commissions without taking ownership of the products.
• Dealers: A dealer is a business or individual that buys products from manufacturers or distributors to sell directly to consumers, taking ownership and handling marketing and sales.
• Distributors: A distributor is a business that purchases products in bulk from manufacturers and sells them to retailers or consumers, managing inventory and logistics to expand market reach.

Issuance of E-Invoice for Payments to Agents, Dealers, and Distributors

When transactions occur between a seller and a purchaser through an agent, dealer, or distributor, two types of transactions typically take place:

1. From Seller to Purchaser: Regular E-Invoice

When a purchaser buys goods or services through an agent, dealer, or distributor, the seller must issue an e-invoice to document the transaction. The roles are as follows:

• Supplier: Seller
• Buyer: Purchaser

If the purchaser doesn't request an e-invoice, the seller can issue a standard receipt instead. However, the seller must then issue a consolidated e-invoice within seven days after the end of the month, covering all receipts issued during that period.

2. From Seller to Agent/Dealer/Distributor: Self-Billed E-Invoice

When agents, dealers, or distributors complete a sale, they are entitled to receive payments or incentives (such as commissions) from the seller. In these cases, the seller must issue a self-billed e-invoice on their behalf. Here, the roles are reversed:

• Supplier: Agent/Dealer/Distributor
• Buyer: Seller (acting as the supplier to issue the self-billed e-invoice)

Steps to issue a Self-billed e-invoice for Payment to Dealers, agents and Payments (through Myinvois Portal)

1. Login to the MyInvois portal
2. Click the New Document button on the side navigation bar.
3. From the dropdown, choose Self-Billed Invoice.
4. Choose the most recent version of the document and click Start.
5. The system will automatically generate the invoice number and date/time. Click Continue.
6. Input Buyer and Supplier Details and click Validate.
7. Choose the applicable currency and click Continue.
8. Click Add Line and input the required product/service details (e.g., classification codes, quantity, unit price, tax, etc.).
9. Input payment, shipping, and billing information such as payment terms, shipping recipient's details, and frequency of billing.
10. Review the document summary to ensure all details are accurate.
11. Click Sign and Submit Document.
12. Select your ID Type, enter your User ID, and input your password.
13. Acknowledge the statement and click Submit to finalize.
14. After digital validation, the self-billed invoice will be created and processed.

Details for Issuing Self-Billed e-Invoice to Agents, Dealers, or Distributors

Key Considerations for Self-Billed E-invoices

1. Payment Basis: Self-billed e-invoices can be issued on an accrual or paid basis, provided consistency is maintained in documentation.
2. Incentives and Payments: Self-billed e-invoices can be based on periodic statements provided to agents, dealers, or distributors. The information about non-monetary incentives can be transmitted annually if only available during the preparation of annual reports.
3. Net Basis Issuance: Self-billed e-invoices can be issued on a net basis, where the gross amount is adjusted for any reversals, if detailed line items of these adjustments are included.

Conclusion

In the case of transactions through agents, dealers, and distributors, the seller is required to issue two types of e-invoices: one e-invoice to the purchaser and a self-billed e-invoice for the payments made to the agents, dealers, and distributors.

For more details, please refer to the specific guidelines released by the IRBM (Inland Revenue Board of Malaysia).