Tax Invoice in Malaysia: A Complete Guide

A tax invoice is a document that you must have seen at one time or another while making any purchase in the market. If you are planning to conduct business in Malaysia, you need to know the tax invoice used in Malaysia, its format, usage, and penalty for non-issuance of such tax invoice. In this article, we will learn all about the tax invoice in Malaysia.

What are tax invoices in Malaysia?

A tax invoice is a standard document issued by the seller to the buyer under the Sales and Services Tax (SST) system of Malaysia. A tax invoice typically includes details such as the buyer and seller's name and address, a description of the goods sold or services provided, the quantity or volume of the goods or services, the taxable and invoice value, and the applicable tax on such taxable value. The taxpayer can add other details as per its requirements such as terms and conditions of sale and payment details, etc.

Are tax invoices mandatory in Malaysia?

Any business, whether individual or otherwise registered with the Royal Customs Malaysia (RMC), must issue a tax invoice for the supply of taxable goods or services in Malaysia. A non-registered person cannot issue a tax invoice.

Rules for issuing Tax Invoice

The Royal Malaysian Customs Department has outlined the following rules for issuance of tax invoice.

• Mandatory for registered manufacturers selling taxable goods and registered persons providing taxable services 
• Invoices can be issued in hard copy or electronically.
• Invoices must contain prescribed particulars and can be in either Malay (Bahasa Malaysia) or English.

What are tax invoices used for?

A tax invoice acts as valid document for the following:

• Determination of the time of supply for payment of tax.
• Filing SST returns and determining revenue of a period
• Refund of SST paid on purchase of taxable goods by foreign tourists.
• Audit or investigation to verify the accuracy of reported transactions and taxes. 
• Tax invoices also serve as documentation for customers, providing them with details of their purchases, including the price, taxes, and terms of sale.

What are the particulars of tax invoices in Malaysia?

A tax invoice must have the following information:

1. Invoice Details:
   1. The word 'tax invoice' is mentioned at a prominent place on the invoice.
   2. Invoice number (must be unique and sequential)
   3. Invoice date (the date when the invoice is issued)
   4. Due date (if different from the invoice date)
   5. Payment terms (if applicable)
2. Seller's Details:
   1. Name of the registered business
   2. Business registration number (BRN) or tax identification number (TIN)
   3. SST number of the seller
   4. Business address
3. Buyer's Details:
   1. Name of the customer or company
   2. Customer's tax identification number (if applicable)
   3. Customer's address (if available)
   4. SST number of the buyer (if applicable)
4. Itemized Description:
   1. Description of goods or services sold (including quantity)
   2. Unit price
   3. Total price for each item
   4. Indication of whether the price includes or excludes SST
5. SST Details:
   1. SST rate applied to each taxable item
   2. Total SST amount for each taxable item
   3. Total SST amount for the invoice
6. Grand Total:
   1. Total amount payable, including SST (if applicable)
7. Additional Information:
   1. Any additional terms and conditions of sale
   2. Any discounts or promotions applied
   3. Any other relevant information deemed necessary
8. Declaration and Signatures:
   1. A statement declaring that the document is a tax invoice, prominently displayed
   2. Signature of the person authorized to issue the invoice (if applicable)

What is the penalty for non-issuance of tax invoices?

A failure to issue a tax invoice may result in a general penalty not exceeding 30,000 Malaysian Ringgit or imprisonment of up to 2 years or both.

Difference between Tax Invoice and Commercial invoice

There are several differences between a commercial invoice and a tax invoice –

Full tax invoice vs Simplified tax invoice

• Full tax invoice – A full tax invoice is a regular tax invoice that a registered person is required to issue for sale transactions undertaken as per Malaysian laws.
• Simplified tax invoice – A simplified tax invoice is generally prescribed wherein a huge volume of invoices are issued such as supermarkets, restaurants, petrol kiosks, etc. A simplified tax invoice does not have the name and address of the recipient. Also, in a simplified tax invoice, the price and tax for each item are not required to be shown separately

Other Types of Tax Invoices in Malaysia

Other than full tax invoice and simplified tax invoice, there are 2 other types of tax invoices:

• Self-billed invoice – A self-billed invoice is issued by the recipient of the supply instead of the supplier. This mainly happens when the supplier is not able to determine the sale value at the time of the supply.
• Invoice by auctioneer – Where the owner of the goods is a taxable person, the auctioneer, whether registered or not, is required to issue a sale document, which can be considered a tax invoice.
• Consolidated Invoice: A consolidated invoice combines multiple individual invoices into one document, often used for multiple transactions with the same buyer within a specific period. In the e-invoicing context, consolidated invoices combine all B2C invoices (where the buyer does not request an e-invoice) to submit one single invoice to the MyInvois portal. 

Tax Invoice vs Receipt

A tax invoice is used by the registered seller requesting payment from the buyer and is generally issued after the sale of goods or services or both but before receiving the payment.

A receipt is issued by the seller as an acknowledgement of receipt of payment after the sale or transfer of goods or provision of service. In simple words, a receipt includes the details of the amount paid and the method of payment. Thus, a receipt acts as proof of payment and is highly useful in case of a legal dispute between vendor and customer concerning payment.

E-invoicing Implementation in Malaysia

Malaysia's e-invoicing initiative kicks off its first phase on August 1st, 2024, targeting businesses exceeding a certain turnover threshold. Under e-invoicing, all tax invoices must transition to e-invoices, facilitated through designated portals or API integrations, and validated by IRBM.

With the implementation of e-invoicing in Malaysia, there will be a standardization of invoice formats, with mandatory details required for every invoice. These details are crucial for tax compliance and include information such as seller and buyer details, item description, quantity, price, tax, total amount, and payment details. Additionally, all invoices must undergo validation by IRBM and acceptance by the buyer to be valid.

As e-invoicing becomes the norm, traditional methods of invoicing, such as paper invoices or computer-generated electronic invoices, will no longer suffice as proof of expense, income, or for audit purposes. Instead, e-invoices will serve as the primary documentation for all financial transactions, providing a digital trail that is easily accessible and tamper-proof.

All in All

Tax invoices in Malaysia stand as the most crucial and common document with legal validity and implications in commercial transactions. While variations may exist in their scope and format, the fundamental components remain consistent. Serving as the cornerstone for payment processing, tax collection, banking activities, and various legal uses, tax invoices play a pivotal role in financial operations.

With the advent of e-invoicing, tax invoices undergo a transformation in name yet retain their essence as the primary source of information for financial transactions. E-invoicing represents an evolution, offering an advanced form of the traditional tax invoice, bolstering efficiency, transparency, and compliance in Malaysia's business landscape.