The Complete Guide to e-Invoice LHDN in Malaysia for B2B Businesses

Malaysia’s business landscape is undergoing a significant transformation. The introduction of the e-Invoice system by the Inland Revenue Board of Malaysia (LHDN). This is a big change for businesses, how do businesses navigate this shift? This guide delves into the intricacies of e-Invoice by LHDN for B2B businesses. Designed to provide you with the confidence to navigate this shift with confidence.

e-Invoice LHDN vs. Digital Invoice

Digital (PDF) invoices are a clear step up from paper-based invoicing. The e-Invoice system by LHDN offers a more robust and standardised approach. Unlike PDFs, e-Invoices follow a specific format mandated by LHDN. A standardised format enables automated sending, processing and validation by LHDN and businesses. This will change business in Malaysia, driving efficiency and automation for everyone.

Implementing e-Invoice LHDN

The LHDN has adopted a phased approach to ensure a smooth transition for businesses. The exact date for mandatory e-invoicing compliance depends on your business’s annual turnover.

• Phase 1 (August 1, 2024). Mandatory for businesses with annual revenue over RM100 million.
• Phase 2 (January 1, 2025). Mandatory for businesses with annual revenue between RM25 million and RM100 million.
• Phase 3 (July 1, 2025). Mandatory for all other businesses, regardless of their revenue.

Voluntary participation is currently available, allowing businesses to familiarise themselves with the system.

What Businesses Need to Understand About e-Invoice With LHDN

Understanding e-Invoicing with LHDN goes beyond mere compliance. It’s a rare government initiative that presents a strategic opportunity for B2B businesses. With e-invoicing businesses have the opportunity to optimise operations and enhance efficiency. Let’s delve into the key reasons why businesses should embrace e-Invoicing:

1. It will be mandatory for all Malaysian businesses. e-Invoicing will become compulsory for all tax-registered entities across Malaysia. Proactive adoption allows businesses to gain a head start and avoid potential disruptions. With such a big change to business processes, you want to be as prepared as possible.
2. Impacts Business Operations. This is important and often overlooked, adoption requires changes to processes. Integrating e-invoicing software with existing accounting systems is one part of the process. Consider your processes, what happens before and after the invoice is generated/received? Finding the right e-invoicing partner to help ensure a smooth transition is key.
3. Penalties for Non-Compliance with LHDN Requirements. A standardised format helps to simplify compliance with LHDN requirements once implemented. But there can be severe penalties for non-compliance. You need to make sure that you are set up and compliant before the mandate kicks in. This will reduce the risk of potential penalties from LHDN.
4. Strategic Adaptation: e-Invoice will foster a more data-driven approach to business. Real-time invoice data can be leveraged for a range of benefits. Better data can drive improved cash flow management and enhanced financial reporting.

The Mechanics of e-Invoice LHDN

The e-Invoice system operates through MyInvois, a dedicated online portal administered by LHDN. The way you send and receive e-invoices depends on your business’s invoice volume. Here’s a breakdown of the two main options:

MyInvois Portal (For Low Invoice Volume). This is a free online portal offered by the IRBM. It’s ideal for smaller businesses with a low volume of invoices. You can manually enter invoice data into MyInvois to send and receive them. But, this will be time-consuming if you generate a large number of invoices.

e-Invoicing Software Integration (For Medium to High Volume). This option is best suited for businesses with a higher volume of invoices or more complex needs. It involves integrating your existing accounting system directly with MyInvois. This integration typically requires the help of an e-invoicing solution provider like Valtatech. Your existing system handles sending and receiving invoice data via MyInvois. This automates the whole process.

In Summary:

• MyInvois Portal: Easy to use, but requires manual data entry. Ideal for low volume.
• e-Invoicing Software Integration: Automated, but requires some initial setup. Efficient for medium to high volume.

Remember: Both methods involve submitting e-invoices to MyInvois for validation by the LHDN. Once validated, the e-invoices are sent to the buyer, often with a QR code for easy access.

Potential Consequences for Non Compliance

As mentioned, non-compliance after the mandatory date can result in penalties. Penalties will be imposed for failure to follow the e-invoicing requirements. LHDN guidelines have outlined potential penalties for non-compliance. They detail fines between MYR 200 and MYR 20,000 and/or imprisonment of up to six months. They can be imposed for failure to issue an e-invoice for any goods sold or services performed.

Getting Started with e-Invoices

Embracing e-Invoice LHDN doesn’t have to be daunting. Here’s a clear roadmap to guide businesses through the process:

1. Understand Your Compliance Requirements. Learn about e-invoice requirements for businesses like yours.
2. Choose a Reliable E-invoicing Solution Provider. Look for a trusted company that makes e-invoicing easy. Their platform should be user-friendly and work smoothly with your accounting system. Click to find out more about our e-Invoice solution.
3. Internal Change Management. Your e-invoicing solution provider should develop a comprehensive training program for your staff. This should equip them with the knowledge needed to navigate the new processes. Communication is key, keep your team informed throughout the entire process.
4. Testing and Support. Your solution provider should conduct thorough pre-launch testing of the system with you. This collaborative approach will help identify and address any potential issues. Your solution provider should also offer ongoing support after implementation. This will ensure a smooth transition for your business and your clients.

Benefits of e-Invoice for Businesses in Malaysia:

• Cost Savings. Reduced paper/email usage, streamlined processes result in faster invoice processing. These can lead to significant cost reductions in your accounts payable/ receivable processes.
• Improved Accuracy: Standardised, automated formats reduce human error and ensure data integrity.

Frequently Asked Questions

1. What happens if my business partner isn’t registered for e-Invoice yet?

The e-Invoice system is designed to be adaptable. Don’t worry if your business partner isn’t currently registered for e-Invoice. You can still issue them an e-Invoice through MyInvois. They will receive an invoice notification and can access through a secure link.

2. Are there any tax implications with switching to e-Invoice LHDN?

Transitioning to e-Invoice LHDN doesn’t affect your existing tax obligations or calculations.

3. I’m concerned about data security with e-Invoices. How safe is the system?

The MyInvois portal adheres to strict security protocols to safeguard business data. All e-Invoices are encrypted and tamper-proof. User access controls within the system ensure only authorised personnel can manage invoices. The same level of security protocols apply to e-invoicing solution providers too.

Next Steps

If you need guidance navigating the e-invoicing landscape, don’t hesitate to contact us. Our team of Malaysian e-Invoicing experts are ready to help. We can help you choose the right solution and ensure a smooth transition to e-Invoicing.