Is E-Invoice Mandatory in Malaysia? Understanding Compliance and Benefits

Is E-Invoicing Mandatory in Malaysia?

Yes, e-invoice is becoming mandatory in Malaysia. The government has introduced regulations requiring businesses to adopt e-invoicing. It is being implemented in phases to ensure a smooth transition for businesses. The rollout plan is based on the annual turnover or revenue of businesses.

Mandatory E-Invoice Implementation Timeline and Interim Relaxation Period

The Government of Malaysia on 26 July 2024, has agreed to provide taxpayers a six (6)-month interim relaxation period from the date of mandatory implementation of each implementation phase to ensure the smooth transitioning and implementation of e-Invoice.

• 1 August 2024 to 31st January 2025: Businesses with an annual turnover or revenue of more than RM100 million.
• 1 January 2025 to 30th June 2025: Businesses with an annual turnover of more than RM25 million and up to RM100 million.
• 1 July 2025 to 31st December 2025: All other taxpayers and MSMEs above RM150,000 annual turnover

During the interim relaxation period, Government of Malaysia has agreed to allow taxpayers to adopt the following:
(a) issue consolidated e-Invoice for all activities and transactions, including the industries or activities listed under Section 3.7 of this e-Invoice Specific Guideline.
(b) issue consolidated self-billed e-Invoice for all self-billed circumstances outlined under Section 8.3 of this e-Invoice Specific Guideline.
(c) input any information / details in the “Description of Product or Service” field in the consolidated e-Invoice or consolidated self-billed e-Invoice. In other words, taxpayers are not restricted to input the receipt statement / bill reference numbers as required under Section 3 and 4 of this e-Invoice Specific Guideline.
(d) not to issue individual e-Invoice or individual self-billed e-Invoice, even if the buyer (in the case of e-Invoice) / supplier (in the case of self-billed e-Invoice) has made a request for an individual e-Invoice or individual self-billed e-Invoice to be issued, provided that the taxpayers comply with item (a) or (b) above, as the case may be.

Source: Item 16.1 IRBM e-Invoice Specific Guideline (Version 3.0) (hasil.gov.my)

Determining Annual Turnover or Revenue

Your turnover for the purposes of e-invoicing is determined in one of the following ways:

1. Businesses with Audited Financial Statements. Your annual turnover for the 2022 financial year. The amount is based on your statement of income in your audited financial statement.
2. Businesses without Audited Financial Statements. The annual revenue will be based on the 2022 financial year tax return assessment.

Your Compliance Obligations:

Businesses must issue and submit e-Invoices after their implementation date. These invoices will be validated by the Inland Revenue Board of Malaysia (IRBM). Any e-Invoice issued on or after the implementation date must follow IRBM’s requirements. You don’t need to convert older invoices before the implementation date into e-Invoices.

Businesses can choose to start issuing e-Invoices before the mandatory dates. Regardless of their revenue which can help businesses get used to the process. For new businesses, starting from 2023 onwards, e-Invoice implementation is 1 July 2025.

Exemptions from E-Invoicing:

IRBM has clear guidelines on situations where you are exempt from e-Invoicing. There are exemptions for certain entities and individuals including:

1. Existing and Former Rulers, Ruling Chiefs and their Consorts. All do not need to issue e-invoices.
2. Government Bodies and Authorities do not need to issue e-invoices for their transactions.
3. Local and Statutory Authorities do not need to issue e-invoices for their transactions.
4. Non-Business Individuals selling a personal item do not need to issue e-Invoices.
5. MSME with less than RM150,000 annual revenue

There are also exemptions for specific types of income or expenses. The following transactions do not need e-Invoices:

1. Employment Income – Salaries paid by an employer to an employee.
2. Pension – A retired individual receiving a monthly pension.
3. Alimony – Alimony payments made by one spouse to another as part of a divorce settlement.
4. Distribution of Dividends – Paid by a company to shareholders under specific conditions.
5. Gift Giving – an individual giving a gift to a friend or family member.
6. Transactions Between Government Entities.

Consider the following practical examples. A person selling their used furniture through an online marketplace to another individual. This sale does not need an e-Invoice because it is a non-business transaction. The Ministry of Health provides funding to a local hospital. This transaction is exempt as it is between government entities. A retired teacher receiving a pension from the government. The pension payments are exempt from e-Invoicing.

Compliance Requirements for E-Invoicing in Malaysia

To follow e-invoicing regulations in Malaysia, businesses must adhere to several specific requirements. These requirements are designed to ensure the authenticity, integrity, and accessibility of e-Invoices. They also facilitate seamless transactions between businesses and the tax authorities.

Mandatory Fields and Formats

Businesses must ensure that all necessary information is included in each e-Invoice. This typically includes:

• Invoice Date and Number: The unique identifier and date of issuance.
• Supplier Information: Name, address, and tax identification number (TIN) of the seller.
• Buyer Information: Name, address, and tax identification number (TIN) of the buyer.
• Description of Goods or Services: Detailed information about the products or services provided.
• Quantity and Unit Price: The number of items and the price per unit.
• Total Amount: The total payable amount, including any applicable taxes.
• Tax Details: Breakdown of applicable taxes (e.g., VAT or GST), including rates and amounts.

All invoices are processed through the MyInvoice portal run by IRBM. Invoices can either be manually entered into the Portal or sent via an API. For the API, E-Invoices must be transmitted in a standardised XML format.

Do businesses need to submit an e-Invoice within the same day the transaction is being
made during interim relaxation period ?

Based on the IRBM FAQ –

• For consolidated e-Invoice, suppliers are required to issue the consolidated e-Invoice within seven (7) calendar days after the month end.
• The timing of issuance of consolidated self-billed e-Invoice is similar to the timing of issuance of consolidated e-Invoice
• For e-Invoice for foreign income, the suppliers (i.e., income recipients) are required to issue the e-Invoice latest by the end of the month following the month of receipt of the said foreign income.

Digital Signature and Security Measures

Digital signatures are required to ensure the authenticity and integrity of e-Invoices. They verify that the invoice has not been changed after it was sent. Whilst also confirming and verifying the identity of the issuer.

E-Invoicing in Real Life: A Case Study From Australia

Although Malaysian case studies are not available, consider this example from Australia. HammondCare, a leading national health and aged care provider, adopted e-Invoicing. Their aim was to further enhance and automate their invoice processing system. They integrated e-Invoicing as part of their cloud-based source-to-pay platform implementation with Coupa.

Valtatech partnered with HammondCare to help this transformation. Over a period of two months, their Coupa platform was configured to receive e-Invoices. Pilot suppliers were onboarded and activated. Soon, HammondCare began receiving their first e-Invoices.

The results have been impressive and exceeded expectations:

• 21% decrease in cost to process each invoice
• 81% of e-Invoices processed and approved automatically
• 73% reduction in manual data entry time, freeing up valuable resources.

You can read more about our work with Hammond Care here.

Get Ahead with E-Invoicing

E-invoicing will be a mandatory requirement for businesses in Malaysia. Businesses can stay ahead of the curve by understanding the regulations. Our team of e-invoicing specialists can help you get you started. We will assess your readiness and identify the solution for your business needs. 

Contact us today If and we can help you navigate the e-invoicing landscape. Our team of Malaysian e-Invoicing experts are ready to help.