Thought Leadership
Malaysia E-Invoicing: A Step-by-Step Guide to Compliance
May 08, 2024
The way we do business in Malaysia is evolving. Malaysia is implementing mandatory electronic invoicing. Electronic Invoicing (e-invoicing) replaces traditional paper or PDF invoices. Instead invoices are sent directly from the customer’s system to the buyer. This shift improves efficiency, reduces errors and streamlines processes for businesses.
Businesses have been mailing paper invoices or emailing PDF invoices for too long. Processes that were fraught with inefficiencies. Manually creating and processing invoices is time-consuming and prone to errors. Lost invoices and data entry mistakes can disrupt cash flow. Creating headaches for both businesses and their clients.
E-invoicing represents a significant leap forward. Directly addressing these historical pain points making invoicing far easier and reliable. But e-invoicing isn’t just a passing trend. The Malaysian government has a phased approach to mandating it across the country.
Key e-Invoicing Dates in Malaysia
The exact date for mandatory e-invoicing compliance depends on your business’s annual turnover. The Malaysian government has implemented a phased approach to ensure a smooth transition:
- 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.
At the time of writing we are in Phase 1 and your business might not be affected until later phases. But, don’t wait to learn about e-Invoicing. Start familiarising yourself now for a smooth transition when your compliance date arrives.
Key E-Invoicing Guidelines in Malaysia
The Inland Revenue Board of Malaysia (IRBM), or Lembaga Hasil Dalam Negeri (LHDN) are managing e-Invoicing. They have provided specific requirements for e-invoicing compliance. Here’s a breakdown of the key points:
Invoice Format
E-invoices must follow specific technical standards set by the IRBM. The table below summarises the essential data fields required for e-invoices in Malaysia. Mandatory fields are denoted by (M).
| Category | Fields | Description |
| Parties (M) | Supplier Name, Buyer Name | Names of issuing party and recipient |
| Party Details (M) | * Supplier: TIN, Registration Number, SST Reg. Number (if applicable), Tourism Tax Reg. Number (if applicable), Email, MSIC Code, Business Activity Description * Buyer: TIN, Registration Number, SST Reg. Number (if applicable), Email | Tax ID, registration details, contact info, business nature (Supplier) |
| Address (M) | Supplier Address, Buyer Address | Issuing party and recipient addresses |
| Contact Number (M) | Supplier Contact Number, Buyer Contact Number | Phone numbers (office, mobile, fax) |
| Invoice Details (M) | e-Invoice Version, e-Invoice Type, e-Invoice Code/Number, Original e-Invoice Reference Number (if applicable), e-Invoice Date & Time, Issuer’s Digital Signature, Invoice Currency Code, Currency Exchange Rate (if applicable) | Document details, issuance details, authentication, currency info |
| Products/Services (M) | Description, Unit Price, Tax Type, Tax Rate (if applicable), Tax Amount, Details of Tax Exemption (if applicable), Amount Exempted from Tax (if applicable), Subtotal (Line item only) | Item details, tax information |
| Invoice Totals (M) | Total Excluding Tax, Total Including Tax | Sum of payable amounts (excluding/including taxes) |
| Payment Info (Optional) | Payment Mode, Supplier’s Bank Account Number, Payment Terms | Payment method and details (optional) |
| Additional Info (Optional) | Prepayment Amount, Prepayment Date, Prepayment Reference Number, Bill Reference Number | Prepayment information and internal reference numbers (optional) |
Note: This table is for informational purposes only. Refer to the official IRBM e-invoice guidelines for the latest and most accurate information.
Invoice Validation:
For added security and compliance, all e-invoices need to be validated by the IRBM. Validation is done through the IRBM MyInvois portal or an approved API. This verifies the authenticity and accuracy of your e-invoices. Our e-invoice solution is an easy way for Malaysian businesses to enable validation..
Data Retention:
Malaysian businesses are required to store invoices for a set period. The data retention period has not yet been defined by the IRB. Businesses can expect a likely retention period of 5 to 7 years. Data retention ensures you have easy access to these important documents for:
- Audits: The IRB may conduct audits to verify your tax compliance.
- Business Analysis: e-invoices are a treasure trove of data. You can analyse sales trends, customer behaviour, and identify areas for improvement.
Penalties for Non-Compliance
Penalties will be imposed for failure to follow the e-invoicing requirements. IRBM 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. Given the potential fines, it’s best to stay ahead of the curve and ensure a smooth transition.
Steps to Get Started with E-Invoicing
E-Invoicing compliance doesn’t have to be complicated. Here’s a simple roadmap to get your business on board with e-invoicing:
- Understand Your Compliance Requirements. Learn about e-invoice requirements for businesses like yours.
- 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.
- 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.
- 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.
The Road Ahead:
As e-invoicing becomes the norm, you can expect more changes in the process and regulations. It’s important that you don’t get left behind. If you need guidance navigating the e-invoicing landscape, don’t hesitate to contact us. Our team of Malaysian e-Invoicing experts [link to our team page] are ready to help. We can help you choose the right solution and ensure a smooth transition to e-Invoicing.
