What is the Impact of E-Invoices in Malaysia?

E-invoicing is the digital exchange of invoices between businesses and their customers. It will rapidly transform the way Malaysian businesses operate. Businesses will need to change their processes and procedures to remain compliant. With it comes advantages like increased efficiency, cost savings and improved cash flow.

Why is E-Invoicing Being Implemented in Malaysia?

The Malaysian government is mandating e-invoicing due to several key reasons:

• Increased Tax Transparency. E-invoices provide a clear audit trail of business activity. This makes it easier for the IRBM to track business transactions and reduce tax evasion.
• Reduced Fraud: E-invoicing eliminates manual manipulation and duplication, minimising opportunities for fraud.
• Economic Efficiency: Streamlined invoicing processes free up resources and improve economic activity.

Authority Responsible for E-Invoicing in Malaysia

The IRBM, also known as Lembaga Hasil Dalam Negeri Malaysia (LHDN) handles e-invoicing. They are the official authority to enforce e-invoicing throughout the country. They’re also responsible for establishing the legal framework for e-invoices. This includes mandatory issuance or receipt thresholds for different business sizes and timelines. The IRBM oversees the entire e-invoicing ecosystem. This includes managing compliance by businesses and potentially issuing penalties for non-compliance. The IRBM also plays a vital role in educating businesses about e-invoicing procedures.

E-Invoicing Implementation Timeline in Malaysia

The IRBM has chosen a phased rollout to ease businesses into the e-invoicing system. This ensures a smooth transition and allows companies to adapt at their own pace. Here’s a breakdown of the implementation timeline:

• Initial Adopters (August 1, 2024). Mandatory for businesses with an annual turnover exceeding RM100 million. This caters to large corporations with the resources for a swift transition.
• Expanding the Net (January 1, 2025). Mandatory for businesses with a turnover between RM25 million and RM100 million. This targets mid-sized companies, giving them more time to prepare.
• Full Launch (July 1, 2025). E-invoicing will become mandatory for all businesses in Malaysia, regardless of their revenue. This ensures a standardised system across the entire commercial landscape.

Voluntary participation in e-invoicing is currently encouraged, allowing businesses to explore the system.

The Scope of E-Invoicing in Malaysia

The Malaysian e-invoicing system encompasses a broad range of transactions and document types. This ensures comprehensive coverage and promotes transparency across various business interactions.

• Transaction Types:
  • Business-to-Business (B2B) transactions form the core of e-invoicing.
  • Business-to-Consumer (B2C) transactions are also included, although some exceptions may apply. Usually, businesses will need to merge normal invoices into a single e-invoice.
  • Business-to-Government (B2G) transactions are crucial for efficient tax collection and government spending. E-invoicing streamlines this process for both parties.
• Document Types:
  • Invoices to record transactions between a supplier and buyer.
  • Credit notes to correct errors or account for returns from a previous invoice.
  • Debit notes to adjust the original invoice value for extra charges or discrepancies.
  • Refund notes for the process of issuing a full or partial refund to a customer.

The E-Invoicing Process Flow in Malaysia

It’s important for businesses to know the e-invoicing process for a smooth transition. Here’s a breakdown of the key steps:

1. Creating and Sending the Invoice. The e-invoice is generated using either an e-invoicing solution or the MyInvois portal.
   • e-Invoicing Solution. Businesses with high transaction volumes can leverage an API to integrate e-invoicing directly. Data is taken from your accounting systems and integrated with the MyInvois system.
   • MyInvois Portal: For businesses with lower transaction volumes. Through this user-friendly online platform businesses can manually upload and manage their e-invoices.
2. Validation and Signing. The system validates the invoice for accuracy and compliance with regulations. A digital signature is added to ensure authenticity and prevent any future disputes.
3. Secure Delivery. Once validated and signed, the e-invoice is sent to the recipient.
4. Review and Response: The recipient has the option to accept or reject the invoice. Cancelled invoices are documented for record-keeping purposes.
5. Confirmation: Upon acceptance, both parties receive a confirmation of the transaction.

Characteristics of a Compliant E-Invoice in Malaysia

E-invoices in Malaysia follow a strict set of guidelines established by the IRBM. These guidelines ensure consistency and security within the e-invoicing ecosystem. Crucially, the IRBM must be clearly identified on every e-invoice. You’ll need to state whether your business is required to issue or receive e-invoices. To guarantee authenticity and prevent disputes, a valid digital signature is required. Additionally, e-invoices must adhere to specific data formats outlined by the IRBM. Finally, businesses need to keep e-invoices for a period as per IRBM regulations.

E-Invoicing’s Impact on Malaysian Businesses

E-invoicing isn’t just a change in how you send invoices. It’s a transformation for your entire business. Here’s how e-invoicing streamlines operations, simplifies compliance, and unlocks a range of benefits:

Impact on Business Processes:

• Streamlined Workflow. E-invoicing automates tasks, eliminating a lot of manual invoicing tasks. It can reduce the time spent on invoice creation and management.
• Improved Accuracy. Automated data entry minimises human error. This reduces the risk of discrepancies and disputes.
• Enhanced Cash Flow. Faster invoice processing translates to quicker payments from customers. This improves your cash flow and financial stability.
• Tax Reporting Made Easy. E-invoicing simplifies tax filing by automating data collection and reporting. This reduces the burden of manual data entry minimising the risk of audits.
• Cost Savings: E-invoicing eliminates paper, printing, and postage costs. Additionally, streamlined processes cut labour costs associated with manual invoicing and data entry. These cost savings can be reinvested in other areas of your business.
• Increased Efficiency: Automation frees up employees’ time for more strategic tasks.

Frequently Asked Questions about E-Invoicing in Malaysia (FAQ)

• What are the penalties for non-compliance with e-invoicing? 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.
• What software solutions are available for e-invoicing in Malaysia? Several e-invoicing solution providers cater to businesses of all sizes. Valtatech has vast experience with e-invoicing in Malaysia and across the region. Research and choose a solution that integrates with your existing accounting system. Your chosen solution provider should also help you transition effectively.
• How can I prepare my business for the transition to e-invoicing? Start familiarising yourself with the IRBM e-invoicing guidelines. Explore e-invoicing solutions and assess your business needs.

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