E-Invoicing in Malaysia: System Overview and Implementation Process

Starting on August 1st, 2024, Malaysia will mandate the use of an e-invoicing model to enhance the efficiency and transparency of financial transactions across various sectors. Overseen by the Inland Revenue Board (IRB) of Malaysia, this comprehensive e-invoicing system will encompass business-to-business (B2B), business-to-consumer (B2C), and business-to-government (B2G) transactions. The implementation of this national e-invoicing system will follow a meticulously scheduled adoption process, divided into three main stages, and is set to be fully operational by July 2025. This strategic move aligns Malaysia with global best practices, promising to streamline invoicing processes, reduce administrative burdens, and improve compliance across the board.

What is e-Invoicing?

E-invoicing, or electronic invoicing, is the process of issuing, transmitting, and receiving invoices in a digital format. This process eliminates the need for paper-based invoices, streamlining the billing process and making it more efficient

e-Invoice Implementation Stages

Malaysia’s e-invoicing model will be rolled out in three main stages starting in August 2024 and concluding in July 2025. This phased approach allows businesses to adapt progressively, providing time for necessary adjustments and training:

1. Initial Phase (August 2024):
   • Focus on large enterprises and government entities to ensure early adoption and to set the foundation for the system.
   • These initial adopters will provide feedback to refine the system for broader use.
2. Second Phase (Early 2025):
   • Medium-sized businesses will be integrated into the e-invoicing system.
   • This phase will address any challenges faced during the initial phase and ensure the system is robust and user-friendly.
3. Final Phase (July 2025):
   • Small businesses and remaining entities will be required to adopt the e-invoicing model.
   • By this stage, the system should be fully functional and optimized based on the learnings from the earlier phases.

e-Invoicing Model

To facilitate the transition to e-Invoicing, taxpayers in Malaysia can select the most suitable mechanism to transmit e-Invoices to the Inland Revenue Board of Malaysia (IRBM) based on their business requirements and specific situations. There are two primary options for e-Invoice transmission mechanisms:

MyInvois Portal

The MyInvois Portal is a user-friendly platform hosted by the IRBM and is accessible to all taxpayers at no cost. This portal is especially useful for taxpayers who do not have an Application Programming Interface (API) connection available. It provides a straightforward, accessible means for issuing and managing e-Invoices without requiring significant technological investment.

Key Features:

• Cost-Free Access: Available to all taxpayers without any charge.
• Accessibility: Ideal for smaller businesses or those without the capability to integrate an API.
• Simplicity: Easy-to-use interface for issuing and managing e-Invoices.

Application Programming Interface (API)

The API option enables direct data transmission between the taxpayers’ systems and the MyInvois system. This mechanism involves a set of programming codes that facilitate seamless integration, allowing businesses to automate and streamline their e-Invoicing processes.

Key Features:

• Direct Integration: Facilitates direct transmission of e-Invoice data from taxpayers’ systems to the MyInvois system.
• Upfront Investment: Requires initial technological investment and adjustments to existing systems.
• Ideal for Large Enterprises: Suitable for large taxpayers or businesses with substantial transaction volumes, as it supports high efficiency and automation.

E-Invoice Workflow Overview

The e-Invoice workflow begins when a sale is made or a transaction is undertaken, prompting the issuance of an e-Invoice by the supplier. This can be done via the MyInvois Portal or through the API, depending on the taxpayer’s chosen mechanism. The process continues as follows:

1. Issuance: The supplier issues an e-Invoice using either the MyInvois Portal or the API.
2. Transmission: The e-Invoice data is transmitted to the IRBM’s system.
3. Validation: The IRBM system validates the e-Invoice.
4. Storage: Validated e-Invoices are stored in the IRBM’s database.
5. Access: Taxpayers can view their historical e-Invoices stored in the IRBM’s database.

This workflow ensures that e-Invoices are accurately captured, validated, and securely stored, providing an efficient and transparent system for managing invoicing across various sectors in Malaysia.

E-Invoice Requirements

All e-invoices must adhere to specific criteria as specified in the LHDN e-Invoice Guideline (released on September 29th, 2023). Key details include:

• Supplier and Buyer Information: Tax identification numbers (TIN), registration/identification numbers.
• Invoice Details: E-invoice code/number, date, description of goods/services.
• Tax Details: Tax type, rate, amount, total amounts excluding and including tax.

Please refer to the official LHDN e-Invoice Guideline for more detailed information.

Act Now: Transition to E-Invoicing

The e-invoicing deadline is fast approaching. Here’s what you need to do:

1. Evaluate Your Current Invoicing Process: Identify areas for improvement in costs and efficiency.
2. Find the Right Solution: Choose or upgrade an e-invoicing solution that aligns with your business needs, considering ease of use, scalability, and integration capabilities.
3. Automate Transmission: Integrate your chosen solution with your ERP system to streamline the process.
4. Train Your Team: Educate your staff on the new e-invoicing process.

Conclusion:

Compliance with e-invoicing regulations in Malaysia is crucial for businesses to ensure smooth operations and adherence to legal requirements. If you have specific questions or need guidance on how to navigate the transition to e-invoicing using ERP, feel free to reach out. We can discuss tailored approaches to integrate e-invoicing into your existing systems, ensuring efficiency, compliance, and seamless adoption of the new regulatory framework. Let’s connect and streamline your invoicing processes together.

Contact us at enquiry@phitomas.com