What's Next for E-Invoicing in Malaysia? Key Insights for Businesses in 2024

E-invoicing in Malaysia is about to improve with the implementation of the new system and guidelines. The system, already available for testing, features a Continuous Transaction Control (CTC) model, allowing the Inland Revenue Board of Malaysia to validate transactions in real-time.

Implementation is set to start on 1 August 2024 for businesses with an annual turnover of RM 100 million and end on 1 July 2025 for all taxpayers. It will help enhance business operations and minimize paper, printing, and postal costs related to invoices.

The IRBM will better ensure tax compliance since every invoice must be transmitted and validated on their portal. The new system guarantees better business relationships due to quicker invoice validation and faster payments.

Adhering to proper e-invoicing implementation can help businesses enjoy these and other benefits. You have to read the guidelines to understand the requirements, which include format, archiving, and using a digital signature.

The Inland Revenue Board of Malaysia uses the MyInvois portal to receive and validate invoices. This platform is free for all taxpayers.

In this article, we'll look at how businesses can prepare for e-invoicing and discuss tips for effective implementation.

What is the updated timeline for e-invoicing implementation in Malaysia?

The new e-invoicing guidance v2.1 published by the Malaysian Inland Revenue Board (IRBM) on 28 October 2023 contains the updated implementation timeline.

E-invoicing in Malaysia will be implemented according to a business's annual turnover as follows:

1 August 2024

The new invoicing system has been available for testing for all businesses since 1 January 2024. However, starting on 1 August 2024, it will be mandatory for all companies with an annual turnover of over RM 100 million.

1 January 2025

By 1 January 2025, all Malaysian taxpayers with an annual turnover of more than RM 25 million will be required to adhere to the new e-invoicing regulations.

1 July 2025

As of 1 July 2025, all Malaysian taxpayers should use the new e-invoicing system to ensure compliant e-invoice issuance, per IRBM's guidelines.

How does the new e-invoicing mandate work in Malaysia?

The new e-invoicing mandate in Malaysia requires businesses to use the new system for certain transactions. The invoices should also be generated and transmitted in a certain format with several mandatory details.

Let us discuss some of the requirements of an e-invoice mandate by the new guidelines:

Format

All taxpayers must generate and issue electronic invoices to the IRBM portal in XML or JSON format. However, when accessing the documents in the MyInvois portal, you can request documents in CSV reports, grids, XML/JSON, metadata, and PDF files.

Entry information

When transmitting an electronic invoice in Malaysia, you must fill out at least 53 mandatory fields. These include the details of the buyers and sellers and information explaining the types of goods or services in question.

Digital signature

With Malaysia's new Continous Transaction Control (CTC) system, the Inland Revenue Board can now validate e-invoices and issue a digital signature almost immediately ot both parties.

The sender is supposed to embed the signature in the invoice before transmitting it to the buyer, who uses the code to track the invoice on the IRBM portal.

Archiving

The minimum archiving period for an e-invoice in Malaysia is seven years.

You may also like: Understanding Electronic Invoicing in Malaysia.

Types of electronic invoices in Malaysia

There are several documents that taxpayers in Malaysia must replace in an electronic format, including:

Invoices

An invoice is a commercial document registering the sale of goods or services between a supplier and the recipient. Self-invoicing is also included for individuals conducting international transactions.

For example, if a Software Solutions Company purchases software licenses abroad, it must generate an invoice and submit it for validation in the MyInvois portal.

Credit notes

A supplier uses a credit note when the transaction value decreases due to errors in the invoice or discounts provided after invoice issuance. However, this document is not used when money is returned to the recipient.

A good example of a credit note being appropriate is when company A mistakenly overcharges company B for a bulk order of processing materials. Upon discovery, Company A issues a credit note to Company B to rectify the excess amount.

The credit card is submitted to the IRBM via the MyInvois portal.

Debit notes

A debit note serves the opposite purpose of a credit note. It is issued when the transaction's value increases after issuing the invoice.

Refund e-invoices

A seller issues a refund invoice to a buyer to document the recipient's payment refund. If a tech company sells laptops to a school that turn out to be defective, it can acknowledge the return by issuing a refund e-invoice and refunding the school.

Self-billed e-invoices

A buyer issues a self-billed e-invoice on behalf of the actual seller. This process is required by various guidelines, such as when conducting business with a taxpayer who does not own a business.

This document is proof of income for the supplier and a record of expenses by the buyer.

Types of transactions included in Malaysia's e-invoicing system

According to the new IRBM guidelines, the following are transactions for which taxpayers must generate an e-invoice:

Proof of income

A proof of transaction documents goods or services a supplier supplies to a recipient. You should also generate an electronic invoice from any 'other transaction' you may be earning from as a taxpayer.

Proof of expenses

This transaction involves purchasing goods or services or any other expense a taxpayer may incur. Taxpayers must also generate an invoice indicating the return of goods and discounts given.

The recipient must issue a self-invoice documenting the expenses if a transaction involves a Malaysian taxpayer and a foreigner.

The above transactions are mandatory for B2C (Business-to-Consumer), B2G (Business-to-Government), and B2B (Business-to-Business) transactions.

Process flow of an e-invoice in Malaysia

With the right software, the electronic invoicing process in Malaysia is easy. Here are the steps involved:

Step 1: Issuance

The supplier generates the electronic invoice and sends it to the IRBM. The tax body verifies all the details and sends a digital signature as a QR code to the buyer and supplier if the invoice is validated.

If not validated, the IRBM rejects the invoice so the buyer can adjust their mistakes.

After validation, the supplier embeds the QR code on the invoice before sending the validated e-invoice to the buyer. The buyer can use the digital signature to verify and monitor the invoice on the MyInvois portal.

Step 3: Transaction summary

If neither party rejects or cancels the invoice, payment is made, and the summary of every process is available through the portal.

How to evaluate your business's readiness for e-invoicing implementation in Malaysia

To ensure compliant e-invoicing in Malaysia on an ongoing basis, you need to assess your e-invoicing readiness to gain valuable and strategic insights and a proposed roadmap to help ensure a smooth transition.

Here are several functional domains of e-invoicing you should assess:

Reporting

Is your ERP system capable of generating frequent accounting information reports to the tax administration? The Malaysian government requires taxpayers to submit monthly, quarterly, and yearly tax reports.

The new e-invoicing system makes filing accurate invoices and tracking tax records easier. You should assess your e-invoicing software to determine whether it can ensure that all the information required for the reports is available.

Technical and legal document rules

According to the Malaysian government's released e-invoicing guidelines, businesses must follow various technical rules and formats. Can your system generate invoices in the right format, or do you have to upgrade?

The e-invoicing software must also be able to generate an invoice that fills out all 53 mandatory fields; otherwise, the IRBM will reject the invoice.

Tips for effective implementation of electronic invoicing for your business in Malaysia

Are you ready to join the thousands of companies in Malaysia embracing the digital age of invoicing? Here are tips to help make the transition easier for your business:

Assess your needs and readiness

The first step towards successful e-invoicing implementation is to assess your business to determine whether it's ready and what measures you need to take to have it ready. Consider all upcoming regulations and determine if your current accounting software is up to the task.

If not, consider investing in an e-invoice generation tool or upgrading your system appropriately. As a large business, you may invest significantly to get the appropriate software.

You will also need an API (Application Programming Interface) to automate electronic invoicing processes. Small businesses without the financial capability to find software to help automate processes can use the MyInvois portal directly. However, it requires manual entry.

Choose reliable electronic invoicing software

The market offers a wide range of e-invoicing materials to consider. Finding the perfect one ensures a smooth transition and compliance.

Here are some facts to consider when choosing e-invoicing software:

Integration

Ensure your e-invoicing software seamlessly integrates with your existing systems to help you track all your financial transactions and tax payments.

Features

Ideal electronic invoicing software is user-friendly and has features that address various basic needs, such as reporting tools, payment methods, and automated reminders. This helps you send your invoices on time to avoid penalties.

Other features you will need include customer service, reliability, and updates to the software.

Compliance

Find software to generate invoices in the required formats and archive them for at least 7 years.

Consider an e-invoicing service provider

The Malaysian government has granted the Malaysia Digital Economic Corporation authority to validate and approve PEPPOL network service providers to facilitate e-invoicing in Malaysia further.

Using PEPPOL to transmit invoices allows you to conduct transactions with over 60 countries using the network easily.

Choosing a reliable PEPPOL network service provider helps you issue compliant electronic invoices. At Storecove, we ensure all your invoices meet the IRBM's required standards.

Onboard your team

Understanding the transition should also include employees interacting with the e-invoicing system. Employees must undergo training to understand various situations, such as when the IRBM rejects an invoice.

You can outsource external training from experts to help your e-invoicing software users understand its integration and how to ensure accuracy and compliance.

Test and refine your e-invoicing process

Before going live, you can now test your system thoroughly by sending sample invoices to identify and fix potential glitches. The MyInvois portal is already available to customers for testing before the first deadline on 1 August 2024.

Why e-invoicing is being implemented in Malaysia

The introduction of mandatory electronic invoicing is one of the Malaysian government's steps towards supporting the country's digital economy.

It aligns with the Twelfth Malaysia Plan, which focuses on digitalizing the tax administration and strengthening digital services.

The government plans to:

Minimize business costs and save time

With quick e-invoicing issuance and validation using a QR code, businesses will enjoy improved cash flow. The government will also spend less on ensuring tax compliance.

Explore more: Enhancing Business Efficiency Through E-Invoicing Solutions in Malaysia (Explained!).

Avoid paper invoicing

Paper invoicing negatively affects the environment and is also expensive for business owners. Eliminating paper invoicing will help businesses reduce costs and improve accuracy.

Prevent tax leakages

Mandatory e-invoicing requires all taxpayers to send their invoices to the IRBM for validation. This helps ensure accurate tax data management and easy access to information required during audits.

Ease transaction processes for international trade

The PEPPOL network allows businesses in Malaysia to transact with over 60 countries using the network. This will help expand the market since this platform is reliable, ensures security, and helps businesses maintain compliance.

Takeaway: Embrace electronic invoicing in Malaysia for enhanced business operations

Business owners in Malaysia can already feel the government's support towards the digital economy with the introduction of the new mandatory e-invoicing system. It will help minimize paper use and improve cash flow to boost business performance.

The government also aims to benefit by curbing tax-related issues and ensuring compliance by all taxpayers. Businesses will also find it easier to keep up with their taxes, which is cumbersome for some owners.

But how do businesses prepare for this transition? This e-invoicing guideline provides adequate information on the requirements, including formatting, archiving, and other critical information.

You have to assess your readiness to identify what to do to ensure compliance. You must also evaluate your e-invoicing systems and make necessary adjustments.

In addition, you can also partner with a reliable PEPPOL network service provider to make it easier to deliver compliant e-invoices. At Storecove, we help businesses ensure compliance by connecting them to PEPPOL, one of the most widely used electronic invoicing networks.

Ready to embrace e-invoicing in Malaysia? Schedule a consult with one of our electronic invoicing experts today!

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