The period from 2024 to 2025 will be transformative for Malaysian businesses as the government adopts advanced electronic invoicing trends. By 1 July 2025, e-invoicing will be mandatory for all taxpayers.
The phased rollout of mandatory e-invoicing had been set for 1 July, but a two-month delay was included in the Malaysian 2024 budget submitted on 23 October 2023.
The new timetable consists of three implementation phases, starting with taxpayers with an annual turnover of MYR 100 million (around $21 million).
Mandatory e-invoicing will help businesses perform optimally by eliminating paper invoicing and allowing faster invoice approval and payments.
So how do businesses prepare for mandatory e-invoicing in Malaysia?
In this post, we’ll discuss electronic invoicing in Malaysia, including who governs it, requirements, and the process of transmitting e-invoices. We’ll also delve into the implementation timeline, challenges businesses might face, and how to overcome them.
Is e-invoicing mandatory in Malaysia?
Mandatory e-invoicing in Malaysia will begin on 1 August 2024. All taxpayers with an annual turnover of MYR 100 million (around $21 million) will be required to use the new Continuous Transaction Control CTC e-invoicing model.
This model will require businesses to send invoices to the tax authority before sending them to the recipient. The second wave of mandatory taxpayers should begin sending e-invoices through Malaysia’s e-invoicing portal, MyInvois, on 1 January 2025.
By 2025, all taxpayers will be part of the e-invoicing regime and must use the new portal, MyInvois.
The Malaysian tax authority has provided an alternative: using an Application Programming Interface (API) to process and transmit invoices automatically in XML or JSON format.
A beta version of this software was released on 9 February 2024 to help businesses with integration before August.
What is the e-invoice authority in Malaysia?
The Inland Revenue Board of Malaysia (IRBM) oversees all Malaysian invoicing activities. In July 2023, it submitted the guidelines for implementing mandatory e-invoicing.
These guidelines explain various invoicing concepts, including the implementation methodology, requirements, impact on compliance, consequences of non-compliance, archiving, etc.
The IRBM signed a Memorandum of Understanding (MoU) with the Malaysian Digital Economy Corporation (MDEC). This corporation is a strategic initiative by the government to help attract talent and investors into the country.
This partnership will allow businesses to access the PEPPOL network through reliable access point providers such as Storecove.
MDEC accredits PEPPOL service providers in Malaysia and governs the overall framework, requirements, and technical standards.
Read also: How Do I Become Ready for Peppol? (A Beginner's Guide).
MyInvois portal
MyInvois is free for all business owners. It contains taxpayers' functionalities to generate, reject, or cancel invoices according to Malaysia’s e-invoicing requirements. You can also view and extract invoices from your records.
MyInvois is meant for businesses without the investment required for automated API integration. Some of the main features of MyInvois are bulk upload capabilities, notifications, rejection, cancellation, reporting, and digital certificate integration.
What are the types of e-invoices in Malaysia?
The Inland Revenue Board of Malaysia categorizes the following as types of electronic invoices:
Invoice
This is the fundamental document that details transactions between buyers and suppliers. An invoice is a well-known proof of transaction that can also include situations when self-billed electronic invoices are issued to record expenses.
Credit note
Credit notes help suppliers rectify errors, apply for discounts, and account for returns in order cancellations, invoice errors, and lost/damaged goods. They serve the purpose of reducing the value of the original e-invoice.
Debit note
Debit notes are the vice versa of credit notes. They ensure suppliers include additional charges on an invoice that has already been issued.
Refund
In instances where money is returned to the buyer, the supplier issues a refund invoice. This document provides a clear record confirming the transaction.
What types of transactions are covered in e-invoicing in Malaysia?
The Malaysian e-invoicing system to be implemented includes various types of transactions. These are:
- Business to Business (B2B),
- Business to Customer (B2C), and
- Business to Government (B2G)
The e-invoicing process for B2B and B2G will be similar. However, for B2C transactions, business owners do not have to issue an electronic invoice to customers.
Instead, they will issue a normal invoice or receipt. After a specified period, the seller must add all regular invoices and receipts and issue a consolidated invoice to the IRBM.
Implementation timeline for e-invoicing in Malaysia
Despite the two-month delay, the phased implementation of mandatory e-invoicing in Malaysia is still set to start in 2024. Unlike the previous one, where the last phase was set for 2026, the new timetable will end in 2025.
Let us look at the implementation timeline of Malaysia’s e-invoicing mandate:
1 August 2024
The first phase will target around 4,000 businesses in Malaysia with an annual turnover greater than or equal to MYR 100 million (around $21 million). These are mainly large companies in Malaysia operating locally and internationally.
1 January 2025
Businesses with an annual turnover between MYR 25 million (approx $5m) and MYR 100 million will be required to adhere to the e-invoicing guidelines by 1 January 2025.
1 July 2025
After the second phase, any other taxpayer operating in Malaysia will have to adopt electronic invoicing by 1 July 2025. Regardless of your business size, you must submit your invoicing records to the Inland Revenue Board of Malaysia.
What are the requirements for e-invoicing in Malaysia?
Compliant electronic invoices issued in Malaysia must meet various requirements, including the archiving period, format, digital signature, and mandatory entry information.
Format
XML and JSON are the required formats when issuing electronic invoices in Malaysia.
You can also access your e-invoicing information on the MyInvois portal and request documents in formats such as XML/JSON, metadata, CSV reports, grids, and PDF files.
Information
A compliant e-invoice in Malaysia has 53 mandatory fields. They include buyer and seller information, item or service description, payment details, total amount, etc.
Digital signature
A digital certificate is valid for three years and is used to sign and track an invoice. It is issued by the IRBM after an electronic invoice is validated.
Archiving
The minimum archiving period for electronic invoices in Malaysia is 7 years.
What is the e-invoicing process in Malaysia?
The are two recommended ways of transmitting invoices in Malaysia. They include:
- Manual input through the MyInvois platform
- Automated process through an API in XML or JSON format
There are many similarities to both methods. We’ll discuss the steps involved in transmitting e-invoices in Malaysia:
Step 1: Generating and issuing of e-invoice
After a sale or transaction, your first step is to generate an invoice and share it with the IRBM via the MyInvois portal or API. MyInvois requires manual data entry, making it cumbersome for large businesses with large data volumes.
However, an Application Programming Interface is more effective for invoice generation. But remember that you may have to invest in ideal technology to modify your existing systems for seamless integration.
Partnering with an accredited PEPPOL access point provider such as Storecove will make the process more straightforward. They will ensure that your invoice meets the required Malaysian guidelines.
Step 2: E-invoice validation
The tax authority, IRBM, validates e-invoices in real-time, making e-invoicing fast. They ensure the invoice meets the necessary standards, including the required information.
After validation, the invoice issuer receives a Unique Identifier number to be embedded on the invoice before sharing. It is transmitted through MyInvois or the API, allowing traceability of invoices and minimal instances of tampering.
Step 3: Notification of validation
After sending the Unique Identifier Number, IRBM notifies the supplier that the invoice has been validated using the MyInvois portal or API.
Step 4: Sharing invoice
The supplier should then embed the QR code and send the invoice to the buyer. Both parties can use the QR code to check the invoice's status on the MyInvois portal.
Step 5: Rejection or cancellation of invoice
After sharing the invoice, the IRBM sets timelines for when the buyer can request the rejection of an invoice and when a supplier can request cancellation.
Both requests must be justified.
What are the benefits of e-invoicing in Malaysia?
E-invoicing will help businesses enhance their overall performance by providing numerous benefits, which include:
Streamlining business operations
E-invoicing will help businesses streamline operations by simplifying the invoicing process. The risk for errors will be minimal with reduced manual effort.
Processing payments will be quicker and more frequent, thanks to IRBM’s real-time validation system.
Enhancing transparency
Businesses using a similar e-invoicing system will keep their transactions more transparent and are less likely to tamper with validated electronic documents.
The system allows both parties to track the invoices, enhancing trust in business relationships.
Improved security
Despite data security challenges, issuing e-invoices can help minimize tampering. The Unique Identifier Number makes it easy to monitor an invoice.
Enhancing communication
Due to the transparency of Malaysia's tax authority system, buyers and sellers communicate efficiently, minimizing delays.
Challenges of e-Invoicing for businesses in Malaysia
While most companies will aim for seamless integration with the new e-invoicing system in Malaysia, challenges are bound to happen.
Let’s discuss some of the main issues companies may face during the implementation period:
Data security
It would be catastrophic if data, especially financial data, is hacked or leaked. Most businesses have concerns with the risk they face while accumulating and transmitting sensitive financial information.
Technological transition
Moving from traditional manual invoicing processes involves incorporating new technology into your business operations. You may face challenges when ensuring that your team is up to par with the transition.
Resistance to change
Resisting developments in technology and business processes is a sure way for a business to lose to its competitors. However, some employees may be hesitant to embrace changes they deem challenging.
How can businesses prepare for the e-invoicing mandate in Malaysia?
Besides familiarizing yourself with the e-invoicing guidelines in Malaysia, here are other ways you can ensure your business is ready for the mandate:
Choose reliable service providers
Partner with reliable service and product providers to ensure seamless integration. If your system needs to be updated, find a reliable specialist to upgrade your digital services infrastructure with compatible and convenient equipment.
A reputable access point service provider like Storecove can also come in handy in ensuring compliance. We take on the task of ensuring your invoices are ready for submission to the IRBM.
Familiarize yourself with IBRM’s portal
It’s never too early to learn how the MyInvois portal works, even if you are in the last wave of the implementation phase. You can slowly start familiarizing yourself with the e-invoicing solution.
Takeaway: Embrace electronic invoicing in Malaysia for business efficiency
Malaysia is about to undergo one of the best technological advancements, which is ideal for the economy. As a business owner, you should prepare ahead for e-invoicing.
Familiarize yourself with the guidelines to understand what the Inland Revenue Board of Malaysia expects of you. You can set aside an upfront investment solely for e-invoicing to make the transition easier.
Storecove provides a singular platform to ensure regulatory compliance with e-invoicing regulations in over 50 countries.
Ready to join the thousands of businesses in Malaysia adopting e-invoicing? Contact Storecove today to get started.
More information about E-Invoicing in Malaysia?
Contact us for more information or schedule a consult with one of our e-invoicing experts.
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