How Malaysian Businesses Can Leverage E-Invoicing for Growth

Since e-invoicing implementation began in Malaysia, businesses that have complied with the set regulations have gained several advantages over their competitors, including improved cash flow, enhanced tax compliance, and stronger business relationships.

The Lembaga Hasil Dalam Negeri Malaysia (LHDNM), also popularly known as the Inland Revenue Board of Malaysia (IRBM), implements and oversees electronic invoicing regulations to enhance Malaysia's tax administration management.

The body hosts the MyInvois portal, which is free and accessible to all taxpayers for issuing and receiving invoices. Business owners can also create and issue invoices to the IRBM for validation through an Application Programming Interface (API) or a PEPPOL network provider.

There are numerous PEPPOL network service providers, but to partner with businesses in Malaysia, they must be accredited by the Malaysian Digital Economy Corporation (MDEC).

The last phase of the set e-invoicing implementation timeline in Malaysia will be 31 December 2025, when all taxpayers must adhere to the set e-invoicing regulations.

In this post, we’ll discuss how businesses in Malaysia can take advantage of e-invoicing for growth.

Is e-invoicing mandatory in Malaysia? (250)

Mandatory e-invoicing for B2B, B2G, and B2C transactions is in its implementation phase, which started on 1 August 2024. It is estimated to end on 31 December 2025 and will be mandatory for all taxpayers.

Electronic invoicing has been available and optional in Malaysia since 2015. Both parties must agree to use electronic invoicing and retain the documents for at least 7 years.

The IRBM announced mandatory e-invoicing in March 2023. The body released the users' requirements and the dates for the three implementation phases, starting with the largest businesses and moving on to SMEs and other taxpayers.

Phase 1: Starting 1 August 2024, all businesses with an annual turnover or revenue thresholds of at least RM100 million must generate and issue e-invoices to the IRBM for validation.
Phase 2: The second phase will include all taxpayers with an annual turnover between RM25 million and RM100 million. This group must adhere to the e-invoicing regulations starting 1 January 2025.
Phase 3: The IRBM will commence enforcing the last phase from 1 July 2025 to 31 December 2025 and will cover all taxpayers in Malaysia.

How can Malaysian businesses leverage e-invoicing for growth?

Electronic invoicing offers businesses a digital and competitive advantage. It facilitates cost savings by reducing paper invoicing and helping companies manage efficient tax filing.

Here are ways Malaysian businesses can leverage e-invoicing for growth:

Global connection

Before conducting international transactions, business owners are sometimes challenged by how to make and receive payments while remaining tax-compliant. The Malaysian government has eliminated this challenge by allowing businesses to use PEPPOL.

PEPPOL is an international invoicing network used in more than 60 countries. This platform allows Malaysian businesses to transact seamlessly with any of these countries. Your chosen PEPPOL access point provider helps you ensure that your e-invoices are compliant.

Strengthening business relationships

Adopting electronic invoicing helps elevate customer service to new heights through streamlined invoicing processes. Business owners can generate and issue an electronic document almost instantly after completing a delivery of goods or services.

Providing suppliers and buyers with quick and efficient invoicing services helps strengthen relationships, improve operational efficiency, and solidify trust. E-invoicing also enhances accuracy, reducing disputes and facilitating smooth transactions.

Supporting business scalability and financial management

Implementing e-invoicing allows businesses to scale more effectively. A reliable system will enable you to streamline invoicing processes, which is crucial as transaction volumes grow.

Automated systems allow businesses to manage higher volumes of invoices while maintaining accuracy and compliance with the Inland Revenue Board Malaysia’s regulations. E-invoicing enables direct data transmission to tax authorities, simplifying financial reporting and enhancing operational efficiency.

Analyzing data insights and reports

An e-invoicing system allows users to access real-time invoice data and statuses. This will enable you to monitor and track payments, make informed decisions, and plan strategically.

Malaysian companies can use this data and reports to optimize business operations, identify trends, and drive growth.

Enhancing cash flow management

Processing invoices quicker means payments are settled promptly, giving businesses a better cash flow. This directly impacts profitability and enhances a company’s ability to invest in other promising business areas.

Electronic invoicing also eliminates manual reconciliation, saving time while ensuring accuracy.

Facilitating tax compliance

Malaysian businesses that issue non-compliant invoices risk fines and penalties from the Inland Revenue Board of Malaysia. Most electronic invoicing processes are automated, making adhering to the regulations easier.

For example, when you partner with an MDEC-accredited PEPPOL access point provider like Storecove, you are guaranteed to issue compliant invoices. Storecove checks the invoices you create to ensure they are compliant and can convert them to the required formats.

Improving competitiveness

The introduction of electronic invoicing in Malaysia offers many businesses an opportunity to make a digital shift that enhances growth and innovation. Many organizations will likely be open to this transformation, which will help them keep up with competitors.

Using PEPPOL will also allow companies to participate in global operations. It will increase imports and exports and attract foreign investors, supporting Malaysian economic growth.

Automating invoicing processes for efficiency

E-invoicing offers automation capabilities organizations can use to minimize manual errors, save time, and enhance efficiency. It allows employees to focus on value-added tasks to drive company growth and performance.

Enhancing audit readiness and reducing administrative burden

E-invoicing reduces the administrative burden of handling paper invoices and manual data entry, ensuring smoother financial operations. With real-time data capture and storage, businesses can easily access past transactions, making audit preparation simpler and more transparent.

Financial teams can leverage accurate and up-to-date records to meet compliance requirements quickly, reducing the risk of errors during tax filings. This improved audit readiness enables businesses to focus on growth while maintaining confidence in their financial reporting.

Transactions covered under Malaysian e-invoicing

Malaysia’s e-invoicing mandates apply to all commercial activities, including exchanging goods or services. According to the IRBM’s regulations, the following are the transactions covered:

B2B (Business-to-Business): B2B transactions involve the exchange of goods or services between wholesalers, retailers, manufacturers, and service providers.
B2C (Business-to-Customer): B2C transactions are commonly seen in online shopping stores, service industries, and retail environments. They involve the sales of goods or services directly to the consumer.
B2G (Business-to-Government): All Malaysian business entities providing services or selling goods to government institutions or agencies must adhere to the e-invoicing regulations.

Types of e-invoice in Malaysia

According to the IRBM regulations on electronic invoicing, there are several documents that users must generate electronically when in use during a transaction. They include:

Invoices

An invoice is a document that records a sales transaction between a buyer and a supplier.

Self-billed invoices

These are created by the buyer instead of the seller and used to transact with unregistered sellers.

Self-invoicing can help Malaysian businesses transact with unregistered foreign suppliers while maintaining compliance with the country’s e-invoicing standards. A self-billed electronic invoice proves the buyer’s expenses and the seller’s income.

Credit notes

A credit note is issued by a supplier to the buyer in case of a decrease in the transaction amount due to errors in the invoice or discounts provided afterward. However, this document should not be used if the seller returns money to the buyer.

Debit notes

Debit notes are the complete opposite of credit notes. Suppliers issue debit notes when there is an issue involving an increase in the transaction amount. This can be due to a rise in transportation, production, or other unanticipated costs.

Refund electronic invoice

A refund electronic invoice is used to confirm the payment refund to the buyer. This can be due to errors in the invoice, overpayment, cancellations, or returns.

Self-billed credit notes

Buyers issue self-billed credit notes to adjust a previously issued self-billed invoice. The self-billed credit note works like a credit note, accounting for errors and applying discounts.

Self-billed debit notes

Like a regular credit note, a self-billed debit note is issued by a buyer to record additional charges on an invoice. However, self-billed debit notes work for self-billed invoices.

Methods of generating e-invoices in Malaysia

Malaysian business owners have three options for issuing compliant invoices. These include:

MyInvois portal: The IRBM hosts the MyInvois portal, which is free and accessible to all taxpayers. It is ideal for small businesses but may be inefficient for large companies. Users must manually enter or upload invoice data to issue an invoice, which may be time-consuming.
Application Programming Interface (API): An API requires advanced IT systems, and the initial setup cost can overwhelm SMEs. However, large companies with existing IT infrastructures can use an API to automate the invoicing process and enhance efficiency.
PEPPOL service providers: Business owners can also partner with PEPPOL network service providers who help ensure you generate compliant invoices. Joining the PEPPOL network also provides you access to more than 60 countries where you can transact seamlessly.

The process flow of e-invoice in Malaysia

The e-invoicing process in Malaysia is similar whether you use the MyInvois portal, an API, or a PEPPOL access point provider.

Here are the steps involved when generating and issuing an electronic invoice:

Step 1: Invoice issuance

The first step is to generate an electronic invoice using your preferred method (PEPPOL, API, MyInvois) and include all required information.

Malaysia’s e-invoicing specifications demand that the 55 provided areas be filled with seller, buyer, and item details.

Step 2: Invoice validation

After generation, you must send the invoice to the IRBM through the MyInvois portal for validation. The Inland Revenue Board of Malaysia checks to ensure the invoice is in the required format and requirements.

This helps maintain data accuracy and integrity, making e-invoicing efficient and successful.

Step 3: Notification to transacting parties

The IRBM validates the invoice and assigns it a unique identifier. This helps the transacting parties track and monitor the invoice. The buyer and supplier receive a notification about the invoice’s status.

The invoice is now ready for the supplier to send to the buyer electronically. The document may include a QR code for easy verification.

Step 5: Invoice rejection or cancellation

When the buyer receives the invoice, they have up to 72 hours to reject it if they encounter discrepancies or errors. The supplier can cancel the invoice if the buyer has provided justifiable reasons for the rejection.

The invoice becomes final if the supplier fails to cancel within the required period.

Step 6: Archiving

Both buyers and suppliers must archive an electronic invoice for at least 7 years after completing a transaction.

Penalty for non-compliance with e-invoicing regulations in Malaysia

Non-compliance with Malaysian e-invoicing requirements results in strict penalties. The following are the consequences businesses risk facing for generating non-compliant electronic documents:

Companies may be fined amounts ranging from RM200 to RM20,000.
For serious cases, those responsible for non-compliance may face jail terms of up to six months.

Takeaway: Unlock efficiency, compliance, and global opportunities through e-invoicing in Malaysia

Implementing e-invoicing in Malaysia presents a significant opportunity for businesses to enhance operational efficiency and improve cash flow management.

Companies can reduce errors, improve their payment process, and ensure compliance with the Inland Revenue Board Malaysia’s regulations by automating invoicing processes.

This shift to digital invoicing streamlines financial operations offers valuable insights into financial data, and enhances the overall management of business finances.

Malaysian businesses that embrace e-invoicing also benefit from increased competitiveness, allowing them to operate globally and build stronger customer relationships.

Storecove can help your business achieve growth, efficiency, and compliance.

Schedule an appointment with one of our e-invoicing experts to help you navigate the e-invoicing implementation process.

More information about Electronic Invoicing in Malaysia?

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