Common Mistakes in E-Invoicing Implementation in Malaysia and How to Avoid Them

Business owners are prone to errors when generating invoices, leading to rejection or cancellation.

But how do you deal with these mistakes? Can they be corrected? What happens when you have already issued an invoice with an error?

Malaysia's new electronic invoicing mandate has helped transform the country's invoicing and taxation processes. The new system has also improved the efficiency of business transactions.

As businesses transition to the new system, they must understand the e-invoicing procedure to avoid mistakes that cause rejections and cancellations.

There is a wide range of electronic invoice mistakes, including those detected by the invoicing system, rejected by the buyer, and canceled by the supplier.

In this post, we’ll discuss common e-invoicing mistakes that can lead to the cancellation or rejection of an e-invoice.

We’ll also discuss the e-invoicing procedure in Malaysia and best practices to help you avoid making mistakes.

Overview of Malaysia's e-invoicing system

Malaysia’s electronic invoicing system operates on a CTC (continuous transaction controls) model. It validates invoices in real time before they reach the buyer.

The new invoicing process will be implemented starting June 2024. By July 2025, all Malaysian taxpayers must comply with the upcoming standards and transmit invoices through the new system.

The Malaysian tax authority has developed two ways of transmitting invoices: the MyInvois portal or an API (Application Programming Interface).

The MyInvois portal requires manual data entry and is ideal for small businesses with low data volumes. This also makes it easier for business owners to make mistakes that can be avoided through automation.

The IRBM (Inland Revenue Board of Malaysia) platform will check invoices for structure and other details, such as the TIN (Tax Identification Number). After invoice validation, the buyer can submit a rejection request stating valid reasons for rejection.

Electronic invoices in Malaysia should be in JSON or XML format. After validation, the IRBM must provide an electronic signature, which the sender embeds on the invoice before issuance.

The code helps the buyer verify and check the invoice’s status. It also helps retrieve data for future audits or other tax-related purposes.

To help businesses comply with the new regulations, the IRBM has integrated its e-invoicing system with the PEPPOL network. This allows Malaysian businesses to operate internationally while adhering to the country’s e-invoicing regulations.

Approved PEPPOL service providers such as Storecove help businesses transmit compliant invoices and adhere to taxation regulations.

What is the e-invoicing process in Malaysia?

E-invoicing in Malaysia is a straightforward process outlined in the guidelines released by the Inland Revenue Board of Malaysia.

The process is available through two modes of transmission. Companies can use the MyInvois portal or integrate an API.

Let us look at the step-by-step e-invoicing process in Malaysia:

1. Creating an invoice

The first step in any electronic invoicing process is generating an invoice that is compliant with Malaysian standards. You can use the MyInvois portal to enter e-invoice data into the system manually.

The portal is free for all Malaysian taxpayers, making it suitable for small business owners. Large organizations are better off integrating an API to automate the processing of large invoice data.

According to Malaysian e-invoicing requirements, every invoice has 55 entry fields, which, if not filled out, the IRBM system detects the error. This is why manual data entry in the MyInvois portal makes it much easier to make mistakes.

2. Sending the invoice to the IRBM for validation

After generating your invoice, you must send it to the IRBM through their portal for real-time validation. The system checks the invoice data, including the TIN, to ensure it meets the mandated criteria.

If validated, the invoice is sent back to the supplier. The IRBM also issues a code to both parties (sender and recipient) to help verify and check the invoice’s status.

3. Submitting the invoice to the recipient/buyer

When the sender receives the invoice, they embed the code accompanying it and issue it to the buyer. This QR code provides a direct link to all the invoice details, facilitating the recipient’s verification process under the new regulations.

4. Retention and archiving

When both parties agree on the invoice and payment is made, the document must be archived for at least 7 years.

5. Rejection or cancellation

After issuance, the buyer has up to 72 hours to request rejection of the invoice in case of an error. The supplier also has 72 hours to perform cancellation of the invoice.

This gives both parties enough time to verify the invoice details regarding goods or services sold.

What are the common mistakes in e-invoicing implementation in Malaysia?

The e-invoicing process in Malaysia provides two instances where an invoice can be canceled or rejected.

The IRBM system can flag it due to errors, or the buyer and supplier may cancel or reject it after issuance.

What are the common reasons for the rejection of e-invoices by the MyInvois portal?

The MyInvois portal is the first instance where an invoice can be rejected. The system is set to verify the details of every invoice before generating a QR code to help track it.

Here, we discuss reasons why the MyInvois portal can reject an invoice:

Structural non-compliance

All invoices sent in Malaysia through the IRBM system should be in XML or JSON format. The document’s structure, including hierarchy and format, must adhere to the set standards.

Missing or inaccurate information

Invoice information, including Tax Identification Number (TIN), addresses, amount, and other critical information, must be accurate.

Filling out inaccurate information or omitting some details results in rejection by the MyInvois portal.

With 55 mandatory fields to be filled, one has to ensure maximum accuracy during data entry.

Invalid digital signature (QR code)

After invoice validation, the IRBM system generates a QR code the sender should embed on the document before issuance.

The system also sends the code to the recipient to help them verify the invoice’s validity and track its progress.

If you make a mistake and embed the wrong digital signature, the system will reject your request to perform the issuance process.

Incorrect code usage

When transacting internationally, you may confuse currency codes or tax type codes. The IRBM system rejects any invoice with incorrect or missing code fields.

Duplication

The MyInvois portal also detects and rejects invoices that may share unique information, such as the invoice number and digital signature.

This helps prevent mistakes where suppliers accidentally send an invoice more than once.

What are the common reasons the buyer may reject an e-invoice?

After validation, the invoice is sent to the buyer, who is given 72 hours to reject the invoice in case of any inconsistency.

Here are some reasons why the buyer may reject an e-invoice:

Wrong details

Inputting the wrong details, such as the incorrect number of items, quality, or supplier details, may lead to conflict in business. This is likely to happen when using the MyInvois portal manually, increasing the chances of incorrect data entry.

Difference in agreed terms

Transacting partners agree on payment terms, discounts, and other details before finalizing the deal. If the invoice is sent to the buyer later with terms different from what was agreed upon, they can reject it.

It is best to note down the terms of every transaction to avoid feuds caused by mistakes such as a mismatch in price.

Incorrect purchase order

The person creating the purchase order may misalign details such as item specifications, leading to confusion. Invoices with incorrect details cause delays and interrupt business operations.

Unauthorized charges

If an invoice includes charges the buyer did not agree upon, they can reject it within the stipulated time.

Inaccurate tax details

As stipulated by Malaysian tax laws, tax rates must be included in every invoice. The tax rates may differ across different industries, including manufacturing, retail, and import.

Therefore, you must research taxation in Malaysia before making transactions. A reliable electronic invoicing services provider like Storecove can also help you ensure tax and structure compliance.

Late submission

When purchasing a product or service, the buyer agrees with the supplier on when to deliver it. If the supplier fails to deliver on the set date, the buyer can reject the invoice and fail to make payment.

What are the common reasons for suppliers' cancellation of e-invoices?

Suppliers benefit significantly from the 72 hours as they often cancel invoices after realizing a mistake.

The following are some of the main reasons a supplier may cancel an e-invoice after issuance:

Duplicate electronic invoice

If you accidentally issue the same invoice more than once for one transaction, you can cancel it to avoid confusion and overcharging clueless buyers.

Change in terms and conditions

If the buyer and supplier agree to change a few terms and conditions, the recipient may request the supplier to cancel the electronic invoice and generate a new one.

Error in invoice data

After sending the invoice, the supplier may discover errors in details and information such as quantities, pricing, and other essential info.

Customer request

If customers need to change their order, they can request the supplier to cancel the invoice. Other reasons that may force them to make this request are pricing disputes and incorrect items.

Regulatory compliance

A supplier can cancel an invoice if it does not meet Malaysia’s e-invoicing requirements and tax laws.

How does the e-invoice rejection or cancellation process work in Malaysia?

The rejection or cancellation of an electronic invoice is well stipulated in the recently released e-invoicing guidelines.

Here are the steps involved in each process:

Buyer rejection

The buyer has 72 hours to request rejection after an invoice’s validation. The request, sent to the IRBM (Inland Revenue Board of Malaysia), must specify why you rejected the invoice.

After making the request, the IRBM notifies both parties and awaits the supplier’s response. If they agree with the cancellation request, the system cancels the invoice.

Supplier cancellation

If the supplier realizes an invoice has errors after issuance, they can cancel it within 72 hours of its validation. The cancellation request must be fully justified.

If an invoice is not canceled or rejected within 72 hours, any required adjustments are made using a new document, such as a credit note, debit note, or refund note.

How to correct a rejected e-invoice in Malaysia

If an invoice intended for a buyer or customer is rejected, either by the system or the recipient, a structural approach is taken to resolve it.

For B2B transactions, the supplier should first contact the buyer to confirm the invoice details. Then, verify and correct the incorrect information on the document before resubmitting the e-invoice through the MyInvois portal.

B2C transactions require a different approach that begins with customer notification. The business owner must inform the customer promptly about the e-invoice issue.

The next step is to find the errors in the invoice, correct them, and send the invoice to the customer. You can offer assistance if they need anything.

How to avoid the common mistakes in e-invoicing implementation in Malaysia

It is entirely impossible to generate and deliver electronic invoices without making any errors. However, there are specific steps you can take to help you minimize the chance of making mistakes. They include:

Effective training

The best way to ensure seamless e-invoicing processes is to train your staff.

All those involved in billing, accounting, and issuing e-invoices must learn to adhere to the new regulations, use the new system, and the best practices for e-invoicing in Malaysia.

Powerful billing and ERP (enterprise resource planning) system

Does your company have a robust system allowing buyers to fetch and feed data? Utilizing ideal e-invoicing systems helps ensure compliance, as modern systems can quickly generate documents accepted by the Malaysian tax administration.

Eliminate manual data entry

Manual data entry is slow, tedious, and prone to errors. The Malaysian invoice structure has 55 entry fields, making filling even a single invoice exhausting.

Implementing an API e-invoicing model in your system helps automate data sharing between systems. This makes it easier to generate an invoice, provided that transaction data is already in the system.

Confirm with the buyer

Even if you think you are right, double-checking the invoice details with the recipient doesn't hurt. This helps guarantee accuracy and address any concerns.

Find a reliable e-invoicing solution provider

Accredited PEPPOL network providers in Malaysia can help businesses avoid mistakes by ensuring compliance and accuracy.

Storecove provides Malaysian taxpayers with an opportunity to go international. Over 60 countries use the PEPPOL network. We help you generate compliant documents and adhere to tax regulations.

Read also: Which Countries Use Peppol?

Takeaway: Ensure a seamless e-invoice implementation in Malaysia by partnering with reliable service providers

Implementing e-invoicing in Malaysia will come with some challenges, but businesses can find ways to transition while minimizing errors made when processing invoices.

Several instances may occur when businesses have their invoices rejected or canceled. Overcoming these mistakes helps enhance business operations and increase cash flow.

One of Malaysia's most effective ways to start issuing compliant invoices is to partner with a reliable PEPPOL network provider such as Storecove. We help you create invoices validated by the IRBM in real time due to their high accuracy.

Join the thousands of Malaysian businesses embracing e-invoicing. Contact us today to get started!

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