E-Invoicing in Malaysia: Everything you need to know
The Malaysian Tax Authority, the Inland Revenue Board of Malaysia/ Lembaga Hasil Dalam Negeri Malaysia (LHDN), and the Malaysian Digital Economy Corporation (MDEC) are set to introduce electronic invoicing regulations in the country by August 2024.
In this blog, we will dive into the details of e-invoicing and how businesses in Malaysia can prepare for the upcoming mandate.
What is e-Invoicing?
An e-invoice is a document exchanged between the buyer and supplier in an integrated environment through an electronic invoice operator or invoicing software. e-Invoice enables the buyer and the supplier to manage invoice data on a centralized platform in a unified format (such as XML and EDI).
Need for e-Invoicing
E-invoicing, or electronic invoicing, is important for several reasons, and its adoption has become increasingly widespread across businesses and industries. Here are some key reasons why e-invoicing is a necessity in the dynamic business environment:
Efficiency and Cost Savings: Automated processes and digital transactions eliminate the manual tasks associated with traditional paper-based invoicing. This leads to substantial cost savings, and streamlines the entire invoicing process, reducing errors and the associated costs of rectifying mistakes.
Accuracy and Reduced Errors: E-invoicing systems automate the creation and processing of invoices, reducing the likelihood of errors that can occur in manual processes. This helps ensure the accuracy of billing information, reducing the risk of disputes and payment delays.
Legal Compliance: E-invoicing systems can help businesses comply with tax regulations and other legal requirements related to invoicing. Many countries and regions have adopted or are considering e-invoicing mandates to enhance tax transparency and reduce fraud.
Electronic Invoicing Model in Malaysia
e-invoicing implementation in Malaysia was announced by The Inland Revenue Board of Malaysia in May 2023. Selection criteria for the initial phase of implementation focused on taxpayers with an annual turnover exceeding MYR 100 million.
The implementation timeline, as announced by the Inland Revenue Board of Malaysia/ Lembaga Hasil Dalam Negeri Malaysia (LHDN) is as follows:
August 2024: e-invoicing for taxpayers with an annual turnover exceeding MYR 100 million.
January 2025: e-invoicing for taxpayers with an annual turnover exceeding MYR 25 million.
July 2025: e-invoicing for all other taxpayers.
e-Invoice generation process
IRBM has introduced two different types of e-invoice transmission mechanisms.
- MyInvois Portal hosted by IRBM
- Application Programming Interface (API)
MyInvois Portal hosted by IRBM
The e-invoice generation process through MyInvois Portal hosted by IRBM follows the given steps,
Issuance/generation of e-invoice: An e-invoice is generated by the supplier when a transaction takes place. This e-invoice is shared with the IRBM portal.
Validation from MyInvois Portal: The e-invoice is validated by IRBM in real-time.
Sharing of e-Invoice: Subsequently, a QR code embedded e-invoice is shared by the supplier to the buyer. The supplier and buyer will be able to obtain a summary of the e-invoice transactions via the portal.
e-Invoice model via API
Taxpayers would need to configure the API integration by setting up call-backs (specific taxpayers system addresses) and logging into the available IRBM APIs via the Digital Certificate issued by IRBM (authentication mechanisms). The API configuration will be included in the SDK, which is expected to be issued in Q4 of 2023.
Formats of E-invoice Transmission: XML or JSON.
There are 53 data fields that are required to issue an e-invoice. These fields are grouped into nine (9) categories:
- Address
- Business Details
- Contact Number
- Invoice Details
- Parties
- Party Details
- Payment Info
- Products / Services
- Unique ID Number
Have any doubts regarding the e-invoicing process in Malaysia?
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