Malaysia is moving towards a more digitized economy, with the introduction of e-invoicing in Malaysia being a key component of this transition. The Inland Revenue Board of Malaysia (IRBM) has mandated that all businesses adopt e-invoicing, aiming to streamline operations and enhance tax compliance.
This guide provides an overview of the e-invoice mandates, deadlines, benefits, challenges, and available software solutions for businesses in Malaysia.
Understanding E-Invoicing in Malaysia
An e-invoice is a digital version of a transaction record between a seller and a buyer, validated in real-time through a government portal. It includes essential details such as seller and buyer information, item descriptions, prices, taxes, and payment details. Once validated, each e-invoice receives a Unique Identification Number (UIN) and a QR code for easy online validation.
The e-invoicing system is designed to reduce paperwork, improve accuracy, and ensure compliance with tax regulations. Malaysia’s government has set specific deadlines for businesses based on their annual turnover, making it critical for companies to prepare for these changes.
E-Invoicing Implementation Timeline
The e-invoicing mandate in Malaysia is being rolled out in phases, targeting different categories of businesses based on their turnover. Here is the detailed timeline:
| Phase | Deadline | Target Group |
|---|---|---|
| Phase One | August 1, 2024 | Businesses with an annual turnover exceeding RM 100 million. |
| Phase Two | January 1, 2025 | Businesses with an annual turnover between RM 25 million and RM 100 million. |
| Phase Three | July 1, 2025 | All remaining businesses, including those with a turnover below RM 25 million. |
Interim Relaxation Period
To ensure a smooth transition to e-invoicing, the Malaysian government has introduced an interim relaxation period of six months for each phase. This period allows businesses to adopt e-invoicing without facing immediate penalties for non-compliance. During this time, companies can issue consolidated e-invoices and self-billed e-invoices without providing individual invoices, provided they meet criteria set by the IRBM.
Relaxation Period Breakdown
| Target Group | Relaxation Period |
|---|---|
| Businesses over RM 100 million | August 1, 2024 – January 31, 2025 |
| Businesses between RM 25 million and RM 100 million | January 1, 2025 – June 30, 2025 |
| All other businesses | July 1, 2025 – December 31, 2025 |
During the relaxation period, creating separate e-invoices for each transaction is optional, and no penalties will be imposed for non-compliance. However, after this period ends, all mandated businesses must produce separate e-invoices for each transaction and fully comply with the regulations.
E-Invoicing Process in Malaysia
The e-invoicing process in Malaysia generally involves the following steps:
- Issuance: The supplier generates an e-invoice using either the MyInvois Portal or their own system integrated via API.
- Validation: The e-invoice is submitted to the IRBM for real-time validation. Upon successful validation, a Unique Identification Number (UIN) is issued.
- Notification: Both the supplier and the buyer receive notifications about the validated e-invoice.
- Sharing: The supplier shares the validated e-invoice with the buyer, including a QR code for online verification.
- Rejection/Cancellation: The buyer can request a rejection within 72 hours, and the supplier can cancel the e-invoice if needed, with justification.
- Human-Readable Format: Suppliers may share a human-readable version (e.g., PDF, JPG) of the e-invoice for the buyer’s records.
E-Invoicing Models in Malaysia
Businesses can choose from the following e-invoicing models:
- MyInvois Portal: A web-based platform where users can manually generate e-invoices, either individually or in bulk by uploading a spreadsheet. This model is ideal for micro and small businesses with lower transaction volumes.
- API Integration: Businesses can integrate their existing ERP, billing, or accounting systems with the MyInvois system via an API. This allows for the automatic generation and submission of e-invoices, enabling real-time processing of large transaction volumes.
Benefits of E-Invoicing
Adopting e-invoicing in Malaysia offers several advantages:
- Increased Efficiency: Automating the invoicing process minimizes manual errors and reduces time spent on administrative tasks.
- Enhanced Compliance: Real-time reporting to the IRBM ensures businesses remain compliant with tax regulations, reducing the risk of penalties.
- Improved Cash Flow: Faster invoicing and payment cycles can lead to better cash flow management.
- Sustainability: By eliminating paper invoices, e-invoicing contributes to a more sustainable business model.
- Data Accuracy: Digital invoicing enhances the accuracy of financial records and simplifies reconciliation processes.
Challenges of Implementing E-Invoicing
While e-invoicing provides many benefits, businesses may encounter challenges during implementation:
- Technological Integration: Integrating e-invoicing systems with existing ERP or accounting software can be complex and resource-intensive.
- Resistance to Change: Employees accustomed to traditional invoicing methods may hesitate to adapt to new technologies.
- Cost Implications: The initial investment in e-invoicing software and training can be a barrier, especially for smaller businesses.
- Data Management: Ensuring the accuracy of data entered into the e-invoicing system is crucial, as errors can lead to compliance issues.
E-Invoicing Solutions Provider in Malaysia
ClearTax is an MDEC-accredited provider of e-invoicing software in Malaysia, offering comprehensive solutions that integrate smoothly with various business systems. ClearTax ensures full compliance with IRBM regulations and streamlines the invoicing process for enterprises.
Compliance and Penalties
Businesses must begin issuing e-invoices according to their compliance deadlines. Failure to comply with the e-invoicing mandate is considered an offense under Section 120(1)(d) of the Income Tax Act 1967. Penalties for non-compliance may include a fine ranging from RM 200 to RM 20,000, imprisonment for up to six months, or both for each instance of non-compliance.
Businesses should choose an appropriate e-invoicing model, such as the MyInvois Portal or API integration, to meet the requirements and avoid penalties.