Tax technology is on a spree in recent times. With an aim to make the tax processes automated and efficient, tax authorities are moving towards digitalisation. One such step is the implementation of e-invoicing in Malaysia. e-Invoicing, which was first introduced in France, has now been adopted by more than 60+ countries. e-Invoicing in Malaysia was first announced in the Pre-Budget statement of 2023. Implementation of the same was to start from 1st July 2024, however, in October 2023, the Inland Revenue Board of Malaysia (IRBM) postponed it from 1st August 2024.
This article gives a brief about e-invoicing in Malaysia, its implementation, and the benefits of the introduction of e-invoicing.
Understanding e-Invoicing in Malaysia
In Malaysia, the governing authority for e-invoicing is the Inland Revenue Board of Malaysia (IRBM). e-Invoices would be created in the format specified by IRBM. For the below-mentioned type of transactions, e-Invoices would have to be issued:
- Business to Business (B2B)
- Business to Consumer (B2C)
- Business to Government (B2G)
For all B2G transactions, the e-invoice flow would be similar to B2B.
If the vendors would be issuing invoices, credit notes, debit notes, or refund notes, all such documents would now be issued digitally in a format specified by IRBM. Further, e-invoices would have to be issued for all specified non-business transactions as well.
The general flow of transactions is that as soon as a transaction happens, the supplier will create an e-invoice and share it with IRBM.
The Government has introduced two methods, for the transmission of invoices to the IRBM portal:
- Manually via the MyInvois portal
- Application Programming Interface (API) in either XML or JSON
Further, IRBM would validate the e-invoices on a real-time basis. After validation, IRBM will allot a unique identifier number and a QR code will be embedded in it. IRBM would inform the parties to the transaction and after that, it would become the responsibility of the supplier to deliver it to the buyer.
On the MyInvois portal, the supplier and buyer would be able to obtain a summary of the e-invoices generated by them.
Implementation of e-Invoicing in Malaysia
The implementation of e-Invoicing is in a phased manner so that the transition is on a smooth basis.
| Phase | Annual Turnover or revenue (as per the case) | Implementation date |
| 1 | >> RM 100 million | 1st August 2024 |
| 2 | RM 25 million-RM 100 million | 1st January 2025 |
| 3 | All taxpayers | 1st July 2025 |
To ensure a smooth process, the taxpayers can issue e-invoices from January 2024. Though it would be valid, it would not be a compulsion to issue the same till 1st August 2024.
Further to determine the applicability, the following parameters would have to be considered:
- Businesses having audited financial statements- Annual turnover or revenue mentioned in the financial statements for the year 2022.
- Businesses where there is no requirement of getting the financial statements audited- annual revenue reported in a tax return for the assessment year 2022.
- In case of a change of accounting year end for the financial year 2022- The turnover or revenue will be pro-rated to 12 months to determine the applicability of the e-invoice.
Benefits of e-Invoicing for Malaysia
There are various benefits of e-invoicing. They are:
- Tax Leakage
One of the most prima facie usages is the prevention of tax leakage. With its introduction, the leakage of taxes would be minimal. As and when the taxpayer issues an e-invoice, the government would be notified of the same and hence there would be minimal chances of fraud. Also, the chances of errors are significantly reduced. The employees are more vigilant while preparing the invoices.
- Cost Savings
The ancillary costs like printing, stationery, and other related costs will be greatly reduced. The taxpayers would not have to spend much money on the same. Also, as processes would be automated, the human resources of a company could be employed in other essential tasks.
- Improved working capital
Due to the conventional system of accounting, many taxpayers would need more time to receive the payment of invoices. Due to this delay, the working capital gets blocked. Due to e-invoices, there is a strict check by the Government; hence, payments must be made within the stipulated period.
Conclusion
The advantages of e-invoicing outweigh the disadvantages of the same. It is such a technique that would make people more technology-friendly. The implementation of the same not only benefits the tax authorities but also it is beneficial for the taxpayers as well. It would be difficult for taxpayers at an initial level but gradually they would be used to it. Further, there are various e-invoicing software in Malaysia, which can help to implement the same.
