E-INVOICE GUIDELINE

LHDN is going to implement e-invoice policy in 2024! Companies with an annual turnover of over RM 100 million will be the first batch to compulsory implement it!

The implementation of e-invoice aims to improve the efficiency of business operation and prevent tax leakage. The government will actively study relevant information on the implementation of e-invoice in various countries, in order to ensure an effective rollout.

【Announced by LHDN on July 2023】

Overview for e-invoice workflow

  1. Issuance of e-invoice
  2. Validation of e-invoice
  3. Notification of validated e-invoice
  4. Sharing of e-invoice
  5. Rejection or cancellation of e-invoice
  6. Check e-invoice via MyInvois Portal

The implementation of e-invoice will be done in stage:

Stage 1: June 2024
Companies with a turnover of RM100 million and above

Stage 2: January 2025
Companies with a turnover of RM50 million and above

Stage 3: January 2026
Companies with a turnover of RM25 million and above

Stage 4: 2027
All business implementation is compulsory for all mentioned companies in each stage. At present, the government only implements it for B2B, and it will start to implement for B2C after B2B run smoothly.

When it comes to e-invoice, you must think of “invoices in pdf format”. In fact, the e-invoices are different from the electronic file (pdf) that we usually use！

These are what we guess about how e-invoice will be implemented:

You can imagine it as a system for everyone. All invoices will be issued via this system no matter if it is for suppliers (B2B) or for customers (B2C). This system shall be used by everyone so that when company A bills company B, both parties will have this record

Furthermore, this e-invoice system is expected to be under the government’s supervision and control. Meanwhile, any transaction recorded in the system will be synchronized to the LHDN database, which means, when you file your tax return, all the transactions you made will automatically appear in your tax file.

In this way, e-invoice might be a good solution to prevent tax leakage especially for the shadow economy and illegal businesses.

Again, this is only one of our ideas on how the e-invoice will be implemented, all details are still to be announced by the government.

Source: https://landco.my/social/e-invoice/

For year of assessment 2022 only, a special one-off tax at the rate of 33% is imposed on companies, excluding companies that enjoy the 17% reduced tax rate above, that have generated high income during the COVID-19 pandemic, on the portion of chargeable income in excess of MYR 100 million.

Petroleum Income Tax Petroleum income tax is imposed at the rate of 38% on income from petroleum operations in Malaysia. An effective petroleum income tax rate of 25% applies on income from petroleum operations in marginal fields. No other taxes are imposed on income from petroleum operations.

Local Income Taxes There are no other local, state, or provincial government taxes on income in Malaysia.

Source: https://taxsummaries.pwc.com/malaysia/corporate/taxes-on-corporate-income

Understand Malaysia e-Invoice

To support the growth of the digital economy, the Government intends to implement e-Invoice in stages in an effort to enhance the efficiency of Malaysia’s tax administration management. It is in line with the Twelfth Malaysia Plan, where the focus is on strengthening the digital services infrastructure and digitalising the tax administration.

The e-Invoice will enable instant or near-instant validation and storage of transactions, catering to Business-to-Business (B2B), Business-to-Consumer (B2C) and Business-to-Government (B2G) transactions.

The Inland Revenue Board (IRB) has uploaded the E-Invoicing Guideline Year 2023 in its official portal as a reference and guide to taxpayers covering the scope as follows:

  • E-invoicing implementation concept;
  • E-invoicing implementation timeline;
  • The process of issuing and submitting e-invoices to IRB;
  • Taxpayer readiness assessment guide; and
  • Specification of required data fields.

Taxpayers can access and download these guidelines along with questions (FAQ) through the link https://www.hasil.gov.my/en/e-invoice/

e-Invoice Implementation Timeline
e-Invoice will be implemented in phases to ensure smooth transition.  Below is the mandatory e-Invoice implementation timeline:

No.

Targeted Taxpayers

Implementation Date

 

1.

Taxpayers with an annual turnover or revenue of more than RM100 million

1 June 2024

 

2.

Taxpayers with an annual turnover or revenue of more than RM50 million and up to RM100 million

1 January 2025

 

3.

Taxpayers with an annual turnover or revenue of more than RM25 million and up to RM50 million

1 January 2026

 

4.

All taxpayers and certain non-business transactions

1 January 2027

 e-Invoice Overview Workflow

Picture below demonstrates an overview of the e-Invoice workflow from the point a sale is made or transaction undertaken, and an e-Invoice is issued by the supplier via MyInvois Portal or API, up to the point of storing cleared e-Invoices on IRB’s database for taxpayers to view their respective historical e-Invoices.

e-Invoice Model

To facilitate taxpayers’ transition to e-Invoice, IRB has developed two distinct e-Invoice transmission mechanisms:

  1. A portal (MyInvois Portal) hosted by IRB; and
  2. Application Programming Interface (API).

Taxpayers can select the most suitable mechanism to transmit e-Invoice to IRB, based on their specific needs and business requirements.

No.

 

Mechanism

 

Key Features

 

Considerations

 

1.

MyInvois Portal

 

Enables individual generation through a comprehensive form and the option for batch generation through spreadsheet upload for processing multiple transactions

 

·        Accessible to all taxpayers

·        Suitable for Micro, small and medium-sized enterprises (MSMEs)

·        May not be efficient for large volume of data

·        Businesses that need to issue e-Invoice but API connection is unavailable 

2.

API

 

Enables businesses to conveniently transmit high-volume of transactions

 

·        Requires upfront investment in technology and adjustments to existing systems. API connection may be made directly to IRBM or through intermediary technology providers

·        Ideal for large taxpayers or businesses with substantial transaction volume 

Mandatory and Optional Fields for e-Invoice

Appendices 1 and 2 of the E-Invoicing Guideline set out a list of required and optional fields for an e-Invoice and annexure to an e-invoice. Taxpayers are free to include additional fields, where required.

Assessing Readiness of e-Invoice

To ensure that businesses are ready for the implementation of e-Invoice in the upcoming months, here are a few key steps that can be carried out to assess readiness and standardisation:

  1. Allocate and equip personnel with the necessary capabilities to adopt and oversee the implementation of e-Invoice;
  2. Determine availability of data sources and structure, current IT capabilities to support system readiness and processes to comply to e-Invoice requirements and obligations; and
  3. Review current processes in issuing transaction documents (i.e., invoice, debit note, credit note, refund note).

Source : https://www.3ecpa.com.my/resources/corporate-compliance-requirement/malaysia-e-invoice/

 

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