E-Invoicing Malaysia: Everything you need to know
Malaysia is embracing the digital age, and a key part of this is the implementation of e-invoices. E-invoices are digital representations of traditional invoices, streamlining business processes and tax administration. This article will guide you through everything you need to know about e-invoices in Malaysia
What is an E-Invoicing in Malaysia?
An e-invoice is a digital document that mimics a traditional invoice. It contains important information like supplier and buyer details, item descriptions, quantities, prices, taxes, and totals. Unlike paper invoices, e-invoices follow a specific format for electronic processing by accounting systems. They can replace paper or electronic documents such as invoices, credit notes, and debit notes.
Why is E-Invoicing Being Implemented?
The Malaysian government is rolling out e-invoices in stages to enhance tax administration management, support the digital economy and reduce cost.
- Enhance tax administration management : E-invoices allow for near real-time validation and storage of transaction data, improving tax administration for both businesses and the Inland Revenue Board (IRB).
- Support the Digital Economy: E-invoicing aligns with the government’s focus on strengthening digital infrastructure and promoting a digital business environment.
- Reduce Costs: E-invoices eliminate the need for paper, printing, and physical document management, saving businesses money.
Who Needs to Use E-Invoices?
E-invoicing will be mandatory for all taxpayers undertaking commercial activities in Malaysia. This applies to both domestic and international transactions, encompassing B2B, B2C, and B2G transactions.
When Does E-Invoicing Start to implement?
The e-invoicing initiative began with a pilot program in May 2024. The mandatory rollout is happening in phases :
Phase 1 - August 2024
This is mandatory for businesses with an annual turnover exceeding RM100 million.
Phase 2 - January 2025
This is mandatory for companies with turnover exceeding RM25 million.
Phase 3 - January 2025
This is mandatory for all the remaining companies regardless of their sales threshold.
How to get ready for e-Invoicing?
Businesses can prepare for e-invoicing by:
- Understanding the Guidelines: The IRB website provides comprehensive guidelines on e-invoice formats, technical specifications, and implementation procedures, you may visit the official website for details information: https://www.hasil.gov.my/e-invois/.
- Selecting an E-Invoice Provider: Several providers offer e-invoicing solutions that comply with IRB requirements.
- Upgrading Systems: Businesses may need to upgrade their accounting or enterprise resource planning (ERP) systems to handle e-invoices.
Benefits of E-Invoicing
E-invoicing offers numerous benefits for businesses, including:
- Improved Efficiency: Streamlined invoice processing saves time and resources.
- Reduced Errors: Automatic data validation minimizes errors in invoices.
- Enhanced Visibility: Real-time transaction data provides better financial insights.
- Cost Savings: Eliminates paper and printing costs associated with traditional invoices.
- Environmental Friendliness: Reduces paper consumption and promotes a greener business approach.
How to issue e-invoice to my customers?
As of today, the Myinvois Portal (the platform for E-invoicing) has not been officially launched. According to LHDN guidelines, there are two primary methods to issue an e-invoice.
Myinvois Website or Mobile App: If you’re not currently using accounting software, you can later issue E-invoices for free through the Myinvois website or mobile app. This method is ideal for businesses with low invoice volumes, such as small traders and enterprises.
Accounting Software (API): If you’re already using accounting software, you need to upgrade it to meet government specifications and enable it to link to the government’s website (API) in real-time over the internet. This allows your accounting software to issue E-invoices within seconds.
What to do next if you are an SME/business?
some key actions are recommended to SMEs/businesses in Malaysia regarding e-invoices:
1. Check the IRB Website:
- Emphasize the importance of staying informed. Direct them to the official Inland Revenue Board (IRB) website for e-invoices: https://www.hasil.gov.my/e-invois/. This ensures they have access to the most up-to-date information and official guidelines.
2. Determine If They Fall Under Phase 1:
- Advise businesses to assess their annual turnover. If it exceeds RM100 million, they are subject to mandatory e-invoicing by August 2024.
3. Take Action Based on Turnover:
For Businesses Exceeding RM100 Million Turnover:
- Recommend businesses with >RM100m turnover to prioritize selecting an e-invoice provider. Providers offer solutions compliant with IRB requirements, streamlining the process.
- Encourage them to assess their accounting/ERP systems. Upgrading might be necessary to handle e-invoices effectively.
- Emphasize familiarizing themselves with e-invoice formats and technical specifications outlined by the IRB.
For Businesses Below RM100 Million Turnover:
- Advise them to stay informed. The IRB will announce mandatory implementation dates for their business category in due course.
- Encourage them to explore e-invoicing benefits and solutions. Early preparation can ease the transition when it becomes mandatory for their business.
4. Consider Additional Resources:
- Briefly mention resources like workshops or webinars offered by the government or authorized e-invoice providers. These can provide deeper understanding and address specific business concerns.
By following these steps, SMEs/businesses in Malaysia can proactively prepare for the e-invoicing mandate and leverage the many advantages it offers.
E-invoicing is a significant step towards digitalizing Malaysia’s tax administration and business environment. By understanding the requirements and taking proactive steps, businesses can ensure a smooth transition to e-invoices and reap the numerous benefits they offer.
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