In October 2022, the Inland Revenue Board of Malaysia (LHDNM) and the Malaysian Digital Economy Corporation (MDEC) jointly announced their collaboration on the National e-Invoicing Initiative. LHDNM is responsible for tax administration in Malaysia. The goal of the new system is to enhance efficiency and reduce tax costs. After six months, both parties announced the phased mandatory implementation of the National e-invoicing system.
1. What are the benefits of invoicing in Malaysia?
The use of electronic invoicing is becoming more popular worldwide. According to the “The E-Invoicing Journey 2019-2025” report by Billentis, the global e-invoicing and enablement market was valued at around EUR 4.5 billion (USD 4.9 billion) in 2019. It is projected that this market will grow significantly and reach approximately EUR 18 billion (USD 20.5 billion) by 2025. The volume of electronic invoices and receipts globally is expected to increase fourfold by 2035.
Businesses of all sizes are transitioning to e-invoicing due to its numerous benefits. The Government of Malaysia is taking steps towards enhancing the efficiency of the country’s tax administration management by implementing e-invoices in stages. This move is in line with the Twelfth Malaysia Plan, which focuses on strengthening the digital services infrastructure and digitizing tax administration. The introduction of e-invoice systems offers several benefits, such as reducing manual efforts and human errors, facilitating efficient tax filing, streamlining operational efficiency, and digitizing tax and financial reporting.
2. What are the challenges of e-Invoicing for businesses in Malaysia?
Implementing e-invoicing can bring numerous benefits to businesses, such as streamlined operations, improved cash flow, and enhanced compliance. However, the journey to full e-invoicing implementation can be fraught with challenges. Here are some of the most common challenges and considerations when implementing e-invoicing:
Integration with Existing Systems:
Many companies use legacy systems for their accounting and invoicing needs. Integrating new e-invoicing solutions with these systems can be complex and require significant IT resources.
Adherence to Local Regulations:
E-invoicing regulations vary from country to country. Ensuring compliance with different regulatory environments, especially for multinational corporations, can be a daunting task.
Data Privacy and Security:
Protecting sensitive financial data is crucial. Ensuring the e-invoicing solution is secure from cyber threats, and adhering to data privacy regulations, is paramount.
Training and Education:
Ensuring that the staff is well-trained and comfortable with the new system can be time-consuming, especially if the e-invoicing solution is significantly different from the previous system.
Supplier and Customer Adoption:
Even if your company is ready for e-invoicing, your suppliers and customers might not be. Encouraging them to shift to e-invoicing and ensuring compatibility can be a challenge.
Scalability Concerns:
As the business grows, the e-invoicing solution should be able to handle increased volumes without compromising on performance.
3. Is e-invoice applicable only to domestic transactions in Malaysia?
No, e-Invoice is applicable to both domestic and cross-border transactions. The cross-border transactions include import and export activities. For clarity, the compliance obligation is from the issuance of e-Invoice perspective. In other words, taxpayers who are within the annual turnover or revenue threshold are required to issue and submit e-Invoice for IRBM’s validation according to the implementation timeline.
4. Can the taxpayers cancel the invoice submitted to IRBM?
The e-invoice validation process allows the Buyer and Supplier to cancel or reject the invoice within a specified time frame.
If the Buyer identifies errors within 72 hours of validation, they can request rejection through the MyInvois Portal, specifying reasons such as incorrect invoice data. The Supplier receives a notification and can cancel the e-invoice if they agree with the reason for rejection.
If the Supplier rejects the Buyer’s request or doesn’t cancel the invoice, no cancellation is allowed after the specified period, requiring the issuance of a new e-invoice for any amendments. Similarly, the Supplier can independently cancel an e-invoice with justifications within the 72-hour window, notifying the Buyer. After this period, the status becomes “Valid,” adjustments necessitate Debit/Credit Note issuance, mirroring the e-invoice issuance process.
5. Is e-Invoicing in Malaysia mandatory for all industries?
Initially the implementation will be decided based on annual turnover or revenue (as per the figures reported in audited financial statements for 2022). Nevertheless, starting from January 2027, e-Invoicing will become mandatory for all taxpayers, irrespective of their sales thresholds. In detail you can find the implementation timeline as follows;
- August 1, 2024: Taxpayers with annual income or sales exceeding RM100 million
- January 1, 2025: Taxpayers with annual income or sales exceeding RM25 million and up to RM100 million
- July 1, 2025: All taxpayers
