Some key points about the introduction of e-Invoicing for Malaysian companies
Malaysia’s new e-invoicing system will combine different ways of reporting taxes across the country into one easy system. This is part of the government’s plan to make tax reporting clearer and more effective, making it harder for people to avoid paying or report less tax than they should.
Many business owners frequently ask us about how e-invoicing can affect them in the short and long term.
For those seeking direct references, we have official documents that we’ve utilized as sources:
1. Introducing PEPPOL
PEPPOL stands for Pan-European Public Procurement On-Line and helps companies share documents globally. This is a global framework which allows accounting systems to communicate with each other, and allows for smooth sharing of information for both suppliers, and customers.
It’s a digital system for businesses to send and receive invoices electronically. It streamlines invoicing, reduces errors, and supports government efforts for transparency and digitalization in financial transactions.
2. Tax reporting is going to become easier.
Here is a screenshot provided by LHDN illustrating the typical workflow of an e-invoice.
Since every e-invoice is promptly transmitted to LHDN, businesses can report taxes in real-time rather than gathering and submitting them periodically. This helps SMEs avoid missing opportunities for tax rebates or unintentionally underreporting taxes due to overlooked invoices.
3. Not ALL transactions need e-invoices, but businesses will be required to present one when requested
Many B2C businesses, such as F&B outlets handling numerous small transactions, typically provide regular receipts or invoices unless a customer requests an e-invoice. In fact, there are no requirements to issue e-invoice to consumers. If a buyer doesn’t ask for an e-invoice initially, they have 30 days to do so. However, it’s crucial to aggregate these transactions monthly and send a consolidated e-invoice to LHDN within seven days after each month’s end.
However, if you are a B2B business, it is a requirement to issue e-invoice to your customers. This is compulsory, and business shall be obligated to do so. Any purchases which are not substantiated by an e-invoice shall not be allowed as a tax deduction when it comes to your annual tax submission.
4. Failure to comply with e-invoicing guidelines will be subjected to heavy penalties
A person, who without reasonable excuse, shall be liable to a fine of RM200 to RM20,000 OR imprisonment of not exceeding 6 months, OR both, if he fails to comply with the following:
• Failure to issue e-invoice in respect of goods sold or services performed for that YA
• Failure to issue self-billed invoice in accordance with the conditions determined by the IRB
• Failure to issue and submit a consolidated transaction invoice to to the IRB within a specified time and in accordance with the conditions determined by the IRB
5. E-invoicing will be made easier with the proper API integrated ERP or Accounting system
IRB has launched application programming interface (API) to developers to allow their accounting software to integrate directly into IRB’s e-Invoicing portal. This means that business operators will not be required spend double the time performing data entry inside the myInvoice portal as the accounting system will directly integrate with the portal.
This is especially useful for companies with large volume of B2B transactions, as the integration will be key to significant time saving, especially on data entry.
6. There’s a RM50,000 tax deduction for e-invoicing
Malaysia’s Ekonomi Madani includes a proposed SME tax deduction of up to RM50,000 per year for expenses related to e-invoicing implementation.
However, not every business is eligible for this deduction, and even among those that are, there may not be sufficient funds for everyone. So, consider this your gentle nudge to take action and avoid missing out!
Questions about the implementation of e-invoicing? Wanting to find out more about the solutions we are offering? Get in touch with us to find out more!