Navigating E-Invoice Guidelines in Malaysia: A Comprehensive Guide

Keeping up with the digital era, business transactions landscape in Malaysia is evolving. The Malaysian Government will implement e-Invoicing in stages to enhance the efficiency of Malaysia’s tax administration management. Let us help you understand the guidelines for e-invoicing in Malaysia to help you prepare for the upcoming changes.

What is an e-Invoice?

An e-Invoice is a digital documentation of a transaction between a supplier and a buyer. It replaces paper such as invoices, credit notes, and debit notes but contains the same information for example, supplier’s and buyer’s details, item description, quantity, price excluding tax, tax, and total amount, as its predecessor.

But an e-invoice is not any digital document, it has to be in the specific format mandated by the IRBM guidelines so it can be processed by the relevant IT systems.

An e-invoice CAN be:

• XML file
• JSON file

An e-invoice CANNOT be:

• PDF file
• JPG file
• DOC file
• E-mail
• PNG file

On what transactions are e-Invoicing are applicable?

e-Invoicing covers all routine transactions such as B2B, B2C, and B2G.

Further, e-Invoice applies to all individual taxpayers undertaking commercial activities in Malaysia as well as all legal entities including:

1. Association

2. Body of persons

3. Branch

4. Business trust

5. Co-operative societies

6. Corporations

7. Limited liability partnership

8. Partnership

9. Property trust fund

10. Property trust

11. Real estate investment trust

12. Representative office and regional office

13. Trust body and

14. Unit trust.

Exception:

For B2C transactions with end consumers, e.g. retail store sales, Suppliers will be allowed to issue a normal receipt or invoice by the current practices adopted by Suppliers.

After a certain time, Suppliers have to aggregate the normal invoices issued to end consumers and issue a consolidated e-Invoice to support these transactions.

How to prepare for e-invoices implementation?

To assess if your business is ready for the implementation of e-Invoice in the upcoming months, take these three key steps:

1. Equipped personnel with the necessary capabilities to adopt and oversee the implementation of e-Invoice or onboard an expert like ClearTax to handle the process.

2. Determine and upgrade the capability of data sources and current IT systems to comply with e-Invoicing system requirements and obligations.

3. Review current processes in issuing transaction documents (i.e., invoice, debit note, credit note, refund) and make a transition plan.

What needs to be on an E-Invoice?

There are 51 data fields that are mandatorily required to be filled to issue an e-Invoice as per the new Malaysian Guidelines. These fields are grouped into nine categories:

1. Address

2. Business Details

3. Contact Number

4. Invoice Details

5. Parties

6. Party Details

7. Payment Info

8. Products / Services

9. Unique ID Number

Field requirements may be updated from time to time, so it's advisable to refer to the latest guidelines for accurate information or issue invoices through a trustworthy system like ClearTax to ensure a seamless compliance experience.

How to issue e-Invoices?

To ease taxpayers’ transition to e-Invoice, IRBM has approved two mechanisms:

1. MyInvois Portal

When a sale or transaction is concluded (including adjustments such as debit notes, credit notes, and refunds), the Supplier needs to create an e-Invoice and submit it to IRBM via the MyInvois Portal for validation immediately.

2. Application Programming Interface (API)

Taxpayers need to configure their systems or engage a technology provider like ClearTax to assist in generating e-Invoices in the required XML or JSON format with the necessary fields in accordance with the defined structure in the guidelines.

Benefits of e-Invoicing in Malaysia

Let's delve into some key benefits these e-invoicing guidelines will bring to the Malaysian business environment:

1. Format and standards: e-Invoices in Malaysia will adhere to a standardized format to ensure consistency and compatibility across different systems and will also align with international practices, encouraging cross-border transactions.
2. Authentication and security: Ensuring the authenticity and security of data is paramount in today's day and age. The guidelines mandate the use of advanced encryption techniques and digital signatures to safeguard the integrity of electronic invoices. This not only protects businesses from fraud but also builds trust in the digital ecosystem.
3. Data Retention: Under e-Invoicing guidelines in Malaysia businesses are obligated to store electronic invoices for a specified period, ensuring that transaction records are easily accessible for auditing purposes.
4. Interoperability: This system will facilitate smooth communication between different businesses and government systems, which will result in error-free filings for tax by businesses and reduced need for scrutiny of accounts by authorities. It will also ease up the B2B transaction landscape since everyone will be using a standardized model of operation.
5. Compliance Reporting: Businesses are often required to submit periodic reports detailing their compliance with the prescribed standards. This system will not only ensure accountability but also allows regulatory bodies to monitor the overall effectiveness of the e-invoicing framework in a real-time basis.

In conclusion, embracing e-Invoicing is not just a mandate but a cornerstone of business efficiency. To thrive in the dynamic digital economy of Malaysia, one needs to gear up for the transition to e-Invoicing today.