Implementation of e-Invoicing for e-Commerce Operations in Malaysia

The e-commerce sector in Malaysia is rapidly expanding, solidifying its position as a leading market in Southeast Asia with a market value projected to reach US$ 10.19 billion in 2023.

Starting from January 2025, all businesses, including e-commerce platforms with annual turnovers exceeding RM 500,000, must adhere to the e-invoicing mandate. Transitioning to e-invoicing in e-commerce operations involves tackling challenges like integrating with existing digital platforms, managing high transaction volumes, and navigating multiple stakeholders. To aid in this transition, the IRBM has released industry-specific FAQs addressing common queries, aiming to assist e-commerce businesses in complying with e-invoicing regulations. 

This blog will discuss these challenges and provide insights into key questions related to e-invoicing for e-commerce enterprises.

Challenges in e-invoicing for E-Commerce Operations

E-commerce operations are inherently complex due to the involvement of multiple parties, each playing distinct roles in the transaction process. This includes buyers, e-commerce platforms, sellers, and shipping companies, all contributing to the flow of transactions and payments associated with each order. 

There are additional challenges such as managing platform fees, shipping charges, and other incidental costs that need to be accurately invoiced and accounted for.

 Furthermore, the processes surrounding refunds and returns add another layer of complexity, requiring careful handling of invoicing to ensure compliance with regulatory standards and operational efficiency.

Here are some major challenges with e-invoicing for e-commerce operations

• Responsibility for Issuance: Determining who should issue e-Invoices between e-commerce platforms and merchants, especially for consumer transactions.
• Consolidated vs. Self-Billed e-Invoices: Clarifying when e-commerce platforms can issue consolidated versus self-billed e-Invoices for recording merchant income.
• Handling Platform Usage Charges: Properly managing and invoicing charges imposed by e-commerce platforms to merchants for platform usage.
• Tax Identification Number (TIN) Compliance: Ensuring compliance with TIN requirements, particularly for foreign suppliers.
• Integration of Payment and Invoicing Processes: Coordinating e-invoice issuance with payment release based on consumer confirmation of goods or services received.
• Treatment of Returns and Refunds: Issuing e-Invoices accurately for returns and refunds of goods to maintain financial records and tax compliance.
• Segmentation of Transaction Types: Separating e-commerce transactions from brick-and-mortar store transactions in e-Invoices for accurate reporting.

e-Invoicing for E-Commerce Operations FAQ’s

When a sale or transaction occurs between a merchant and consumer through an e-commerce platform, who is responsible for issuing the e-invoice to the consumer?

The e-commerce platform provider is responsible for issuing:

• An e-Invoice (upon request); or
• A receipt (if no e-Invoice is requested)

to the consumer for transactions conducted via the e-commerce platform. Merchants are not obliged to issue the e-Invoice or receipt to the consumer. If the buyer does not request an e-Invoice, the e-commerce platform provider may issue a consolidated e-Invoice for these transactions. The platform provider must include the relevant classification coding in the e-Invoice to indicate that it pertains to e-commerce transactions where the e-Invoice is issued by the platform provider. 

Who is responsible for issuing the e-invoice to record the income generated by a merchant and/or service provider (e.g., logistics provider) from transactions conducted through an e-commerce platform?

The e-commerce platform provider assumes the role of Issuer and is responsible for issuing a self-billed e-Invoice to record the income earned by the merchant and/or service provider from transactions concluded via the e-commerce platform. The frequency of self-billed e-Invoice issuance should align with the current practices of the e-commerce platform provider. 

How should charges imposed by the e-commerce platform provider to a merchant and/or service provider for platform usage be treated in e-invoices?

The e-commerce platform provider is required to issue an e-Invoice for the charges imposed on the merchant and/or service provider for using the platform. The frequency of e-Invoice issuance should align with the current practices of the e-commerce platform provider. 

If a foreign business or individual does not have a Tax Identification Number (TIN), what TIN should be used in a self-billed e-Invoice?

If the foreign supplier does not have or provide a TIN, the general TIN “EI00000000030” can be used as the Supplier’s TIN in a self-billed e-Invoice. 

Is the e-commerce platform provider allowed to issue consolidated e-Invoices to record the income generated by a merchant and/or service provider from e-commerce transactions?

No, the e-commerce platform provider is not permitted to issue consolidated e-Invoices for recording the income earned by the merchant and/or service provider from transactions conducted via the e-commerce platform. Instead, the platform provider must issue self-billed e-Invoices in these instances. Please see the response provided in Question 2 above for additional details. The frequency of self-billed e-Invoice issuance should align with the current practices of the e-commerce platform. For further guidance, refer to Section 8 of the e-Invoice Specific Guideline.

When should the e-commerce platform provider issue an e-Invoice to record the income generated by a merchant and/or service provider from e-commerce transactions, considering the typical payment release practice?

The e-commerce platform provider may follow the current billing arrangement, releasing payment to the merchant and/or service provider upon the consumer’s confirmation of receipt of goods and/or services. If necessary, the platform provider may issue draft or proforma invoices to the merchant and/or service provider. However, only the final e-Invoice needs to be submitted to IRBM for validation.

How should returns of goods, where the e-commerce platform provider refunds money to the affected consumer, be handled in terms of e-Invoices?

A refund note e-Invoice must be issued by the e-commerce platform provider to record the refund for returned goods.

Can retailers include e-commerce transactions in the same consolidated e-Invoice as transactions from brick-and-mortar stores?

It may not be advisable to issue a consolidated e-Invoice combining e-commerce transactions and transactions from brick-and-mortar stores due to differences in transaction flow, responsibility, and classification as outlined in the e-Invoice data catalogue. This could potentially create confusion during future reconciliation.