e-invoice Model in Malaysia: Benefits, Requirements and How to Get Started

Electronic invoicing, commonly known as e-invoicing, is gaining popularity around the world, and Malaysia is no exception. To facilitate this transition, the Internal Revenue Board of Malaysia (IRBM) has developed two unique e-invoice transmission platforms: MyInvois Portal and Application Programming Interface (API) Let’s explore the e-invoice models and how they work in Malaysia, their benefits and challenges, and let’s explore how businesses can start using e-invoicing in Malaysia.

What is the e-invoice Model in Malaysia?

To facilitate a seamless shift to e-invoicing, IRBM has developed two separate e-invoice transmission processes:

1. MyInvois Portal: Maintained by IRBM, the MyInvois portal enables businesses to generate e-invoices individually or in bulk through spreadsheet upload. It is accessible to all taxpayers. This is ideal for businesses who are required to submit e-invoices but do not have APIs and handle a small volume of data.
2. API: The API architecture is suitable for businesses with a large number of transactions and allows for high-volume e-invoice transmission. Under API there are three different methods:
   1. Direct integration of taxpayers’ ERP system with MyInvois System.
   2. Through Peppol service providers.
   3. (Through non-Peppol technology providers

Although it offers flexibility, it requires an upfront investment and is ideal for large taxpayers or highly commercialised businesses.

How to generate Malaysian e-invoice through MyInvois Portal?

The MyInvois Portal can be used to generate and view e-invoices.

However, taxpayers will have to log in to MyTax Portal to utilise MyInvois Portal for creating e-invoices.

Step 1: Creation and submission

When a sale or transaction is concluded, the Supplier creates an e-invoice and submits it to IRBM via the MyInvois Portal for validation. Two options are available:

1. Individual Creation: Taxpayers can create e-invoices individually by completing a form with all the required fields.
2. Batch Generation: Taxpayers can generate a certain amount of e-invoices in batches by uploading a defined layout file to the portal containing the necessary invoice information.

Step 2: e-invoice Validation

Once validated, the Supplier will receive a validated e-invoice in PDF from IRBM via the MyInvois Portal. The validated e-invoice includes the IRBM Unique Identifier Number, date, and time of validation, and a validation link. The IRBM Unique Identifier Number allows traceability and reduces instances of tampering with the e-invoice.

If the e-invoice is returned unvalidated, an error message is displayed, and the Supplier is required to correct the error and resubmit it for validation.

Step 3: Notification

Once the e-invoice is validated, IRBM notifies both the Supplier and Buyer via the MyInvois Portal. Notifications are also sent via email and include invoice clearance and Buyer rejection requests.

Step 4: Sharing of e-invoice

Upon validation, the Supplier must share the validated e-invoice (embedded with a QR code provided by IRBM) with the Buyer. The QR code can be used to validate the existence and status of the e-invoice via the MyInvois Portal.

Step 5: Rejection or Cancellation

Once the e-invoice has been validated, both the Supplier and Buyer have the option to cancel or reject the e-invoice within a stipulated time frame.

1. Buyer to request rejection of the e-invoice:

• If the e-invoice contains errors, the Buyer can request rejection within 72 hours of validation.
• The rejection request should specify the reason for rejection.
• Upon the Buyer initiating the rejection request, a notification is sent to the Supplier.
• If the Supplier agrees with the reason provided, they proceed to cancel the e-invoice.

2. Supplier to perform cancellation of e-invoice:

• If the e-invoice contains errors or was erroneously issued, the Supplier can cancel the e-invoice within 72 hours from the time of validation.
• Cancellation requests must also be accompanied by justifications.

If the e-invoice is not rejected or canceled within 72 hours, any subsequent adjustments require a new e-invoice, such as a credit note, debit note, or refund note e-invoice.
Example: Stationery Hub Sdn. Bhd. (Supplier) generates an e-invoice for the sale of 50 stationery items purchased by Mrs. Kim (Buyer) using the MyInvois Portal. Upon validation, both parties are notified. Mrs. Kim reviews the e-invoice and can request a rejection within 72 hours if errors are detected.

Step 6: Storing e-invoices

All accepted and validated e-invoices submitted via the MyInvois Portal will be stored in IRBM's database. Taxpayers are reminded to retain sufficient records and documentation related to the transaction.

Step 7: Reporting and Dashboard Services for Taxpayers

Through the MyInvois Portal, both Suppliers and Buyers can request and retrieve e-invoices, providing essential invoice details in various formats, such as XML/JSON, metadata, CSV reports, grids, and PDF files.

How to generate Malaysian e-invoice through API model?

API allows taxpayers to submit e-invoices directly to IRBM using:

• direct integration with ERP systems, 
• Peppol service providers, or 
• non-Peppol technology providers. 

API integration is particularly suitable for businesses with high transaction volumes. The e-invoice structure supports B2B, B2G, and B2C transactions and provides XML and JSON formats for transmission.

Step 1: Submission

Once a sale or transaction is concluded, the Supplier or technology provider creates an e-invoice in XML or JSON format and submits it to IRBM via API for validation.

Step 2: e-invoice Validation

Upon validation by the MyInvois System, the Supplier or technology provider receives a validated e-invoice with essential information, including the IRBM Unique Identifier Number, date, time of validation, and a validation link via API.

If errors are detected during validation, an error message is shown, and a validation e-invoice is provided upon successful validation.

Step 3: Notification

API allows taxpayers to receive notifications from IRBM directly or via a technology provider. Notifications include e-invoice clearance and Buyer rejection requests, ensuring efficient communication and timely actions.

Step 4: Sharing of e-invoice

Upon validation, the Supplier embeds a QR code with a validated link on the e-invoice and shares it with the Buyer. The QR code allows validation via the MyInvois Portal.

Step 5: Rejection and Cancellation

Buyers and Suppliers can request rejection or cancellation of the e-invoice within a specified time frame.

Example: Hebat Group (Buyer) obtains supplies from Fresh Food Hub (Supplier) and uses the API to generate e-invoices in XML/JSON format. Errors are detected, and the e-invoice is rejected, leading to the issuance of a revised e-invoice.

Step 5: Storing e-invoices

All e-invoices submitted via API are stored in IRBM's database, and taxpayers are reminded to retain relevant records.

Step 6: Reporting and Dashboard Services for Taxpayer

API integration enables Suppliers and Buyers to request and retrieve e-invoices in various formats, enhancing transparency and efficiency in e-invoice management.

Benefits of the e-invoice Model for Businesses

1. Streamlined Processes: The e-invoice model simplifies the process of generating, submitting, and managing invoices, reducing manual effort and the risk of errors.
2. Cost Savings: Businesses can save on paper, printing, and postage costs associated with traditional paper invoices.
3. Real-time Validation: e-invoices are validated in near real-time, ensuring accuracy and reducing the risk of errors and disputes.
4. Improved Traceability: Each e-invoice receives a unique identifier, allowing for easy traceability and reducing the risk of tampering.
5.  Efficient Communication: The system facilitates efficient communication between suppliers and buyers, reducing delays and improving business relationships.
6. Enhanced Transparency: Both suppliers and buyers have access to detailed invoice information, promoting transparency in financial transactions.

Challenges of the e-invoice Model

While the e-invoice model offers several benefits, it also presents challenges for businesses, including:

1. Upfront Investment: API integration requires an initial investment in technology and may involve adjustments to existing ERP systems, which can be costly.
2. Technical Expertise: Businesses may need to acquire or hire technical expertise to implement and manage the e-invoice system effectively.
3. Change Management: Transitioning to e-invoicing may require changes in business processes and employee training, which can be disruptive.

Conclusion

The e-invoice model in Malaysia represents a significant shift towards digitisation and offers numerous benefits to businesses, including streamlined processes, cost savings, and improved transparency. While it presents some challenges, the advantages of e-invoicing far outweigh the drawbacks. To get started with e-invoicing, businesses in Malaysia can choose between the MyInvois Portal and API transmission mechanisms, based on their specific needs and business requirements. This transition promises a more efficient and transparent invoicing process, ultimately benefiting both businesses and the Malaysian tax system. Cleartax is one of the most experienced vendors and offers seamless integration capabilities with 99.99% success rate.