Malaysia e-Invoicing: A Guide for Profit Distribution & Foreign Income

With the implementation of e-invoicing in Malaysia, businesses are required to issue and receive e-invoices as proof of expenses and revenue in nearly all cases. Here are some key points to note:

• Domestic Profit Distributions: Businesses need to generate self-billed e-invoices except those listed on Bursa Malaysia and companies not entitled to deduct tax under Section 108 of the Income Tax Act 1967

• Foreign Income and Dividends: Recipients of foreign income or dividends in Malaysia must issue an e-invoice by the end of the month following the receipt of the income.

This guide will provide a detailed overview of the process for issuing e-invoices for both domestic profit distributions and foreign income.

e-Invoice Requirement for Profit Distribution and Foreign income

Profit Distribution refers to the payment of profits to shareholders or beneficiaries, typically in the form of dividends. Foreign Income includes any income earned outside of Malaysia that is received within the country, such as foreign dividends or profits.

As of August 1, 2024, Malaysia has implemented mandatory e-invoicing for all businesses. This means that businesses must generate e-invoices for both sales and, in some cases, self-billed e-invoices where the buyer is not required to issue an e-invoice.

E-invoices serve as both proof of expenses for the payer and proof of income for the recipient. Therefore, Malaysian businesses are required to generate e-invoices for all types of profit distributions and foreign income, with certain exceptions.

The information required when generating an e-invoice differs based on the type of transaction. These specific details are outlined in the following sections.

Profit Distribution or  Dividend Distribution

Profit distributions, such as dividends, trust profits, or unit trust payouts, are usually documented by issuing vouchers or warrants to shareholders or beneficiaries. 

Under the e-invoicing mandate, the method for recording these transactions—whether through an e-invoice or the existing process—depends on the legal structure of the business and whether it qualifies for specific exemptions under Malaysia's e-invoicing regulations.

Shareholders who receive the dividend/profit are not required to issue an e-Invoice for proof of income.

Entities Required to Issue e-Invoices for Profit Distribution

For businesses not covered by the exemption, e-invoicing is mandatory. The process involves issuing self-billed e-invoices for profit distributions. This applies to various entities such as private companies, partnerships, trusts, and limited liability partnerships.

Exemption From Issuing e-Invoices for Dividend Distribution

Not all entities are required to issue e-invoices for profit distributions. Businesses that meet the following criteria are exempt:

• Companies not entitled to deduct tax under Section 108 of the Income Tax Act 1967
• Companies listed on Bursa Malaysia

These exempted companies can continue using existing methods, such as issuing dividend vouchers or dividend warrants, without needing to generate a self-billed e-invoice for distribution. The exemption applies to shareholders as well, who are not required to issue an e-invoice to prove dividend income.

Steps to Issue Self-Billed e-Invoice for Profit Distribution

The taxpayer can follow the e-invoicing model via either the MyInvois Portal (for manual entry or batch uploads) or through API integration (for automated processes).

1. Issuance of Dividend Voucher: When the dividend is paid or credited, the taxpayer making the distribution must issue a dividend voucher to the recipient of the distribution (i.e., the shareholder or beneficiary).
2. Issuance of Self-Billed e-Invoice: The entity distributing the profit (acting as the “Buyer” in the e-invoice) is then required to issue a self-billed e-invoice to the recipient of the distribution (the "Supplier"). In this case, the recipient of the dividend is referred to as the Supplier.
3. Completion of e-Invoice Fields: The distributor must fill in the necessary fields required in the e-invoice, based on the data fields outlined in the IRBM’s e-invoice Guideline.

Key Data Fields for Issuing Self-Billed e-Invoices for Profit Distribution

The table below outlines the key fields that need to be completed by the taxpayer making the distribution:

Foreign Profits/Dividend Distribution

Any foreign income or profits, including foreign dividends, received in Malaysia requires issuing an e-invoice. This is a vital part of ensuring proper tax documentation for income received from abroad.

Steps to Issue an e-Invoice for Foreign Income/Dividends

For foreign dividends or income, the Income Recipient (the party receiving the foreign profit) takes on the role of the “Supplier,” and the Foreign Distributor (the party paying the dividend or foreign income) is considered the “Buyer.”

Step 1: After receiving foreign income, the Malaysian Seller will issue an e-invoice to the Foreign Purchaser to document the foreign income.

For e-invoice issuance, the roles of both parties are defined as follows:

• Supplier: Malaysian Seller
• Buyer: Foreign Purchaser

Step 2: The Malaysian Seller is required to complete the necessary fields as outlined in of the e-invoice guidelines. 

Step 3: The issuance process of the e-invoice by the Malaysian Seller must adhere to the detailed e-invoice workflow of the e-invoice guidelines, with the following exceptions:

• After validation, the IRBM will send a notification only to the Malaysian Seller (no notification will be sent to the Foreign Purchaser as they do not use the MyInvois System).
• The validated e-invoice will serve as proof of income for the Malaysian Seller. The Malaysian Seller may share a copy of the validated e-invoice with the Foreign Purchaser for record-keeping purposes as part of standard business practice.
• Since the Foreign Purchaser is not part of the MyInvois System, they will not be able to reject the e-invoice. If any errors occur on the validated e-invoice, any necessary adjustments should be made by issuing a credit note, debit note, or refund note e-invoice by the Malaysian Seller.

Required Data Fields for E-Invoice Issuance by Foreign Income Recipient

Conclusion

Issuing e-invoices for profit distributions and foreign income in Malaysia requires businesses to follow specific steps based on the type of income and the role of the parties involved. With the introduction of e-invoicing mandates, companies must adapt to the new system, whether through manual submission using the MyInvois Portal or via API integration for automated processes.