Steps for submission, validation, and issuance of e-invoices in Malaysia

Malaysia is embracing change by digitising its financial practices, and one notable transformation is the shift towards e-invoicing. E-Invoicing is about making the invoicing process reliable and transparent, as every sale /purchase transaction would be validated by the Inland Revenue Board of Malaysia (IRBM).

However the process of e-Invoicing is complex, especially for first time users.  Here is a detailed step by step guide to submit, validate, and issue e-invoices in Malaysia.

What is e-invoicing?

An e-invoice is a digital record of a transactional exchange between a seller (supplier) and a purchaser (buyer), which goes through the government portal for validation and recordkeeping.

E-Invoice contains all the details of an invoice along with a Unique Identification Number (UIN), which is generated by the government system after proper verification of the core fields like TIN, MCIR, etc. and QR code, which enables online validation of the e-invoice.

Who is required to issue e-invoices in Malaysia?

The mandate for e-invoicing in Malaysia extends to all taxpayers but will be done in phases based on the revenue. 

In the first phase of e-invoicing, all companies whose turnover exceeds RM 100 million should generate e-invoices for B2B, B2C and B2G transactions starting from 1^st August 2024.

E-Invoice Models: 

The Inland Revenue Board of Malaysia (IRBM) has introduced two mechanisms (models) for generating and submitting e-invoices: 

MyInvois portal 

MyInvois portal is designed for MSMEs and businesses with limited resources, requiring manual logins and data entry. 

Suppliers can either feed data and create a single e-invoice or prepare a detailed spreadsheet in specific formats and upload them for batch e-invoice generation.

Application Programming Interface (API) with MyInvois system

On the other hand, the API option is more suitable for larger businesses, necessitating system configuration or third-party software providers (referred to as "middleware" providers) for generating e-invoices.

A middleware integrates the business system – ERP, POS or accounting and billing software, enabling easy data between the business system and MyInvois system for real-time e-invoice generation.

Steps for Submission, Validation, and Issuance of e-Invoices (B2B)

Here are the key steps outlined in the e-invoicing guidelines for submitting, validating, and issuing e-invoices through the MyInvois portal or API:

Step 1- Submission: 

A company needs to generate an e-invoice in the specified format and send it to the IRBM through either the MyInvois portal or an API for verification. The company will need to create an e-invoice for each transaction, including credit notes, debit notes and refund notes.

Step 2- E-invoice validation: 

If no errors are found, and the details are validated successfully, the IRB sends a validation link with a unique identification number for traceability. The process verifies factors like file format, mandatory data fields, tax identification number (TIN), and the accuracy of numbers (like amount, tax value etc.)

Step 3- Notification: 

For the API option, a notification API communicates the validation status to both suppliers and buyers, facilitating efficient communication. On the other hand MyInvois portal will send notification e-mails to both buyers and suppliers through the portal.

Step 4- Sharing of e-invoice: 

Once approved, the supplier must send the cleared and validated e-invoice, embedded with a QR code containing the validation link, to the buyer.

Steps 5, 6, and 7 (where applicable): Rejection and cancellation: 

After the IRB validates the e-invoice, both the supplier and buyer have a 72-hour window to cancel or reject it. If no action is taken within this timeframe, the e-invoice is automatically accepted. Subsequent modifications are not permitted, and in such cases, a new e-invoice (e.g., credit note, debit note, or refund note e-invoice) must be issued for adjustments.

Step 8- Storing e-invoices: 

All e-invoices submitted to the IRB will be stored in the IRB's database. Nevertheless, businesses must ensure they maintain appropriate records and documentation pertaining to the transaction

Step 9- Reporting and dashboard services: 

Suppliers and buyers can request and retrieve e-invoice data from the IRB's database in various formats (XML/JSON, PDF, metadata).

Process to Issue e-Invoice in B2C Transaction

The e-invoice issuance requirement differs based on the buyer's requirements and the nature of transactions. while for B2B transactions, the e-invoicing process should be completed within a time frame (72 hours as of now), the e-invoicing requirement for B2C transactions differs based on whether the consumer wants an e-invoice or not.

Here are the two cases.

1. When buyers want an e-Invoice:

1. Once the business gets the request for an e-invoice from the buyer, they must collect the necessary details from the customer and feed it to the system.
2. The MyInvois system will validate the details, generate a Unique Identification Number, send the e-invoice to the buyer for confirmation and return it with the validated e-invoice.
3. This process is like what's outlined for the normal e-invoicing process.

2. When Buyers Don't Want an e-Invoice

1. The seller then gives these buyers regular receipts, like always.
2. After the month ends, within seven days, the seller collects details of all the receipts they gave out during that month.
3. With all the receipt details in hand, the seller creates one e-invoice that covers all the purchases made by buyers who don't need individual e-invoices.

This process could be automated through the ERP or other middleware software. This consolidated e-invoice is proof of the seller's monthly income.

Conclusion

The e-invoicing process could be automated or manual, depending on the requirements. Large businesses are suggested to integrate API integration with business systems for automated e-invoicing processes, while medium and small businesses can go for a manual MyInvois portal.

The process for batch and self-billed e-invoices generation is slightly different. However, the major walkthrough remains the same with few changes.

Taxpayers can choose the e-invoice model that best suits their needs, ensuring a smooth transition to the future of financial transactions. For a more in-depth understanding, check out this guide.