Introduction
E-invoicing has gradually become a transformational wave across the EU and Asia over the past few years. The global e-invoicing market size has reached 13.5 billion USD in 2023, estimated to reach 60.9 billion USD in 2032 with a growth rate of 17.7%. Complying with the implementation of e-invoicing in a manner appropriate to each country's operating characteristics helps businesses enjoy many fixed benefits, enhance overall business operations and minimize unnecessary costs.
As one of the countries planning to introduce and officially synchronize the process of bringing e-invoicing into overall operation, Malaysia has been gradually affirming high levels of compliance for the mandatory application of e-invoicing. In March 2023, the Inland Revenue Board of Malaysia (IRBM) officially announced a plan to apply e-invoicing in stages across the country, with all types of transactions.
So what is e-invoicing Malaysia? What core information do you, as a business owner in this country, need to grasp? The article below with specific, detailed and updated information will help you better understand these issues.
What is e-Invoicing Malaysia?
Definition
E-invoicing in Malaysia refers to the creation, transmission and storage of invoices between businesses (B2B), businesses and consumers (B2C), and businesses and government agencies (B2G) in the form of electronics as a form of digital transformation.
Since 2015, Malaysian businesses have had the option to use e-invoices voluntarily. This is a move to modernize the entire tax compliance process and improve efficiency in transactions. From August 2024, businesses are required to use the new national e-invoice system to simplify the payment process and handle tax issues, as well as increase transparency in tax reports.
Types of e-Invoicing Malaysia
E-invoicing Malaysia, as an answer of what is e-invoicing Malaysia, is divided into different categories:
- Invoices: are standard documents used to record transactions between suppliers and buyers, including self-generated invoices to proactively track costs.
- Credit Notes: issued to correct or update a previous version when errors, discounts, or returns due to a problem arise.
- Debit Notes: used to record additional charges related to the original invoice, such as additional costs or services provided after the invoice has been approved.
- Refund Notes: official documents issued to record the refund amount handed over to the buyer.
Types of Transaction under E-invoicing Malaysia
Different transaction forms are also information you need to understand about what is e invoice in Malaysia before officially diving into e-invoicing:
- Proof of Income: documentation of goods or services provided, including any additional transactions from which a taxpayer earns income.
- Proof of Expenses: documentation of purchases and other expenditures, including returns and discounts. For cross-border transactions, for example, taxpayers in Malaysia must issue invoices and expense documents themselves.
Difference between e-Invoice and Normal Invoice
For you to have a clearer understanding of e-invoice and to answer what is e-invoicing Malaysia, we have made an overview comparison table between e-invoice and normal invoice below. The information is based on the experience of a team of experts who have many years of operating and developing the e-invoice system.
Criteria | e-Invoice | Normal invoice |
Format | Digital | Paper or digital |
Accuracy | Verified in real time by tax authorities | No instant authentication |
Mandatory fields | 55 fields including unique identifiers and QR codes | Fields are standard and typically do not have a unique identifier |
Approval process | Must be approved and confirmed by IRBM | No approval required before release |
Recordkeeping | Stored automatically in government and corporate databases | Usually stored manually |
Malaysia's complete shift to e-invoicing represents a significant change in the way businesses manage the invoice setup and processing process. That change still requires good efficiency, and compliance with tax collection conditions. The phased implementation plan by the Malaysian government ensures businesses of all types are better prepared to embark on a new, streamlined and transparent journey.
Timeline of E-invoicing Implementation Date in Malaysia
The implementation of e-invoicing in Malaysia is carried out in stages, based on the annual revenue of the business. This process ensures companies, no matter their size, can adapt seamlessly to the new way of doing things. The Inland Revenue Board of Malaysia (IRBM) has outlined specific timelines in updated guidance issued in October 2023.
The e invoice Malaysia implementation date:
Phase | Annual Turnover (in 2022) | Implementation Date |
Phase 1 | Over RM 100 million | August 1, 2024 |
Phase 2 | From RM 25 million to RM 100 million | January 1, 2025 |
Phase 3 | All taxpayers | July 1, 2025 |
Besides, you also need to understand some important notes about what is e-invoicing Malaysia and its implementation process:
- The e-invoicing system has been put into testing by many businesses since January 1, 2024 - the first phase of e-invoicing implementation date.
- The Finance Bill 2024 has delayed the e invoice Malaysia start date by two months to ensure a smoother transition.
- The e invoice Malaysia start date for B2C via e-Receipt transactions has not yet been announced.
- February 1, 2025, marks the conclusion of the six-month soft landing phase for the initial group of large taxpayers from August 2024.
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Businesses with annual sales under RM150,000 will be exempt from this mandate.
What is e-Invoicing Malaysia: Goals Behind Implementing E-invoicing Malaysia
The decision to make e-invoicing Malaysia 是什么 a mandatory condition in Malaysia's corporate finance activities is a revolutionary step. The plan of what is e-invoicing Malaysia aims to achieve multiple win-win benefits, for both business and government, in promoting efficiency, transparency and sustainability.
Streamlined Tax Process
The implementation of e-invoicing Malaysia helps businesses save significant time and resources. For example, where it used to take days to manually reconcile paper invoices, the same can now be achieved in just a few hours with e-invoicing.
This streamlined approach reduces administrative burden, allowing businesses to focus more on their core activities.
Enhanced Information Security (InfoSec)
Switching from paper-based invoicing to a secure digital platform increases the protection of sensitive financial data. The MyInvois portal from what is e invoice in Malaysia ensures invoices are created and exchanged securely, minimizing the risk of data leaks and unauthorized access.
This move not only keeps the safety of business transactions, but also instills confidence in trading partners about the integrity and security of financial exchanges.
Environmentally Friendly Initiative
The move to e-invoicing enhances the positive impact on the environment by significantly reducing paper use. Malaysia's initiative to cut down on paper-based invoicing is in line with global efforts to combat climate change.
By eliminating paper invoices, a large corporation can help reduce thousands of trees each year, contributing to a greener and more environmentally friendly operating journey.
This approach not only creates benefits for the environment but also enhances the image of corporate social responsibility. Furthermore, these are great strides to help Malaysia once again affirm its steadfastness and drastic attitude in environmental protection.
Improved Accuracy and Transparency
Automation in e-invoicing minimizes human errors, ensures information recorded on invoices is always accurate and complies with tax regulations.
IRBM's strict authentication protocols ensure that all necessary details are accurately captured and verified. This way of implementation of e-invoicing Malaysia leads to greater transparency in business transactions, as every invoice can be easily tracked and audited digitally. It reduces the risk of fraud and discrepancies.
Simplified Invoice Compliance Process
MyInvois portal helps businesses simplify compliance with tax regulations. Automated validation ensures that all transactions of what is e-invoicing Malaysia meet required standards, reducing the risk of penalties for tax non-compliance and, at the same time, easing regulatory audit burdens.
Cost and Time Savings
Automating and digitizing the invoicing process reduces the need for manual administrative tasks, resulting in significant cost savings for businesses. Companies can reduce the time and money involved in printing, mailing, and storing paper invoices.
These savings from what is e-invoicing Malaysia can be reinvested in business growth and development, creating significant changes in the business journey.
Stable Revenue Growth
E-invoicing Malaysia 是什么 increases transparency and accuracy in financial reporting, helping to prevent revenue leakage. As a result, IRBM's real-time tracking and validation capabilities are also sure that tax data is collected accurately, helping the government achieve more stable revenue growth.
A stable revenue stream will be a driving force for the government to better plan and implement public service and infrastructure projects.
Preventing Tax Leakage
E-invoicing ensures that all invoices, regardless of value, are authenticated by IRBM before being officially published. This process of what is e-invoicing Malaysia helps prevent tax leakage and makes audits faster, simpler and more efficient. Businesses will find it easier to maintain accurate records, thereby simplifying tax reporting and compliance efforts.
Favorable Conditions for International Trade Development
The Malaysian government's application of the PEPPOL network also allows the country's businesses to participate in transactions with more than 60 other countries globally. This network ensures cross-border transactions are reliable, secure, and enhances market expansion opportunities for Malaysian businesses.
It will be easier for companies to navigate international trade regulations and position their footprint in world markets.
Who Are Required to Implement E-Invoicing in Malaysia?
The Malaysian Domestic Revenue Department (LHDN) has issued specific guidance on which entities need to comply with the new regulations, and which regulations are exempt. Understanding these requirements is vital for businesses to remain compliant and benefit from the benefits of e-invoicing.
Who are required to carry out e-invoicing in Malaysia? | Who are exempt from e-invoicing in Malaysia? |
Corporations and limited liability partnerships | Government and diplomatic entities |
Business trusts and property trust funds | Rulers and their consorts |
Co-operative societies and partnerships | Individuals not conducting business |
Associations and bodies of persons | Local authority |
Trust bodies and unit trusts |
Although the transition to what is e-invoicing Malaysia is not an easy one to get used to immediately, it is an important step towards modernizing Malaysia's tax administration process and improving overall business efficiency. By understanding and complying with these regulations, businesses have the right to expect a more reasonable and transparent financial environment than ever before.
Comprehensive Process of E-invoicing Malaysia: How Does It Work?
Implementing what is e-invoicing Malaysia is a structured process designed to enhance accuracy, efficiency and transparency in business transactions.
We thoroughly cover the step-by-step process of e-invoicing Malaysia 是什么 as follows:
Step 1: Issue e-Invoice
The process starts when the supplier creates an e-invoice after the transaction. This invoice is then transmitted to the Inland Revenue Board of Malaysia (IRBM) through the MyInvois portal or API. The step ensures that the invoice is officially recorded and meets all conditions for confirmation.
Step 2: Conduct Authentication by IRBM
On receipt of the e-invoice, IRBM performs a thorough validation check to make sure that all details are correct and comply with required standards. If the invoice passes the validation process, IRBM will issue an e-signature in the form of a QR code. In case an error occurs, the invoice will be rejected, and the supplier will have to correct it and resubmit it again.
Step 3: Invoice Sharing
Once in possession of a verified invoice, the supplier will embed the QR code in the invoice and send authenticated e-invoices to the buyer. The buyer can then verify the authenticity of the invoice and track it through the MyInvois portal.
Step 4: Transaction Summary
If there are no problems, the buyer will proceed with payment based on the information recorded on the e-invoice. All transactions, including issuance, confirmation and payment of invoices, are recorded and summarized on the MyInvois portal for easy access and auditing by both parties.
Step 5: Refuse or Cancel (if any problems arise)
In case of any discrepancies or errors, the buyer will have 72 hours from the time of confirmation to request rejection of the invoice. The supplier will be notified and must resolve the issue at the same time. If you agree with the buyer's opinion, you can cancel the invoice; otherwise, it will still be valid after 72 hours.
Some key notes to remember to avoid unnecessary errors and prolong the processing process:
- Issuing invoice: Make sure the invoice contains all necessary details, such as registration name, tax information, invoice number.
- Invoice format: Convert invoices to XML or IRBM format.
- QR code: Attach a QR code to the verified e-invoice before sending it to the buyer.
- Storage: Store e-invoices for at least 7 years, with the option to store in your country with appropriate benefits.
Challenges of E-invoicing Malaysia: How to Overcome?
The transition to e-invoicing in Malaysia faces a number of challenges. That's for sure, because not every business is ready on all factors to transform from traditional methods to digital.
However, with the right strategy, you can completely overcome these barriers and quickly enjoy the valuable benefits of e-invoicing Malaysia.
Technology Readiness
Challenge: Not all businesses, especially small and medium enterprises (SMEs), have sufficient infrastructure and resources to meet the mandatory requirements of e-invoicing implementation.
How to Overcome: Thoroughly understand the minimum infrastructure requirements for implementing what is e-invoicing Malaysia. This includes adopting cloud-based invoicing software that is user-friendly and highly scalable. If this is too costly or time-consuming, you should consider partnering with e-invoicing solutions providers in Malaysia like us, A1 Consulting for the implementation of e-invoicing Malaysia. We will advise and handle all suitable solutions thoroughly.
Training and Onboarding Employees
Challenge: Businesses' employees may be resistant to sudden change or lack the necessary skills to use and operate e-invoice effectively.
How to Overcome: Conduct comprehensive training programs so employees understand the implications and become familiar with the new system. Regular seminars and hands-on training can help employees understand the benefits of what is e invoice in Malaysia, become familiar with the answer of what is e-invoice Malaysia, and gradually adapt to how to use the system effectively.
Integrate with Existing Systems
Challenge: Integrating what is e-invoicing Malaysia with existing accounting and ERP systems will not be an easy obstacle for businesses to overcome, especially in terms of complexity and time consumption. Difficulties will become more problematic when your business is not too strong in the digital segment.
How to Overcome: Choose an e-invoicing software that integrates seamlessly with existing systems. One preferred option is Odoo. You should also work with an e-invoicing solution provider to simplify this process, as they can provide custom integration solutions to ensure compatibility and data synchronization.
Comply and Update Regulations
Challenge: Complying with the ever-evolving e-invoicing regulations and standards from the Malaysian government and globally can be challenging. Every day you have to deal with hundreds of thousands of tasks, it will be difficult to constantly update the latest features and regulations.
The resulting consequences can be more serious than you think, especially when it comes to taxes and rising e-invoicing standards.
How to Overcome: Schedule regular updates on the latest e-invoicing regulations by subscribing to industry newsletters and attending relevant conferences. You can also request permanent consultation from e-invoicing solutions partners to ensure that your business remains compliant with the latest regulations without the need for constant supervision from CEOs.
Final Thoughts
What is e-invoicing Malaysia? This question has been answered comprehensively in this article. The digital shift from the smallest elements such as invoices will play a decisive role in helping Malaysian businesses develop further and take the country to a new level in bringing digital into the implementation process compulsively and directly.
Of course, every beginning has difficulties. But don't worry, because A1 Consulting is always here to accompany you. As a trusted Odoo partner - an ERP module including the key features for e-invoicing in Malaysia, we are confident in providing your business with sharp, clear advice and effective implementation customized for each business. The journey to conquer what is e-invoicing Malaysia will become faster and smoother than ever.
Don't hesitate to contact us immediately for more detailed information and consultation about e-invoicing in Malaysia!
