Welcome to our guide on essential technical terms and abbreviations used in Malaysian e-invoicing.
As businesses increasingly adopt electronic invoicing, understanding key terminology is essential for smooth operations and compliance. This post will break down crucial terms that will help you navigate the e-invoicing landscape in Malaysia, empowering you to make informed decisions and optimize your invoicing processes.
1. API (Application Programming Interface)
A set of protocols and tools that allow different software systems to communicate and exchange data, crucial for e-invoicing systems.
2. B2B (Business-to-Business)
Transactions and interactions between two businesses rather than between a business and individual consumers. This model encompasses various activities, including wholesale trade, supply chain management, and service agreements
3. B2C (Business-to-Consumer)
Transactions where businesses sell products or services directly to individual consumers. This model encompasses various sectors, including retail, e-commerce, and service industries.
4. B2G (Business-to-Government)
Transactions and interactions between businesses and government entities. This model involves the provision of goods and services to various levels of government, including federal, state, and local agencies.
B2G typically includes bidding processes for contracts, compliance with regulations, and the fulfillment of public sector needs, with an emphasis on transparency and accountability in the procurement process.
READ MORE: 4 Transaction Types That Need E-invoicing
5. Compliance
Adherence to legal and regulatory requirements related to e-invoicing in Malaysia.
6. Credit Note
A credit note is issued by a seller to a buyer to document a reduction in the amount owed. This typically occurs when there is a return of goods or an adjustment to the original invoice due to pricing errors or discounts. Like the debit note, a credit note must also be issued as a new e-invoice to reflect the changes in the transaction.
7. Cross-Border Invoicing
The process of sending and receiving e-invoices between businesses in different countries, with specific compliance requirements.
8. Debit Note
A document issued by a buyer to a seller, indicating that the buyer intends to increase the amount owed due to reasons such as additional goods received or services rendered. Debit notes must be electronically submitted through the MyInvois system for validation and record-keeping purposes.
9. Digital Signature
An electronic form of a signature is used to authenticate the sender’s identity and ensure the integrity of the e-invoice.
10. Disbursement
Out-of-pocket expenses incurred by the buyer (payer) and paid to a third party by the seller (payee) on behalf of the buyer in connection with goods sold or services rendered.
Some common examples of disbursement include court filing fees paid by a law firm on behalf of a client or regular payments made for services like electricity, water, and internet.
11. E-Invoicing
The electronic delivery and processing of invoices in a standardized digital format.
E-invoicing, or electronic invoicing, is the process of sending and receiving invoices in a digital format, streamlining the billing process between businesses and their clients. This method enhances efficiency by reducing paperwork, minimizing errors, and facilitating quicker payments through automated workflows.
12. ERP (Enterprise Resource Planning)
A software system that integrates various business processes, including finance, supply chain, and human resources, into a unified platform to automate and streamline the e-invoicing process.
13. GST (Goods and Services Tax)
A consumption tax levied on the supply of goods and services, abolished in Malaysia in 2018, but still relevant for historical invoicing data.
14. Invoice Lifecycle
The stages an invoice goes through from creation to payment. It typically includes the following steps:
- Creation – The seller generates the invoice upon a sale.
- Dispatch – The invoice is sent to the buyer.
- Approval – The buyer’s accounts payable team reviews and approves the invoice.
- Payment – The buyer processes the payment.
- Archiving – The invoice is stored for record-keeping and auditing purposes
15. IRBM (Inland Revenue Board Malaysia)
The Malaysian government agency responsible for tax administration, also known as Lembaga Hasil Dalam Negeri (LHDN).
16. ITA 1967 (Income Tax Act 1967)
The Income Tax Act 1967 (Act 53) is a Malaysian legislation that governs the imposition of income tax across the country. Enacted on September 28, 1967, it establishes the framework for tax assessment, collection, and compliance for individuals and corporations.
The Act outlines the types of income subject to taxation, the methods for determining chargeable income, and the responsibilities of taxpayers, including the requirement to maintain proper records for tax purposes.
17. JSON (JavaScript Object Notation)
JSON (JavaScript Object Notation) is a lightweight data interchange format that is easy for humans to read and write, and easy for machines to parse and generate. It uses a text format that is completely language-independent, making it a popular choice for data exchange between web servers and clients.
18. MyInvois Portal
An online platform where suppliers can submit invoices and track payment status electronically. An online platform where buyers can manage received invoices and payments electronically.
WATCH: Step-by-step MyInvois Portal User Guide Videos by LHDN
19. MyInvois System
A digital platform tailored to support e-invoicing for businesses in Malaysia. It enables companies to generate, send, and manage invoices electronically, thus ensuring compliance with local tax regulations and enhancing operational efficiency.
20. PDF (Portable Document Format)
A widely-used file format for digital invoices that preserves the document’s layout and content.
21. PEPPOL (Pan-European Public Procurement Online)
A standardized framework for electronic invoicing that facilitates seamless and interoperable exchange of invoices between businesses. Managed by the Malaysian Digital Economy Corporation (MDEC), PEPPOL enables companies to connect through a secure network and is a key component of Malaysia’s national e-invoicing initiative.
22. QR Code
A machine-readable code included on e-invoices to facilitate quick access to invoice details and payment options.
23. Refund Note
A document that signifies a return of funds to a buyer, typically issued when a transaction is canceled or goods are returned.The refund note acknowledges the amount refunded and must be documented as an e-invoice to maintain compliance with e-invoicing regulations. This ensures that both the seller’s revenue and the buyer’s expenses are accurately recorded and reported to the Inland Revenue Board of Malaysia (IRBM).
24. Reimbursement
The process where a service provider incurs business expenses on behalf of a client and later seeks compensation for those expenses.
For example, if a consultant pays for travel costs while working on a project, they can issue an e-invoice to the client to recover those costs. This ensures that the expenses are documented and reimbursed properly
25. Sandbox
A testing environment provided by the Malaysian Inland Revenue Board (IRBM) where businesses can trial their integration with the MyInvois e-invoicing system.
This environment allows organizations to test how their internal systems connect with MyInvois using APIs, ensuring compatibility before full implementation. Access to the sandbox was initially limited to pilot companies but has since expanded to all businesses, facilitating a smoother transition to mandatory e-invoicing
26. SDK (Software Development Kit)
The e-Invoice Software Development Kit (SDK) is a comprehensive collection of tools, libraries, and resources providing a set of functionalities, Application Programming Interfaces (APIs), and development guidelines to assist businesses in integrating their existing system to the MyInvois System via API.
Visit Software Development Kit (SDK) Version 1.0 (updated on 28 June 2024) with the latest function of Digital Signature verification.
27. Self-Billing
Self-billing allows buyers to issue e-invoices on behalf of suppliers for specific transactions, effectively assuming the supplier’s role. This process is applicable for payments to agents, foreign suppliers, and other designated transactions often used in B2B transactions.
The buyer must submit the self-billed e-invoice to LHDN for validation, which then serves as proof of expense for tax purposes, streamlining compliance and record-keeping for both parties involved.
28. SST (Sales and Service Tax)
A consumption tax applied to goods and services, with a standard rate of 10% for goods and 6% for services. The tax is collected at each stage of the supply chain, ultimately borne by the final consumer.
29. Tax Code
A numerical or alphanumerical code used to categorize the type of tax applied to a transaction, essential for correct e-invoicing under SST regulations.
30. TIN (Tax Identification Number)
In Malaysia, the Tax Identification Number (TIN) is a unique identifier assigned to individuals and entities registered as taxpayers with the Inland Revenue Board (IRBM). It consists of a combination of letters and numbers and serves as a crucial identifier for tax purposes, facilitating compliance with tax laws and e-invoicing requirements. The TIN is mandatory for businesses to issue validated e-invoices.
READ MORE: How To Check And Get Your TIN
31. UBL (Universal Business Language)
The standard for defining electronic business documents like invoices. Its purpose is to simplify e-invoicing by providing a common format that can be easily exchanged between different accounting systems. UBL is designed to be extensible and customizable for specific industries and regions.
32. VAT (Value Added Tax)
Similar to GST, a consumption tax applicable in Malaysia until September 2018.
33. XML (eXtensible Markup Language)
A structured text-based format used to represent and share e-invoicing data electronically. Its strict syntax rules ensure that files are processed reliably by software, facilitating accurate data exchange between businesses and tax authorities in real-time transactions.
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