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19 JUN 2024
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E-Invoice for Staff Claims, Perquisite and Benefit-in-kind

Post title 'E-Invoice for Employee Expenses' on green banner overlaying background image of staff at company dinner

What is Defined as Staff Claims?

Staff claims as a company’s expenses refer to reimbursements made to employees for work-related costs they have personally incurred while performing their duties. These expenses encompass a wide range of costs, such as travel, meals, accommodation, office supplies, professional development, client entertainment, communication, and work clothing. 

  • For instance, travel expenses include transportation costs like airfare, train tickets, car rentals, and mileage for personal vehicle use, as well as accommodation costs for hotel stays and daily allowances for meals and incidentals during business trips. 
  • Office supplies and equipment cover reimbursements for necessary items like stationery, printer ink, laptops, and mobile phones, while professional development costs might include fees for attending conferences, workshops, and obtaining certifications.
  • Client entertainment and business meals are also common staff claims, including expenses for meals and hospitality provided to clients and partners during business meetings. 
  • Communication costs may involve reimbursements for mobile phone and internet service expenses used for business purposes, as well as postage and courier services for mailing business documents. 
  • Companies may also reimburse employees for the purchase, cleaning, and maintenance of required uniforms and protective gear necessary for certain job roles.

New e-Invoice Process for Staff Claims

With e-Invoicing in place, nearly all expenses now require supporting documentation in the form of a legitimate e-Invoice. Failure to obtain or provide a proper e-Invoice can result in the expense being disqualified for a tax deduction, which may lead to higher tax liabilities for the business. Many are currently uncertain about the specifics of what is required, when and where it is needed, who is responsible, and how to comply with these new regulations, and we aim to address those questions in this article. 

The Scenario:

For a Seller to issue an E-Invoice, they need the customer’s or client’s information, including their name, address, and most importantly, their Tax Identification Number (TIN). Without this information, the Seller cannot issue an e-Invoice and must instead issue a Consolidated Invoice. While a Consolidated Invoice records business revenue, it does not qualify the consumer for any tax deductions. There is an alternative method that combines issuing both a Consolidated Invoice and an E-Invoice.

The Solution: 

The solution to the above scenario is inside the guideline provided in Inland Revenue Board’s (LHDN’s) e-Invoice Specific Guideline (Figure 3.8). See the following diagram for an illustration of the some of the methods for Suppliers to issue e-Invoice to Buyers, be it on the spot or post transaction: 

Overview of methods for Suppliers to issue e-Invoice to Buyers

(Source: LHDN Malaysia)

Firstly, employees do not need to request the e-Invoice immediately (if they cannot remember their company’s details). Instead, they can initially request a Consolidated Invoice. After obtaining the Consolidated Invoice, the employee can subsequently request the E-Invoice, and this does not need to occur on the same day. Employees can even compile multiple invoices from the same seller for different purchases and request the E-Invoice for all of them at once, provided this is done before the seventh (7th) day of the following month in which the expenses incurred.

According to the guidelines provided by LHDN on the aforementioned matters, businesses are permitted to utilize e-Invoices issued in the name of the employee or existing supporting documents issued by the supplier to validate specific transactions as proof of expenses for tax purposes. This alternative method is recognized by LHDN. However, in cases where the seller is not based in or from Malaysia, and the transaction involves the import of goods or services, a Self-Bill invoice is not required. This applies irrespective of whether the employee was in Malaysia at the time of purchase or not.

In Summary:

Below is a summary of the above for a better understanding of E-Invoice for staff claims: 

Illustration of disbursement and reimbursement process via e-invoicing between suppliers and buyers

(Source: LHDN Malaysia)

Proof of Expense Also Required for Employment Perquisite and Benefit-in-kind 

An individual under a contract of service (i.e., employment) may be provided with employee benefits by his/her employer. Such perks may include benefits in cash or in kind that are received by an employee from the employer or third parties in respect of having or exercising the employment, such as:

  • Employees’ pecuniary liabilities (e.g., utility bills, parking fees, and car maintenance charges)
  • Club membership
  • Gym membership
  • Professional subscriptions
  • Allowances (e.g., traveling allowance, petrol allowance or toll rate, parking rate/ allowance, meal allowance)

Employees who are permitted to claim such expenses from their employer must provide proof of authenticity with supporting documents (e.g., bills, receipts, invoices, statements, payment slips, etc.). Consequently, the expenses claimed by employees are recorded as the employer’s expense and reported for tax purposes.

Potential Challenges & LHDN’s Concession:

With the implementation of e-Invoicing, employees are required, whenever possible, to request e-Invoices be issued in their employer’s name upon concluding a sale or transaction to validate the expense. LHDN acknowledges the potential challenges in having e-Invoices issued in the employer’s name (as Buyer). Therefore, LHDN has offered the following concession:

  1. Businesses will be allowed to proceed with the use of e-Invoice issued in the name of the employee or existing supporting document issued by the Supplier to support the particular transactions as proof of expense for tax purposes.
  1. In the event where payment in relation to perquisite and benefit is made to foreign suppliers, both employer and employee are not required to issue a self-billed e-Invoice. As such, LHDN will accept the foreign supplier’s receipts/ bills/ invoices as a proof of expense.

This exception will only be applicable if the perquisites and benefits are clearly stated in the employer’s policy.

Table of concessions for e-invoice issuance to employees relating to employment perquisites, benefits and expenses incurred on behalf of employer

(Source: LHDN Malaysia)

FAQs

What documentation or information is required for staff claims via e-invoice? 

For staff claims via e-invoice, several key documents and pieces of information are required. Firstly, employees need to fill out a claim form detailing their expenses, including dates, descriptions, and amounts. They must also provide original receipts or invoices that clearly show the vendor, date, amount, and nature of each expense.

Each expense should include a brief explanation of how it relates to company business. All claims must comply with company policies on spending limits and allowable expenses. Specific details for the e-invoice system, such as unique identifiers or digital signatures, should be included. If expenses were in a foreign currency, documentation of the exchange rate used for conversion is also required.

When and where is this information required?

In general, claims are to be submitted by the end of each respective month as when the expenses are incurred to the human resources (HR) department or the accounting department.

Who is responsible for ensuring an employee’s expenses are properly accounted for to qualify for tax deductions? 

Manager or supervisor approval is often needed before the claim can be processed, and this can be done digitally. Information about which cost center or account to charge the expense to is necessary for accurate accounting.

Moving forward with E-Invoicing in Malaysia

Stay up to date with Bispoint as we navigate this pivotal change towards e-Invoicing in Malaysia together: 

Speak to any of our experienced tax consultants for tailored advice and assistance for your business.

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TAGS :e-invoicestaff claims