The Malaysian government took note of the global shift towards e-invoicing and reaffirmed its commitment to digitizing tax administrative processes through the adoption of e-invoicing, as outlined in the 2023 Pre-Budget statement by the Ministry of Finance.
Subsequently, in October 2023, the Inland Revenue Board of Malaysia (IRBM) announced a postponement of the e-invoicing initiative, with a gradual implementation plan starting from August 1, 2024.
This article provides an overview of e-invoicing in Malaysia, covering its definition, rationale for implementation, implementation timeline, types of transactions affected, its scope, and other relevant details.
What Is An E-invoice?
An e-Invoice is a digital file formatted according to specifications set by LHDN, enabling automated processing by associated systems. It serves as a digital record confirming a transaction between a seller and a buyer. This digital format substitutes paper documents and other electronic formats like images, PDFs, and Excel files, encompassing invoices, credit notes, debit notes, or invoices in unspecified formats.
What an E-Invoice is and isn’t
In Malaysia, a valid e-Invoice must comprise 53 mandatory fields which includes crucial information such as seller and buyer particulars, item descriptions, quantities, prices, taxes, total amounts, payment specifics, and more.
E-Invoicing Implementation Timeline in Malaysia
LHDN intends to roll out e-Invoicing gradually in stages to ensure a seamless transition. Here is the timeline for the implementation of e-invoicing in Malaysia:
| Phase | Company Annual Turnover | Implementation Date* |
| 1 | > RM 100 million and above | 1 August 2024 |
| 2 | > RM 25 million and above | 1 January 2025 |
| 3 | All taxpayers | 1 July 2025 |
Implementation is compulsory for all companies that fall within each stage. Presently, the Malaysian government is focused only on implementation for B2B businesses, and will move on to B2C businesses after things run smoothly for the former.
Moreover, in its continuously updated e-Invoice Guidelines, LHDN outlines the process for determining the annual turnover or revenue to be taken into account for e-invoice implementation:
| Scenario | Annual Turnover Consideration |
| Businesses with audited financial statements | Annual turnover or revenue reported in the financial statements for the financial year 2022 |
| Businesses without audited financial statements | Annual revenue reported in the tax return for the year of assessment 2022 |
| In the scenario is a change of accounting year end for financial year 2022 | Turnover or revenue will be pro-rated to 12 months to determine the e-Invoice applicable date |
What is the Process Flow of E-Invoice in Malaysia?
In a nutshell, every time a transaction occurs, the supplier creates an e-Invoice and sends it to LHDN either through the MyInvois portal or e-Invoicing software by way of an API.
Next, the invoice gets validated by LHDN and is notified to the supplier and buyer.
Once validated, it becomes the duty of the supplier to share the e-Invoice embedded with QR code to the buyer.
Typical process flow of e-Invoice in Malaysia
4 Types of E-Invoices in Malaysia
The below documents must be issued in electronic format under Malaysia’s e-Invoice system:
- Invoices: It is generally used to itemise and record transactions between supplier and buyer. Invoices also include a self-billed invoice issued for tracking expenses.
- Credit notes: A credit note is a document issued by sellers to make corrections to an e-Invoice issued previously mainly to lower the original invoice’s value without returning money to the Buyer. It is generally used to adjust errors, apply discounts, or account for returned items.
- Debit notes: In contrast to credit notes, debit notes are issued to record additional costs related to a previously issued e-Invoice.
- Refund notes: A refund e-Invoice is an official document issued by a Seller to record refund issued to the Buyer. This is used in situations where there is a return of monies to the Buyer.
Transactions Covered Under The Malaysian E-Invoice System
The adoption of e-Invoicing will impact various transaction types, including Business to Business (B2B), Business to Customer (B2C), and Business to Government (B2G). Notably, the e-invoice process for B2G transactions mirrors that of B2B.
The e-Invoice mandate extends to all commercial activities in Malaysia, spanning the sale of goods and services as well as specified non-business transactions among individuals.
For B2C transactions, sellers are not obligated to provide e-invoices directly to end consumers. Instead, they may issue standard invoices or receipts. Subsequently, within a specified timeframe, sellers should compile all standard invoices or receipts and issue a consolidated e-invoice.
How To Report E-Invoices in Malaysia?
In Malaysia, companies can choose between two approved transmission mechanism to report e-invoices:
- MyInvois Portal hosted by IRBM: The MyInvois Portal can be accessed by all businesses. However, this portal is only suitable for a small volume of data and is feasible for Micro, Small, and Medium-sized Enterprises (MSMEs).
OR
- Application Programming Interface (API): API in either XML or JSON format. Adoption of API requires an investment in technology and modifications to the current systems. However, this is the ideal e-invoice generation mode for large businesses with a huge volume of transactions
Who Is The E-Invoice Authority in Malaysia?
The Inland Revenue Board of Malaysia (IRBM) is the authority that oversees the entire scope of activities related to e-Invoice adoption in the country. For a start, it has issued a detailed guideline in July 2023 addressing key concepts such as:
- Implementation methodology
- Impact on compliance
- Record keeping
- Commonly asked questions and concerns
Moving Forward with E-Invoicing
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