E-invoicing has been officially implemented in Malaysia since 1 August 2024. Before its implementation, LHDN has multiple updates on e-invoicing guidelines and even a grace period is granted to taxpayers. Looking back to all these changes, it doesn’t change the main objective of LHDN, which is to move towards tax digitalization, improving tax compliance, and reducing the possibilities of tax fraud.
Since e-invoicing is officially implemented and is not going to stop as of now, the local businesses that have yet to implement e-invoicing still have to understand the framework and know how to implement it efficiently in their companies
What Does LHDN Mandate E-invoicing On?
For the unfamiliar, e-invoicing may come across as a complex or intimidating system. However, the opposite is actually true. Basically, the LHDN-mandated e-invoicing framework focuses on two areas: proof of income and proof of expense. This means that you will need to issue an e-invoice when you need to prove your income and expenses to LHDN.
Proof of income
Whenever a business generates a sale, it is required to issue an e-invoice as proof of income. Sales income indicates that a service has been performed or goods delivered to the customer or purchaser. Besides that, any other income generated from sources aside from your principal business activity is also required to issue an e-invoice by LHDN.
Proof of expense
To validate proof of expense, an e-invoice needs to be requested from the supplier whenever any goods are purchased or other expenses are incurred by the taxpayer. If there is a need to return goods or offer discounts, an e-invoice is issued in the form of a refund note or credit note to prove it. If the taxpayer has any transactions from foreign sellers, the taxpayer has to issue a self-billed e-invoice to prove the transactions took place.
4 Transactions Types That Require Issuing An E-invoice
#1: B2B (Business-to-Business) Transactions
B2B transactions are defined as an exchange of goods or services between 2 businesses. Follow the e-invoicing guidelines, if you are a sole proprietor business, you also fall within the category of businesses required to implement e-invoicing. In a B2B transaction, both seller and purchaser are required to issue an e-invoice to each party.
Example of B2B transactions:
- Company A, a manufacturing company, sells finished goods to Company B, a trading company.
- Company C, a property marketing agency provides advertising services to Company D, a property developer.
#2: B2C (Business-to-Consumer) Transactions
B2C transactions means sales of goods or services performed by a seller (business) directly to a customer/purchase. In a B2C transaction, the seller (business) is required to issue an e-invoice to the purchaser to prove the income. However, the consumer can opt to request an e-invoice from the seller (business) as the e-invoice is not compulsory for the consumer.
Example of B2C transactions:
Company A runs a retail shop selling products to customers. In this case, the customer can opt to obtain a normal receipt or request an e-invoice from the retail shop while Company A must submit a consolidated e-invoice or one e-invoice per transaction to LHDN.
#3: B2G (Business-to-Government) Transactions
B2G transactions refer to transactions with government-related companies, organizations, or agencies. The e-invoice flow mirrors that of B2B transactions, except for being under the B2G category.
#4: Cross border transactions
Cross-border transactions take place when there is an exchange of goods or services between the taxpayer in Malaysia and foreign suppliers or foreign buyers.
When dealing with foreign suppliers, the taxpayer as the buyer is required to issue a self-billed e-invoice to prove the expenses as the foreign supplier canot issue an e-invoice for the buyer to prove the expenses.
With a foreign buyer, the taxpayer plays the role of a seller and must issue an e-invoice to the foreign buyer to prove the income generated.
Who Needs to Comply with E-invoicing Requirements in Malaysia?
There are 14 categories of persons and entities on whom Malaysia’s e-invoicing requirements apply, namely:
- Association;
- Body of persons;
- Branch;
- Business trust;
- Co-operative societies;
- Corporations;
- Limited liability partnership;
- Partnership;
- Property trust fund;
- Property trust;
- Real estate investment trust;
- Representative office and regional office;
- Trust body; and
- Unit trust.
How to Implement e-Invoicing for Different Transaction Types
Choosing the Right e-Invoicing Platform
There are 2 methods to submit e-invoice for LHDN validation; namely through the MyInvois Portal or Application Programming Interface (API). It is recommended to choose the right e-invoicing platform according to your business size and cash flow.
- Via Myinvois Portal
As a FREE portal released by LHDN to facilitate a smoother implementation of e-invoicing for Malaysian taxpayers, the MyInvois Portal can be used by anyone. All it requires is a completed account registration, regardless of the business industry and business size. However, this method is recommended for small medium entities with low daily transactions or insufficient cash flow to invest in accounting software.
READ MORE: 13 User Guide Videos to Help You Master MyInvois Portal
- Via API
The API method enables businesses to conveniently transmit high-volume transactions directly from their accounting software into the MyInvois system. There are three methods to transmit e-invoice via API:
- Direct integration of taxpayers’ Enterprise Resource Planning (ERP) system with the Myinvois system
- Through Peppol technology providers
- Through non-Peppol technology providers
This method is recommended for businesses that process high-volume transactions daily and have existing accounting software. However, it’s crucial for companies using the API method need to have strong support from their software provider as these vendors bear the responsibility of ensuring all e-invoices transmit smoothly from the accounting software to the MyInvois system.
READ MORE: How To Implement E-invoice After 1 Aug
No matter which method the business takes, it is vital to provide e-invoicing training to all the staff so that e-invoice implementation can run smoothly and onboard at the soonest possible.
Are you feeling confused by the e-Invoicing system?
Or overwhelmed by the numerous challenges and difficulties as you implement this new policy?
We understand the complexity of the e-Invoicing system and recognize that implementing it can be particularly challenging for small and medium-sized enterprises (SMEs). To help SMEs fully grasp and adapt to this new policy, we’ve designed a comprehensive 4-hour online course that covers EVERYTHING you need to know to transition to e-invoicing with confidence.
Whether you’re new to e-Invoicing and eager to understand the system, or someone with some foundational knowledge seeking to deepen your understanding, our course offers in-depth and practical insights to help you tackle the challenges of this system.
What you’ll learn in the course:
1. E-Invoicing System Framework
We’ll help you understand the entire framework of the e-Invoicing system, including its operational logic and key implementation points, so you can better adapt your business setup to e-Invoicing.
2. How It Works
We’ll explain the working principles of the e-Invoicing system, covering every step from generation and transmission to receipt, validation, storage, and management of electronic invoices. We’ll also demonstrate how to generate a compliant electronic invoice using accounting software.
3. Impact on Businesses
We’ll discuss the impact of e-Invoicing on businesses, from the responsibilities of business owners to what department managers and employees need to understand. We aim to clarify that implementing e-Invoicing is not solely the responsibility of the business owner but involves everyone in the company.
4. Policy Changes and Response
We’ll keep you updated on all e-Invoicing guidelines changes and provide the latest information and response strategies that you can apply into various scenarios within your business.
5. System Tools and Training
We’ll introduce you to various e-Invoicing systems and accounting software available in the market and provide insights into related training content. You’ll be equipped to decide which e-Invoicing system/software best suits your business needs to reduce costs and improve efficiency.
6. Q&A Session
If you have any questions or concerns that require professional answers, our expert instructors will address them at the end of the course.
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Course Details:
📌 e-Invoicing online workshop (#Chinese)：
Date: 29/10/2024 (Tuesday)
Time: 9:30am – 4:00pm
📌 e-Invoicing online workshop (#English)：
Date: 30/10/2024 (Wednesday)
Time: 9:30am – 4:00pm
🎟 Workshop Fee：
Bispoint Customer – FREE
Enlliance Member – FREE
Non-Customers (Early Bird): 1pax (RM180); 3pax (RM400)
Non-Customers (After 23 October, Regular Price) – 1pax (RM200)
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