e-Invoicing Implementation in Malaysia

With the finalization of implementation for e-invoicing, Malaysia is now months away from digitizing, automating, and streamlining the time-consuming process of traditional invoicing. It will allow the country to join the ranks of countries like Japan, India, the US, and Australia.

By replacing paper with digital, e-invoicing in Malaysia will enable businesses to increase data security, accelerate invoice generation and cancellation, avoid disputes caused by manual errors, and improve cash flows.

While the benefits of e-invoicing are numerous, it also has challenges in implementation, integration, and transition from traditional to electronic invoicing.

Luckily, the invoicing authority in Malaysia (the Inland Revenue Board of Malaysia - IRBM) is implementing the e-invoicing mandate for a select few industries, namely Business to Business (B2B), Business-to-Customer (B2C), and business-to-government (B2G).

Who is Required to Implement e-Invoicing in Malaysia?

All commercial activities in the country including the sale of goods and services fall under the authority of the e-invoicing mandate in Malaysia.

Business-to-Business (B2B)

E-invoicing in Malaysia will apply to all business-to-business transactions, helping them ensure faster payments, hassle-free invoicing, and better operational efficiency via B2B invoicing.

Multiple B2B companies will be affected by this “Malaysia e-invoicing 2024” initiative, including but not limited to:

1. Software-as-a service (SaaS)
2. Marketing Firms
3. Variety of Independent Suppliers
4. Manufacturing
5. Construction
6. Retail & Wholesale
7. Telecommunications
8. Engineering

Using a powerful and Peppol-certified B2B invoicing software is the ideal solution for a smooth transition to electronic invoicing. It can enable easy B2B API integration for a faster invoicing process.

Business-to-Customer (B2C)

The business-to-customer is the next major sector that e-invoicing in Malaysia will impact.

In B2C, sellers that provide goods and services to individual customers on a daily basis can generate e-invoices, but they are not obligated to do so. According to IRB guidelines, it is acceptable for sellers to provide traditional invoices or receipts for B2C transactions.

However, sellers are obligated to aggregate all the issued invoices and receipts for generating a consolidated e-invoice after a certain period.

5 types of B2C businesses that will be directly affected by the e-invoicing in Malaysia LHDN initiative :

1. Advertising-based Retailers
2. Community-based Retailers
3. Online Intermediaries
4. Fee-based Retailers
5. Direct Sellers

As a result, many B2C companies will need to monitor and implement the e-invoicing mandate, including but not limited to :

1. Retail Shops
2. Shopping Mall
3. Hotels & Restaurants
4. Video Streaming Companies
5. Smartphone Companies
6. Electronics Store
7. Furniture Store
8. Marketplace Websites (For example, Amazon)

Business to Government (B2G)

Business-to-Government (B2G) transactions in Malaysia will also need to be in compliance with the e-invoicing standards set by the IRB.

While B2G transactions are similar to B2B transactions, the key difference is that these transactions take place for the sale of goods or services between businesses and government establishments/organizations.

Multiple B2G companies in Malaysia will need to prepare for and implement e-invoicing practices to maintain operational stability, including but not limited to :

1. Software-as-a service (SaaS)
2. Marketing Firms
3. Variety of Independent Suppliers
4. Manufacturing
5. Construction
6. Retail & Wholesale
7. Cybersecurity
8. Engineering

Other - Self-billed E-Invoices

These are scenarios where someone else besides the supplier (For example, the buyer) is given permission or is obligated to issue a self-billed e-invoice. Malaysia’s IRB requires this individual to submit the e-invoice to the MyInvois portal for validation.

These self-billed e-invoices help streamline multiple types of transactions between buyers and sellers, helping ensure 100% compliance and transparency.

Additionally, some key taxpayers/individuals/legal entities that will fall under the e-invoicing in Malaysia mandate are :

1. Association
2. Body of Persons
3. Branch
4. Business Trust
5. Co-Operative Societies
6. Corporations
7. Limited Liability Partnership
8. Partnership
9. Property Trust Fund
10. Property Trust
11. Real Estate Investment Trust
12. Representative Office and Regional Office
13. Trust Body
14. Unit Trust

2 Mandatory Reasons For e-Invoicing in Malaysia

Let’s look into the reasons for which the e-invoices must be issued as determined by the Lembaga Hasil Dalam Negeri Malaysia.

Proof of Income

It is mandatory to issue e-invoices if and when your business supplies goods or services to a recipient. It allows the government to accurately track sales and revenue.

It may also be required to document "other transactions" that include earnings, but the IRBM/Lembaga Hasil Dalam Negeri Malaysia has not issued specific guidelines for such transactions as of yet.

Proof of Expenses

It’s necessary to generate e-invoices for documenting purchases, expenses, returns, or discounts. For example, every purchase of a product or service requires the business to issue an e-invoice.

It enables better record-keeping of the expenses incurred by the taxpayer, including discounts offered to customers.

Additionally, self-billed invoicing is necessary to record the expense if the transaction takes place between a Malaysian recipient and a foreign seller.

Parties/Individuals That Are Exempted from E-Invoicing in Malaysia

Below are the various parties and individuals in Malaysia that are exempt from e-invoicing, including the generation of self-billed e-invoices :

1. Ruler and Ruling Chief
2. Former Ruler and Ruling Chief
3. Consort of a Ruler of a State having the title of Raja Perempuan, Sultanah, Tengku Ampuan, Raja
4. Permaisuri, Tengku Permaisuri or Permaisuri
5. Consort of a Former Ruler of a State previously having the title of Raja Perempuan, Sultanah, Tengku
6. Ampuan, Raja Permaisuri, Tengku Permaisuri or Permaisuri
7. Government
8. State Government and State Authority
9. Government Authority
10. Local Authority
11. Statutory Authority and Statutory Body
12. Facilities provided by the above Government or Authority (For example, hospitals, clinics, or multipurpose halls)
13. Consular Offices, Diplomatic Officers, Consular Officers, and Consular Employees

E-invoices, including self-billed e-invoices, are also not required for the types of income or expense mentioned below :

1. Employment Income
2. Pension
3. Alimony
4. Zakat
5. Scholarship
   

The Malaysian Tax Authority (Inland Revenue Board) will review and update this list if and when deemed necessary.

Additionally, certain regulations apply to these exemptions, which you can learn below :

• Suppliers providing goods or services to those mentioned in the lists above must issue e-invoices according to the specified timeline.
• For transactions involving numbers 1, 2, 3, 4, and 13 individuals/parties from the list, suppliers may replace buyer details as per guidelines.
• For transactions involving numbers 7, 8, 9, 10, 11 12 individuals/parties from the list, suppliers are allowed to use a general Tax Identification Number (TIN) in the Buyer’s TIN field as per guidelines.
• The exemptions in the list only apply to individuals/parties, entities owned by them such as companies or partnerships are subject to e-invoicing regulations.
• Regardless of exemptions, all listed individuals/parties are encouraged to implement e-invoicing to support the Malaysian government's digital initiatives

  
  

E-Invoicing Implementation Timeline in Malaysia

To give businesses some time to understand and adopt e-invoicing, the Inland Revenue Board of Malaysia (IRBM) postponed the e-invoice implementation date in October 2023

Now, the IRBM/Malaysian Digital Economy Corporation (MDEC) and the Malaysian government are using a phased approach to implement e-invoicing in Malaysia.

It is intended to make the transition easier for all small, medium, and large businesses.

Beginning on 1st August 2024, the implementation of e-invoice in Malaysia is estimated to be completed within 2 to 3 years, ending on 1st July 2025.

Refer to the table below for the timeline :

Conclusion

With e-invoicing in Malaysia, all B2B, B2C, and B2G businesses have enough time to prepare their business and plan e-invoicing implementation strategies until 1st August 2024. Since the methods provided by IRB include the MyInvois portal or API integration, businesses must carefully evaluate the option that suits their needs the best.

How can GST Hero help with e-Invoicing in Malaysia?

GSTHero is one of the best electronic invoicing software in Malaysia, connecting your ERP/POS system with the IRBM cloud without any hassles to ensure compliance.

The key features of GSTHero e-invoicing include :

Individual Support to Prevent Technological Obstacles

You get support from a certified expert who will provide step-by-step guidance for e-invoicing in Malaysia through GST Hero and help you meet all compliance standards.

Easy ERP Integration

GSTHero facilitates quick integration with multiple ERPs like SAP, Tally, Oracle, Microsoft, and Custom ERPs to ensure compliance faster.

Bulk Generation

GST Hero has a processing speed of 8 million records in 40 minutes, helping you generate bulk invoices within minutes.

Tested Automation Solution

With GST Hero’s automation, you can expect better speed (operational efficiency), accuracy, and prevention of all manual errors.

Faster Generation and Cancellation

You can rapidly generate and cancel e-invoices with a single click.

100% Compliance with IRBM Regulations
The e-invoicing solutions are 100% compliant with IRBM’s regulations for e-invoicing in Malaysia.

GSTHero is a reliable partner in your journey towards effortless e-invoicing and compliance in Malaysia.