Malaysia is gearing up for its nationwide e-invoicing mandate. Businesses must brace themselves for a seismic shift in the country’s tax administration processes. The mandate applies to all commercial transactions by companies who offer goods and services, including B2C, B2B and B2G (business to consumer, business, and government, respectively).
The transition from traditional paper-based invoicing to e-invoicing is in line with the global trend of digitisation and automation in tax systems. It also reflects Malaysia’s commitment to embrace technology to drive economic growth and development.
The Government plans to implement the mandate in phases over 12 months, as follows:
- August 2024: Phase one applies to all taxpayers with annual turnover/revenue exceeding RM 100 million (approx. AUD $32 million).
- January 2025: Phase two applies to taxpayers with annual turnover/revenue of RM 25 to 100 million (approx. AUD $8-32 million).
- July 2025: Final phase applies to all remaining taxpayers, regardless of turnover/revenue amount.
As phase one of the implementation draws near, companies must grasp the scope of the guidelines and ensure compliance from the outset.
We explore the key aspects of Malaysia’s e-invoicing mandate and how companies can prepare for the upcoming changes.
What are the rules for Malaysia’s e-invoicing mandate?
E-invoicing will become mandatory for all businesses in Malaysia. This is part of the government’s plan to modernise tax administration. Not only will it improve the efficiency of tax collection, but it will also reduce the risks of tax evasion and fraud.
The Inland Revenue Board of Malaysia (IRBM) is the e-invoicing authority overseeing the implementation with its governance framework. Before sending an invoice to a buyer, companies will need to create and submit it to the IRBM. This applies to all invoices as well as credit, debit, and refund notes.
Enterprises will need to issue e-invoices for every transaction. Each invoice must be in a specified format (ie. XML and JSON) and comply with the Continuous Transaction Control (CTC) model. The CTC model allows for the tax authorities to receive and authenticate invoices in real-time.
For buyers who do not need an e-invoice, a standard receipt will suffice. In addition, officials, federal and state government agencies, statutory bodies, local authorities, and diplomatic missions are all exempted from the mandate.
How can companies prepare for the e-invoicing mandate?
To prepare for the e-invoicing mandates in Malaysia, companies need to take several important steps:
- Understand the mandate: Start by getting to know the requirements of the legislation. The IRBM have released software development kits and e-invoicing guidelines to help companies prepare.
- Assess system readiness: Ensure your company’s invoicing systems can generate electronic invoices in the required format. Develop a transition plan, which may involve upgrading existing software or implementing new e-invoicing solutions.
- Upskill staff: Does your team have the necessary knowledge and skills to execute the mandate? All employees responsible for invoicing and tax compliance need to understand the new e-invoicing requirements. Organise training for your team to ensure they can comply effectively.
- Communicate with suppliers and customers: Inform suppliers and customers of the changes. Ensure they are also prepared to transition to e-invoicing. Collaboration with trading partners is essential for a smooth transition to the new system.
How to get ready for e-invoicing in Malaysia?
Once e-invoicing becomes mandatory in Malaysia, maintaining compliance will be essential to avoid disciplinary action. Penalties for non-compliance may include fines or other regulatory sanctions imposed by the tax authorities.
Here are some compliance best practices:
- Stay updated: Keep abreast of any changes to Malaysia’s e-invoicing mandates. Also ensure that your company’s systems and processes remain compliant with the latest requirements.
- Monitor compliance: Regularly monitor your company’s invoicing processes to ensure they comply with Malaysia’s e-invoicing mandates. This may involve conducting internal audits or reviews to identify any areas of non-compliance.
- Engage with authorities: Maintain communication with tax authorities and regulatory bodies to address any questions related to e-invoicing compliance. Seek clarity on any ambiguous or unclear requirements to avoid unnecessary mistakes.
- Implement internal controls: Implementing internal guardrails can prevent errors or fraudulent activities in the invoicing process. This may include segregation of duties, authorisation procedures and regular reconciliation of invoicing data.
Leveraging the business benefits of e-invoicing
E-invoicing enables faster invoice processing and improved accuracy in tax reporting. This helps companies enhance their tax compliance while reducing administrative burdens.
It can also provide valuable data insights that can inform strategic decision-making and improve operational efficiency. With advanced analytics tools, companies can extract actionable insights from e-invoicing data. This includes identifying trends in purchasing behaviour or optimising cash flow management.
Related: May 2024: Pillar 2 Highlights
Successful implementation starts with the right e-invoicing solutions partner
As Malaysia transitions to the e-invoicing system, partnering with a reliable e-invoicing solution provider becomes indispensable. Thomson Reuters’ ONESOURCE e-invoicing solutions enable accounting teams to automate financial document flows seamlessly between ERP systems. It can issue, transmit, receive, and process all invoices in accordance with Malaysia’s e-invoicing and CTC regulations.
