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Compliance and Regulations

Malaysia: Mandatory e-invoicing and e-reporting on the horizon

November 20, 2023
9:00 am

The Malaysian government, like many others around the globe, is moving towards mandatory electronic invoicing to enhance tax administration and to improve the country’s invoicing efficiency.

The Malaysia Digital Economy Corporation (MDEC), an agency under the Ministry of Communications and Digital, conducted engagement sessions earlier in the year to discuss their path towards mandatory electronic invoicing. The sessions included discussions with service providers in preparation for mandatory electronic invoicing (e-invoicing) in the country.

The Inland Revenue Board Malaysia (MLHDN) recently published the e-invoice guideline which addresses the country’s scope of implementation. The guide provides businesses with step-by-step guidance, practical examples, taxpayer readiness guidance and also addresses common questions and concerns.

Let’s take a brief look at the guidelines and the details involved.

When will mandatory e-invoicing begin and which businesses will be in scope?

As part of the Budget 2023 presented by the Malaysian Finance Minister on the 7th of October 2022 and confirmed in the recently published guideline, the e-invoicing implementation should commence in stages from 2024.

It will be led by MLHDN and take into account the following turnover or revenue thresholds:

  • 1 August 2024 - Taxpayers with an annual turnover or revenue of more than RM100 million
  • 1 January 2025 - Taxpayers with an annual turnover or revenue of more than RM25 million and up to RM100 million
  • 1 July 2025 - All taxpayers

The annual turnover will be based on the financial year or year of assessment 2022, with subsequent changes in turnover or revenue not affecting the implementation obligations. Earlier voluntary participation is possible regardless of annual turnover or revenue.

The e-invoice system covers various transaction types including B2B, B2C and B2G. Both B2G and B2B transactions will have a similar e-invoicing flow. The types of e-invoices to be issued include invoices, credit notes, debit notes and refunds. The refund e-invoice confirms the refund of the buyer's payment, typically used in return situations.

The roll-out takes place for about a year, which already shows the country’s commitment towards mandatory electronic invoicing. Many governments around the world have begun, or will begin, their e-invoicing journey but many have not detailed a plan that covers B2G, B2B and B2C invoices. Malaysia's proposal shows that the Southeast Asian country may already be ahead of the curve.

Getting into the details: Which model can we expect to see?

According to the latest e-invoicing development guide and information disclosed by MLHDN, the e-invoicing model of choice is the clearance model.

The MLHDN must validate the invoice in real-time prior to it being sent to the end-recipient. This will include the mandatory issuance of e-invoices for businesses conducting sales transactions and certain cases where services are acquired from foreign suppliers (self-issuing invoices). E-invoices will require the provision of 53 data fields, including the Tax Identification Number which must be pre-validated for accuracy and invoice clearance.

Before the buyer receives their invoice, the seller must first send it to the tax authority for clearance. In Malaysia, this will be possible via the MyInvois Portal or via an API.

MLHDN will check, or “clear”, the e-invoice before returning it to the supplier who is then required to share the cleared invoice with the buyer. According to the published guideline, the supplier or buyer can cancel or reject the e-invoice within 72 hours via the MyInvois Portal, providing justifications for their action.

The MyInvois Portal provides e-invoice data access to both suppliers and buyers, enabling them to request and retrieve information from MLHDN. This system aims to streamline invoicing processes and enhance transparency in tax-related transactions in Malaysia.

Adopting Peppol as interoperability standard between businesses

MDEC recently announced that they became a Peppol Authority. In its capacity as a Peppol Authority, MDEC is responsible for accrediting Peppol service providers and Peppol-ready solution providers in Malaysia. It defines local requirements and technical standards, oversees compliance with the overall Peppol framework, and advocates for the widespread adoption of e-invoicing in the Malaysian business landscape.

Ensuring the Integrity and Authenticity of the Documents

Digital certificates issued by MLHDN aim to guarantee the origin of the submitted data as well as the reliability and trustworthiness of the signed content.

The next steps: Ensuring you stay up to date

Staying up to date with the latest e-invoicing and tax compliance mandates around the world can be challenging, especially when no country, model or e-invoicing format is the same.

Which is why we are here to help!

Unifiedpost Group is actively involved in Malaysia's e-invoicing discussions with MLHDN, in order to help shape the country’s final plans. Therefore, we’re in the right place to keep you the most informed.

To stay informed, sign-up to our tax compliance newsletter for monthly updates and follow us on LinkedIn for even more news in real-time.

Details correct as of the publishing date. For the most up to date regulations, view Malaysia's e-invoicing regulations information.

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