Malaysia Digital Economy Corporation (MDEC), an agency under the Ministry of Communications and Digital, is conducting engagement sessions with electronic invoicing service providers in preparation for mandatory electronic invoicing in the country.
The Malaysian government, like many others around the globe, is moving towards mandatory electronic invoicing (e-invoicing) to enhance tax administration and to improve the country’s invoicing efficiency. As many businesses and governments are already aware, the move towards digitalised, electronic processes streamlines operations, cuts costs and therefore improves the efficiency in which invoices are created, distributed, received and treated.
Let’s take a look at Malaysia’s proposed plans.
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 October 7, 2022, the implementation of e-invoicing should commence in stages from 2024, led by LHDN (Inland Revenue Board Of Malaysia).
Although the country’s plans are still subject to change, the MDEC has already put forward an obligation roll-out proposal, detailing which businesses would be in scope and when. A voluntary phase is expected to begin in January 2024 and the mandatory phases are envisaged as follows:
- 1 June 2024 - B2B mandatory (outbound and inbound) for businesses that reach a sales threshold of RM100 million or more per year.
- 1 January 2025 - B2B mandatory (outbound and inbound) for businesses that reach a sales threshold of RM50 million per year.
- 1 January 2026 - B2B mandatory (outbound and inbound) for businesses that reach a sales threshold of RM25 million per year and extension of the mandate to B2G transactions.
- 1 January 2027 - Mandatory for all businesses. B2C transactions are also in scope.
Even though the proposed roll-out takes place over three years, the initiative 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?
While there are still quite a few open questions and a lot of decisions to be taken, it is clear that MDEC has focused on a clearance model, where LHDN (Inland Revenue Board Of Malaysia) must validate the invoice in real-time, prior to it being sent to the end-recipient.
The clearance model is very popular around the world, used in countries such as Italy and Turkey. The model typically involves three parties - the seller, the government/tax authority and the buyer.
Before the buyer receives their invoice, the seller must first send it to the tax authority for clearance. This is usually carried out through a government portal designed by the tax authority, or via approved service providers. The tax authority checks, or “clears”, the invoice before allowing the buyer to receive it.
Such a model allows the tax authority to monitor the invoice in real-time and ensure both the buyer and seller will have the same invoice in hand. The process therefore provides the tax authority with complete visibility of economic activity.
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 LHDNM/MDEC, in order to help shape the country’s final plans. Therefore, we’re in the right place to keep you the most informed.
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