Update: 23 February 2024 by Carolina Silva
Changes to Malaysia’s CTC E-invoice Reporting Mandate Announced
On 9 February 2024, the Inland Revenue Board of Malaysia (IRBM) published long-awaited updates on the upcoming continuous transaction controls (CTC) reform. More specifically, the IRBM has released its Software Development Kit (SDK), along with new versions of the e-invoicing and e-invoicing specific guidelines containing significant changes to the CTC mandate beginning in August 2024.
Updates to CTC e-invoice reporting mandate
The new versions of the e-invoicing documentation define the scope of sectors and transactions subject to mandatory e-invoicing and clearance through the IRBM platform, MyInvois.
Sectors in scope are:
- Automotive
- Aviation
- Luxury goods and jewellery
- Construction
- Licensed betting and gaming
- Payments to agents, dealers and distributors
Transactions with individual buyers (B2C) fall outside of the e-invoicing mandate scope. Any e-invoices for transactions not in scope are subject to the buyer’s request.
Consolidated e-invoice requirement
In cases where the buyer does not request an e-invoice, suppliers can continue to issue an invoice or receipt as they do today. Initially, this exception was only foreseen for B2C transactions, but has now been extended to all transactions besides the ones included in the mandatory e-invoice scope.
However, suppliers will be subject to an invoice data reporting obligation and will be required to issue a monthly consolidated e-invoice (within 7 days of the month end) aggregating all invoices and receipts issued during the period.
Cross-border transactions
Another scenario clarified by the IRBM is the treatment of cross-border transactions under the Malaysian CTC e-invoice reporting mandate.
Foreign parties are not mandated to implement Malaysia’s CTC system but Malaysian buyers must issue a self-billed e-invoice to document the expense. This should be in the same structured XML or JSON format and submitted to the MyInvois platform, similar to a reporting obligation for cross-border transactions.
Rejections and cancellations
The Malaysian CTC system will allow buyers to reject incoming invoices in their e-invoicing flows, as well as allowing suppliers to issue cancellations. These requests are subject to a 72 hour time limit, after that the invoice is considered issued and any correction or amendment will need to be through credit, debit or refund notes.
According to the IRBM, these functionalities were added solely for the convenience of the parties. Corrections can still be done through credit, debit or refund invoices if the supplier prefers.
Additionally, the new documentation has also clarified and explained how self-billing should be handled under the CTC e-invoice reporting mandate scope, as well as specific transactions such as reimbursements, employment benefits, profit distributions, foreign income and e-commerce transactions.
Want help with e-invoicing in Malaysia? Contact our team of experts today.
Update: 29 November 2023 by Carolina Silva
Timeline Changes Proposed for E-Invoicing in Malaysia
The Malaysian 2024 Budget law, which is currently pending parliamentary approval, introduces changes to the implementation timeline of mandatory e-invoicing in the country.
According to the new budget law, implementation of electronic invoicing will be delayed and start for taxpayers with an annual turnover of revenue of more than RM100 million (appx. 20 million euros) on 1 August 2024 – instead of the original planned date of June 2024.
The implementation timeline included in the e-invoicing guidelines was updated at the end of October 2023, and the Malaysian tax authority has shared a new phased timeline:
- August 2024: Taxpayers with an annual turnover or revenue of more than RM100 million
- January 2025: Taxpayers with an annual turnover or revenue between RM25 million and RM100 million
- July 2025: All taxpayers
This proposal offers more time for taxpayers to prepare for the new e-invoicing mandate, although these postponements are not significant. Taxpayers in the first implementation group should start preparing imminently for the new e-invoicing system in order to comply by August 2024.
Currently, the IRBM is set to release a software development kit including the relevant technical documentation by the end of 2023.
Interested in finding out more about e-invoicing’s global rise? Read our dedicated E-invoicing Guide.
Update: 25 July 2023 by Enis Gencer
E-Invoicing in Malaysia Explained
In October 2022, the Malaysian Ministry of Finance announced in its state budget plans to launch a pilot e-invoicing program in 2023 – starting with selected taxpayers.
The budget statement views e-invoices as the main strategy to improve the country’s tax revenue and digital services infrastructure. The Inland Revenue Board of Malaysia (IRBM) and the Malaysian Digital Economy Corporation (MDEC) have been working on the e-invoicing project to meet this goal. They have organised engagement sessions with stakeholders to share details regarding the project.
Following the engagement sessions, the IRBM has published a guideline regarding the implementation details of the upcoming e-invoicing system. The Malaysian e-invoicing system will be a CTC clearance model scheduled to begin in June 2024, with approximately 4,000 companies exceeding the determined threshold.
Read this blog for more information about e-invoicing in Asia.
Scope of the Malaysian e-invoicing mandate
The new e-invoicing system, called MyInvois, will require all taxpayers engaged in commercial activities to issue invoices electronically in Malaysia. This applies to all individuals and organisations including, but not limited to, associations, corporations and limited liability partnerships.
The transactional scope of the requirements covers all B2B, B2G and B2C transactions – both domestic and cross-border.
The following will be subject to e-invoicing:
- Invoices
- Credit notes
- Debit notes
- Refund invoices
A separate guideline will provide further details on the treatment of cross-border transactions.
B2B and B2G e-invoicing will follow a similar workflow, as described below.
For B2C transactions where end consumers do not request e-invoices, suppliers will be allowed to issue receipts or invoices as per the current practices. However, taxpayers must aggregate the receipts or invoices issued to consumers and report them through the e-invoicing system within a set timeframe.
How will businesses issue e-invoices?
To generate e-invoices, taxpayers must use the MyInvois platform through the free solution provided by IRBM or via APIs. The authentication with the platform is based on digital certificates issued by IRBM.
Taxpayers must create and submit their e-invoices in either XML or JSON format to the MyInvois platform. After successful submission, the platform performs schema checks and assigns a unique ID to each e-invoice.
It’s important to understand that the exchange of e-invoices will not be handled by the MyInvois platform. Instead, suppliers will be responsible for including the validation link provided by IRBM, in the form of a QR Code, on the e-invoice and sending it to buyers. Buyers will utilise this QR Code to validate the existence and status of the e-invoice via the MyInvois platform.
Key requirements for Malaysia’s e-invoicing system
- The guideline defines an e-invoice as a file created in the format specified by IRBM (XML and JSON) that the relevant accounting systems can automatically process. This means PDFs, JPGs or other electronic formats will no longer be considered an e-invoice.
- A key component of the new e-invoicing system is the validation of the customers’ Tax Identification Number (TIN), which the issuer should validate before issuing the invoice.
- Taxpayers will be able to request and retrieve essential invoice data from the MyInvois platform in certain formats through API integration.
- IRBM will store all e-invoices. However, this doesn’t exempt taxpayers from maintaining their records during the storage period.
- Certain non-business transactions between individual taxpayers will also be subject to e-invoicing requirements.
- Currently, no registration or certification is required for service providers but this may change in the future.
- Cancellation and rejection of e-invoices will be performed through the MyInvois system within 72 hours following the clearance process.
- While the guideline does not explicitly mention PEPPOL, efforts are being made to establish a PEPPOL Authority in the country.
Implementation Timeline
The roll-out of the mandate will follow this schedule:
- From June 2024: Mandatory implementation for taxpayers with an annual turnover or revenue of more than RM100 million (appx. 20 million Euros)
- From January 2025: Mandatory implementation for taxpayers with an annual turnover or revenue of more than RM50 million
- From January 2026: Mandatory implementation for taxpayers with an annual turnover or revenue of more than RM25 million
- From January 2027: Mandatory implementation for all businesses
The annual turnover or revenue will be based on audited financial statements or tax returns from 2022. Once a taxpayer’s implementation timeline has been set using the 2022 financial statements, any subsequent changes to their annual turnover or revenue will not impact their go-live date.
What’s next?
With more detailed information now available about the implementation of e-invoicing in Malaysia, taxpayers must begin preparing their systems for the upcoming changes.
In Q4 2023, the IRBM is set to release a Software Development Kit including the relevant technical documentation and APIs. Furthermore, additional guidance on certain aspects of the implementation and anticipated legislative changes are expected in due course.
Looking for further information on e-invoicing in Malaysia? Contact our expert team.
