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:
- 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.
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.
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.