In today’s digital era, traditional paper-based invoicing is gradually making way for its more efficient counterpart – electronic invoicing or e-invoicing. With this in mind, Malaysia’s Ministry of Finance has announced in the 2023 Pre-Budget statement that Malaysia will start to embrace e-invoice initiative as a means to digitize tax administration activities and enhance efficiency in financial transactions.
And of course, at the infant stage of the e-invoicing implementation, there arise many questions surrounding how businesses should go about e-invoicing. This article will provide you an insider view into what e-invoicing entails, why it’s necessary, and how Malaysian businesses can prepare for its implementation.
What Is E-Invoicing?
Why Is E-Invoice Is Required?
- Enhancement in operational efficiency by reducing manual efforts, processing time, and costs.
- Improvement in tax reporting accuracy to combat tax evasion and fraud.
- Digitalization of tax and financial reporting processes in accordance with industry standards.
Process Flow of E-Invoice
Step 1: Issuance of e-Invoice
Suppliers need to create e-invoices for transactions and submit them to the IRBM through the Myinvois Portal or API.
Step 2: Validation of e-Invoice
IRBM validates the e-invoice data in real-time to ensure compliance with standards. Suppliers receive a Unique Identifier Number from IRBM for traceability and security.
Step 3: Notification of validated e-Invoice
IRBM notifies both supplier and buyer of the validated e-invoice via MyInvois Portal or APIs.
Step 4: Sharing of e-Invoice
Suppliers share the validated e-invoice with the buyer, including a QR code for validation on the MyInvois Portal.
Step 5: Rejection/Cancellation of e-Invoice
Buyers can request rejection within a stipulated time, and suppliers can cancel e-invoices with proper justifications.
Step 6: MyInvois Portal
Suppliers and buyers can get a summary of e-invoice transactions via MyInvois Portal.
Implementation Timeline of E-Invoicing
To ensure smooth transition, e-invoicing will be rolled out in phases. The phased implementation includes different deadlines for businesses based on their annual turnover. Large enterprises were the first to adopt e-invoicing, followed by medium-sized and small businesses in subsequent phases.
The following table is the government’s implementation timeline:
Targeted Taxpayers | Implementation Date |
Taxpayers with an annual turnover or revenue of more than RM100 million | 1 August 2024 |
Taxpayers with an annual turnover or revenue of more than RM25 million and up to RM100 million | 1 January 2025 |
All taxpayers | 1 July 2025 |
Does E-Invoicing Apply To Your Company?
As mentioned above, e-invoicing applies to all businesses operating in Malaysia, regardless of their size or industry. However, the implementation timeline varies based on annual turnover, with larger businesses mandated to adopt e-invoicing earlier than smaller ones. Therefore, it is crucial for businesses to assess their compliance requirements and prepare accordingly.
How To Prepare For E-Invoicing Launch?
It is always best to start off on the right foot in order to make the whole e-invoicing process smooth and hassle-free. Preparing for the launch of e-invoicing involves several key steps as follows:
- Assess Readiness:
Evaluate your company’s readiness for e-invoicing, including infrastructure, software capabilities, and staff training needs. - Select Service Providers:
Choose a reliable e-invoicing service provider that meets your business requirements and complies with regulatory standards. - Upgrade Systems:
Ensure your accounting and invoicing systems are compatible with e-invoicing standards and capable of generating and processing e-invoices. You could look out for this AI solution that could expedite your document processing. - Train Staff:
Provide training to staff members involved in invoice generation, transmission, and processing to familiarize them with e-invoicing processes and tools. - Test Procedures:
Conduct thorough testing of e-invoicing procedures to identify and address any potential issues or challenges before full-scale implementation. - Compliance Check:
Ensure compliance with regulatory requirements and guidelines related to e-invoicing, including data security and tax regulations.
Conclusion
In conclusion, e-invoicing represents a significant step forward in modernizing financial processes and enhancing business efficiency in Malaysia. By understanding the guidelines and adequately preparing for its implementation, businesses can leverage e-invoicing to streamline operations and stay competitive in today’s digital landscape.