Navigating the Dynamics of E-Invoicing Implementation in Malaysia

Introduction

The global digital transformation has brought significant changes to traditional business practices. One area that has undergone transformation is invoicing. With the rise of technology and automation, businesses are increasingly shifting towards electronic invoicing, or e-invoicing. For years, the Malaysian government has been seeking ways to bring the shadow economy within the tax net and address tax leakages in the current tax system. Capitalising on this digital trend, the Malaysian government has mandated e-invoicing through the newly introduced S. 82C of the Income Tax Act 1967 (ITA 1967), to help prevent leakages in the tax system. Comprehensive details on the implementation can be found in the guidelines provided by the Inland Revenue Board of Malaysia (HASiL), thus aiding taxpayers in navigating the intricacies of e-Invoice adoption.

Implementation Dates

The scope of e-Invoice implementation covers all types of business transactions, namely:

• Business-to-Government (B2G)
• Business-to-Business (B2B) 
• Business-to-Consumer (B2C).

Depending on the sales turnover of the business in financial year 2022, the 3 implementation dates set by HASiL are as follows:

Legal Provisions

The term “electronic invoice” is defined in S. 2 of the ITA 1967 as follows:

“Electronic invoice” means an invoice or any document approved by the Director General, issued by a person in respect of goods sold or services performed as provided under Section 82C.”

The provisions in S. 82C set out the compliance requirements for issuance of e-Invoices and shall come into operation on 1 January 2024. S. 82C(1) states that:

“Subject to this section, a person shall, in a year of assessment, issue an electronic invoice for each transaction in respect of any goods sold or services performed by the person for that year of assessment.”

Any e-Invoice issued by a person undertaking commercial activities shall be transmitted electronically to and validated by HASiL. The Minister is empowered to prescribe the persons as well as particulars to be included in the e-Invoice.

With respect to offences and penalties, S. 120(1) provides for a fine of not less than RM200 and not more than RM20,000 or imprisonment not exceeding 6 months or both, if a person fails to issue an e-Invoice, a self-billed invoice or a consolidated transaction invoice.

The conditions and specifications for e-Invoice shall be determined by the Director General under the guidelines issued in accordance with S. 134A. The following guidelines have been issued by HASiL on 9 February 2024:

• E-Invoice Guideline (Version 2.2) (General Guideline).
• E-Invoice Specific Guideline (Version 2.0) (Specific Guideline).

Validation Of E-Invoices Via MyInvois Portal

HASiL’s General Guideline specifies 4 types of e-Invoice documents. A brief description of the purpose for each type of e-Invoice which seeks to address different transactional needs of a business are as follows:

• Invoice – Records sales transactions, including self-issued invoice.
• Credit note – Records reduction in the value of the original e-Invoice (does not involve a refund of monies by the supplier to the buyer).
• Debit note – Records increase in the value of the original e-Invoice.
• Refund note – Records refund of the overpayment by a buyer.

An e-Invoice issued by a business shall be transmitted to and validated by HASiL. What is the e-Invoice transmission mechanism between the taxpayer and HASiL? There are 2 options available for taxpayers (referred to as a “Supplier” in HASiL’s Guidelines) in the e-Invoice transmission mechanism for validation by HASiL. First, the supplier can log on and submit the e-Invoices (with all required information) for validation directly via HASIL’s MyInvois Portal.

This option requires manual input and is suitable for a lower volume of invoice transactions.

Alternatively, a supplier may configure an Application Programming Interface (API) in its accounting software / electronic resource planning (ERP) system for direct integration with the MyInvois Portal. The formats that will be available for transmission of e-Invoice data via API are Extensible Markup Language (XML) and JavaScript Object Notation (JSON). The API can also be housed by an outsourced technology service provider, either through Peppol3 or non-Peppol service providers, engaged by the supplier. The software developer is required to make reference to HASiL’s Software Development Kit4 to configure the API. The different choices within the API option would depend on the supplier’s business environment. In deciding its choice of API, the supplier is advised to seek consultation from its technology service provider, study the current system, and conduct an evaluation before deciding on the option that best fit its business requirements.

The high-level workflow involved between the supplier, buyer and HASiL are as follows:

1. Issuance of e-Invoice by the supplier for sharing with HASiL’s MyInvois Portal or API for validation.
2. Near real time validation of e-Invoice by the MyInvois Portal with a Unique Identifier Number given to the supplier.
3. Notification of validated e-Invoice by HASiL to both the supplier and the buyer.
4. Sharing of validated e-Invoice in PDF format by the supplier to the buyer.
5. E-Invoice may be cancelled by the supplier or rejected by the buyer within 72 hours from the time of validation.
6. E-Invoice is stored in the MyInvois Portal and the records are accessible by the supplier or the buyer.

The e-Invoice validation workflow diagram can be viewed from HASiL’s website at: https://www.hasil.gov.my/en/e-invoice/overview-of-the-e-invoice-model/.

This article was first published in the Tax Guardian, Vol. 17, No. 2, 2024/Q2.