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The Comprehensive Guide to E-Invoicing in Malaysia

The Comprehensive Guide to E-Invoicing in Malaysia

In today’s fast-paced business environment, adopting digital technologies is necessary for streamlining financial procedures. E-invoicing or electronic invoicing is a life-changing technology, marks a significant leap in digitalizing the financial transactions landscape, offering a streamlined, efficient, and environmentally friendly alternative to traditional paper invoices. It embodies the process of billing transactions electronically, enabling the exchange of the invoice document between a supplier and a buyer in an integrated electronic format and improve traceability and accuracy.

The Reason of Government Launch the E-Invoicing Initiative

The Malaysian government’s initiative to execute the E-Invoicing project stems from a desire to enhance the efficiency of tax collection, reduce business operating costs, and combat invoice fraud. By adopting E-Invoicing, the government aims to bolster the digital economy, improve the ease of doing business, and ensure greater transparency and record any financial transactions all around the corner for taxing purposes. 

Type of e-Invoices in Malaysia

Type of e-Invoices in Malaysia

Invoices

Invoices are fundamental to recording transactions between a supplier and a buyer. This category includes self-billed invoices, which are issued for tracking expenses. The primary function of an invoice is to detail the products or services provided, the amount due, and the payment terms. 

Credit Notes

Credit notes are documents issued by sellers to correct or adjust the value of a previously issued e-Invoice, without the need to return any money to the buyer. These adjustments might be due to errors, the application of discounts, or the return of items. Credit notes ensure that any modifications to the transaction values are accurately reflected and accounted for. 

Debit Notes

Debit notes, in contrast to credit notes, are issued to increase the total amount of a previously issued e-Invoice. This might be due to additional costs or charges that were not included in the original invoice. Debit notes are a way for sellers to request additional payment from buyers for charges that arise after the initial billing. 

Refund Notes

Refund e-Invoices or refund notes are official documents issued by sellers to record refunds provided to buyers. These documents are essential for documenting the return of funds to the buyer, ensuring both parties have a record of the transaction reversal or adjustment. 

Who Should Implement E-Invoicing to Their Business

E-Invoicing is essential for all businesses seeking to modernize their operations and comply with Malaysian government regulations. Particularly, small and medium-sized enterprises (SMEs), large corporations, and multinational companies operating in Malaysia are encouraged to adopt E-Invoicing. This transition not only facilitates compliance with legal requirements but also positions businesses for better scalability and operational efficiency. 

Who Should Implement E-Invoicing to Their Business
When is the E-Invoicing Implementation Timeline

When is the E-Invoicing Implementation Timeline

The Malaysian government has adopted a phased approach for the implementation of e-Invoicing to ensure a smooth transition for all stakeholders. This methodical rollout has been meticulously planned, considering various turnover or revenue thresholds to afford taxpayers ample time for preparation and adaptation. 

  • Targeted Taxpayers with an annual turnover or revenue of more than RM100 million: Implementation Date set for 1 August 2024. This first phase targets the largest taxpayers, providing them with a clear deadline to prepare for e-Invoicing. 
  • Taxpayers with an annual turnover or revenue of more than RM25 million and up to RM100 million: These taxpayers are required to implement e-Invoicing by 1 January 2025. This stage allows businesses within this turnover range to align their processes and systems with e-Invoicing requirements. 
  • All taxpayers: The final phase includes all remaining taxpayers, with a deadline for e-Invoicing implementation by 1 July 2025. This comprehensive rollout ensures that all businesses, regardless of size, will eventually transition to e-Invoicing, fostering a fully digital and efficient invoicing environment across Malaysia.

What Are the Consequences of failing to Generate E-Invoice

According to the Income Tax Act, the failure to issue an e-Invoice is not merely an oversight but a criminal offense. Businesses found in violation of this mandate face substantial penalties, including a fine ranging from RM 200 to RM 20,000 for each offense. Moreover, the law allows for the possibility of imprisonment for a term of up to six months for severe breaches. In some cases, offenders may be subjected to both fines and imprisonment, underscoring the government’s commitment to enforcing these regulations rigorously.

What Are the Consequences of failing to Generate E-Invoice

What are the benefits of E-Invoicing?

Accelerated Billing Process

Accelerated Billing Process:

The creation of electronic invoices is quicker, and the supplier is spared from delays from courier or postal services. It’s also helps to eliminate the tedious and time-consuming process like preparing the paper invoice or using the excel format. First off, the supplier can easily create an electronic invoice using the account system which has dropdowns and easily accessible customer and product data. It will be significantly faster if the system already recognises the Order information. Processing time can be reduced by hours or even days when an electronic invoice is created straight from the system, especially as compared to a fresh data entry that frequently requires digging up the documents. There are various of accountings system offer in market, it allows direct transmission of invoices in structured digital format from one finance system to another.  

In getting ready for e-Invoicing, you will probably be searching for a seamless integration of your company’s ERP or accounting system with the e-invoice portal. Therefore, we would like to share some important factors to your checklist: 

  1. e-Invoicing – The invoice must be approved by the MyInvois Portal 
  2. Buyers who receive bills from other countries can choose to self-e-Invoice. 
  3. Organisation plan & process of implementing the e-invoicing on your Accounts Receivable (AR) & Accounts Payable (AP). 
  4. Choosing the right tool to adopt the new requirement & IRB’s e-Invoice Guideline. 

Cost Reduction & Better Record Keeping

Besides, E-invoicing significantly lowers the costs associated with paper-based processes, including printing, postage, and storage expenses. By eliminating the need for physical materials and handling, businesses can achieve substantial savings. E-Invoices also can be stored in cloud-based systems, facilitating easy access, organization, and retrieval. This improves record-keeping practices and supports efficient audit processes.

Cost Reduction & Better Record Keeping
According to the IRB’s guidelines, there are two ways to send e-Invoices to the IRB’s database_

According to the IRB’s guidelines, there are two ways to send e-Invoices to the IRB’s database

1) Using the MyInvois Portal, which is a free portal that is hosted by IRB.  

For businesses that opt to this method are required to manually uploading Invoices to the MyInvois Portal. Manual submission of invoices is a very straightforward, However, it can be time-consuming, especially for processing many invoices.  

  1. To manually upload an invoice to MyInvois, follow these steps: 
  2. Visit the MyInvois website and log in to your account 
  3. Click on the “Invoices” tab 
  4. Select “Add New Invoice” 
  5. Choose the “Manual Upload” option 
  6. Browse for the invoice file you wish to upload 
  7. Click the “Upload” button 

 2) Using the Application Programming Interface (also known as API) 

The advantage of direct integration method (API) is that e-invoices are generated in real time in the ERP system and delivered directly to the IRB database with no manual work, the e-Invoices are directly ready for additional processing (such as validation and approval). 

With the API integration, this method allowed your business to have more flexibility and efficiency. As you can setup the automation / integration to auto-update the progress with other systems within your organisation. Example for some organisation using many different systems or having a proper digital ecosystem like DATANORY to manage different process and operations across all the departments. Probably, you may also need your in-house IT team to update the systems on a regular basis. It may need a little more effort, such as setting up and reconfiguring ERP / other systems in response to regulatory modifications, which is expected to spend various one-time development expenses. Also, some of the ERP systems’ infrastructure that comply with global criteria, these systems to suit local regulations may create more challenges to Malaysian organisations’ e-Invoicing adoption timelines.

What Are The Common Challenges in the Implementation Process

Current Accounting System Not Supported for E-Invoicing  

Businesses often face the challenge of existing systems that aren’t compatible with E-Invoicing, necessitating an upgrade or a switch to compliant systems. 

Current Accounting System Not Supported for E-Invoicing
Cost Reduction & Better Record Keeping

Current Accounting System Provider Increases Subscription Cost

The transition to E-Invoicing can appear costly if existing accounting system providers increase prices for E-Invoicing compatibility. Selecting a cost-effective solution is crucial to mitigate this challenge. Herewith some recommendation for those business is looking for better accounting system Fav365 Accounting System with comprehensive accounting features, and stability with the reasonable monthly subscription rates. 

Complicated Accounting System Migration

Migrating to an electronic invoicing system involves significant challenges, including data transfer and system integration. Choosing a user-friendly system like Fav365 Accounting System simplifies this transition.

Complicated Accounting System Migration
How You Can Overcome These Challenges

How You Can Overcome These Challenges

When you adopt a reliable accounting solution such as Fav 365 Accounting System, you will save a lot of time and work. These technologies relieve the issues connected with migrating data from your current accounting system by providing detailed guidance for implementing e-invoicing and effective data migration support. Consider contacting MC Crenergy for a thorough explanation of e-invoicing and assistance in determining the option that best meets your company’s specific requirements. By booking a consultation, their specialists will walk you through the transition process, ensuring that your organisation is ready for the future of invoicing. Furthermore, MC Crenergy specialises in improving operational efficiency for specific industries by implementing technologies such as the Sales Force Automation System DATANORY ECOSYSTEM, which simplifies business processes 

 Understanding the complexities of e-invoicing is critical—not just to avoid penalties from the Malaysian government, but also to prepare your business to ensure it meets government’s requirements. It gives you the benefit of managing your transactions between diverse parties to ensure they are accurate and clear. Begin researching the benefits and drawbacks of e-invoicing immediately to put your firm on the path to optimal financial management and compliance.

LinkedIn : MC Crenergy | Datanory | IT Solution Provider

Updated On : 18th Mar 2022

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