KUALA LUMPUR: Despite the Inland Revenue Board (LHDN) providing a six-month grace period for companies to implement the e-Invoicing system starting today (Aug 1), many businesses are still unprepared, according to industry experts.
Chin Chee Seong, the national vice president of the SME Association of Malaysia, said that most companies are not ready due to a lack of resources, financial constraints, and limited technological infrastructure.
He added that the six-month grace period granted by LHDN was primarily in response to complaints from numerous companies expressing concerns about being able to get the system ready in time.
"Technical integrations, interoperability with other systems, system security, and higher costs incurred are among the challenges faced by businesses," he told Business Times.
Chin noted that many companies also depend heavily on external vendors to support and manage their e-Invoicing systems.
The role of these vendors is crucial in ensuring that the systems are implemented and functioning correctly.
He added that the ability of the company's internal support staff, particularly those in finance and accounts, to handle and manage the e-Invoicing processes is equally important.
He said without adequate vendor support and competent internal personnel, companies may struggle to implement and maintain effective e-invoicing systems.
A recent KPMG Malaysia survey found that most large taxpayers (60 per cent) and SMEs (56 per cent) want the government to offer a no-penalty period during the early stages of e-invoicing to help manage the complexities.
The professional services firm conducted the survey from July 1 to July 8, 2024, collecting insights from over 200 respondents, including large taxpayers and SMEs.
The survey also found that a majority of large taxpayers with annual revenues exceeding RM100 million are not fully ready for their e-invoicing implementation by Aug 1, which is the compliance deadline mandated by LHDN.
Almost six in 10 reported being less than 50 per cent prepared, while 30 per cent claimed to be more than 50 per cent prepared, and only four per cent reported to be fully ready for e-Invoicing.
Furthermore, the survey revealed that the main challenges of transitioning to e-invoicing are additional costs for IT systems and gadgets, the need for extra manpower, and system glitches and possible errors.
One of the primary concerns reported by the survey respondents is the readiness of their systems and processes as companies transition to e-Invoicing.
Despite best efforts, many are still fine-tuning the technical aspects and ensuring compatibility with their existing infrastructure.
SME Management Expert and Byond Group Sdn Bhd chairman Abdul Basit Abdur Rahim expressed concerns about the hurdles smaller SMEs might face with the implementation of e-invoicing.
He said unlike larger corporations, which have dedicated IT departments and substantial budgets for technological upgrades, smaller SMEs frequently rely on basic software or even manual filing.
"The shift to e-Invoicing demands new investments in software and possibly upgrading existing hardware.
"I believe some SMEs may struggle with a spike in management costs due to these requirements," he said.
Meanwhile, Abdul Basit also pointed out that some SME might not be ready for this new implementation due to the lack of awareness of e-invoicing requirements.
Even if they are aware, he said low literacy and digitalisation levels among SMEs would make the major obstacles.
"Without sufficient guidance and support, these businesses may struggle to comply with the new regulations effectively.
"As the government pushes forward with digital initiatives, I emphasised the need for targeted support to help smaller SMEs navigate these changes, ensuring they can fully benefit from the advantages of this e-invoicing," he said.
Small and Medium Enterprises Association Malaysia (Samenta) national secretary Yeoh Seng Hooi mentioned that larger companies should be prepared since the deadline for implementing the new system has been set for a while.
However, he acknowledged that there might be some issues with certain details during the implementation process and hopes there won't be significant problems with system access.
Yeoh noted that the six-month education period provided by LHDN is beneficial because it means that genuine administrative errors won't result in penalties.
"SMEs should start preparing for full implementation in July next year. Those SMEs that supply to the larger companies may have to come on board earlier.
"By attending training and workshops, SMEs have a one-year runway to prepare. They shouldn't procrastinate and wait until the last minute," he stressed.
Yeoh also said some business groups are asking for an increase in the exemption threshold for e-invoicing requirements.
He added that they want the limit to be raised to RM500,000 or at least RM350,000, instead of the current RM150,000, as they believe the current exemption limit is too low and that a higher limit would better accommodate their needs.