The Malaysian government is implementing e-Invoicing from 1 August 2024 for taxpayers with more than RM100 million turnover. Taxpayers having more than RM25 million to RM100 million will come on board on 1 January 2025 with the rest starting from 1 July 2025.
Based on the Inland Revenue Board's (IRB) guidelines on e-invoicing, certain mandatory fields were made optional in order to give e-invoicing a soft landing and businesses are also allowed to submit a consolidated e-invoice instead of a specific one (except for certain industries specifically disallowed from issuing consolidated e-invoices such as auto dealers, issuance of flight tickets, luxury goods, private charter, gambling payouts generally and payments to agents, dealers and disctibutors, where the values transacted would be relatively huge).
Further, in a press release by the IRB on 26 July 2024, to ensure the smooth implementation of e-invoicing, the government has provided a relaxation period of six months from the mandatory implementation date of e-invoicing whereby consolidated e-invoices can be issued for all industries and allowing any description to be included in the "Product or Service Description" field.
This relaxation provides sufficient time for taxpayers to implement e-Invoicing efficiently and ensuring systems availability.
There is essentially no deferral of the implementation of e-invoicing essentially as the six month period simply widens the scope of the consolidated e-invoice to cover all industries and businesses.
No prosecution action will be taken during this period for non-compliance with e-Invoicing regulations, provided that taxpayers comply with the consolidated e-invoice requirements.
Meanwhile, many large businesses have started using the sandbox environment with more than 4,300 taxpayers testing the e-invoice mechanism and more than 100 taxpayers using the live production environment to issue e-invoices.
E-invoicing involves the generation of an electronic invoice by keying in relevant data of the supplier and purchaser and submitting the invoice to the IRB's MyInvois portal for validation.
There are 55 fields to be filled up (with an additional 12 fields for cases involving import and export transactions essentially) with N/A filled for irrelevant fields.
Although filling up so many fields may seem tedious, once the data has been populated the first time, it will be auto-filled for subsequent transactions with the need to only fill in the relevant details of the different purchaser.
In a consolidated e-invoice, taxpayers do not need the specific details of buyers to issue an invoice and can continue issuing normal invoices i.e business as usual.
This leeway during the transitional period is given bearing in mind that businesses might have difficulties in obtaining the full details of the buyers initially but would be able to gather the relevant information along the way.
Within 7 days of the end of the relevant month, the consolidated e-invoice will need to be submitted to IRB's MyInvois portal, with the receipt / invoice numbers of the normal invoices included in the consolidated e-invoice.
It is envisaged that e-invoices will be required for all transactions eventually once the My Invois Apps / QR codes/ E-POS systems are available that would have stored the details of purchasers so that the seller can scan and have access to the details required to issue a validated e-invoice.
The Government has also announced that taxpayers earning less than RM150,000 per annum are exempted from issuing e-invoices.
They can continue to issue the normal receipts / invoices and keep the records accordingly. This measure in meant to allay the fears of petty traders and micro businesses that might not have the capabilities or capacity to implement e-invoicing.
It is expected that once full implementation takes place by July 2025, it would become a prerequisite for taxpayers to have a validated e-invoice to claim a tax deduction.
The Income Tax legislation currently does not specify that an e-invoice is required to claim an expense but there are plans to legislate this requirement in due course.
For now therefore, the normal invoices/receipts would suffice to claim a tax deduction.
There is understandably concern amongst the SMEs about the implementation costs for e-invoicing but the IRB's advice is that these are misplaced concerns as the MyInvois portal is provided free of charge.
Taxpayers can access the MyInvois Portal via the MyTax Portal, the gateway of HASiL e-Services. For the sandbox environment, taxpayers can visit https://preprod-mytax.hasil.gov.my whilst for the production / live environment they can visit https://mytax.hasil.gov.my and click the MyInvois Portal User Guide.
Additionally, taxpayers that are using their ERP systems for direct integration to the MyInvoise portal can also use the MyInvois portal directly if their systems are not fully functional by the implementation deadlines.
The impact of e-invoicing would be far reaching in widening the taxpayers' database and therefore there is the determination to ensure its smooth implementation. The announcement of the relaxation period of six months is a welcome move to facilitate smooth business operations and change management.
*Harvindar Singh is a Tax Partner for SCS Global Consulting (M) Sdn Bhd.