MALAYSIA will be following many other countries in digitalising invoicing through the e-invoice system that will be mandatorily implemented in stages starting with companies with a turnover of more than RM100 million on June 1, 2024.
This will be followed by companies with more than RM50 million to RM100 million on Jan 1, 2025, more than RM25 million to RM50 million on Jan 1, 2026, and remaining taxpayers by Jan 1, 2027.
Once this is implemented, the Inland Revenue Board (IRB) can on a real-time basis see the activities of the company – that is, the income and the expenditure, and partially the capital transactions of the company. Leakages and manipulation of accounts will be drastically reduced.
Is it simple?
IRB has issued an excellent set of guidelines detailing how e-invoicing will be implemented, and the actions taxpayers should undertake to adopt this system. Further guidelines will be issued later this month, and more explanations will be given over the months to come.
There are still gaps to be filled by IRB, especially dealing with end-consumers who are non-businesses, dealing with disbursements and reimbursements, international transactions, etc. However, the main concepts have been clearly explained in the guidelines.
Although it is an easily readable document, the process explained is complicated for an ordinary businessman and needs more clarity. The first complexity will be to tailor your current accounting system or Enterprise Resource Planning software to dovetail into IRB’s e-invoicing portal.
You have a choice: Use IRB’s MyInvois portal, or connect your accounting software through an application programming interface (API). If you are using an API, then you need to reconfigure your accounting software to meet the requirements of IRB.
In simple terms, the process involves the supplier generating the e-invoice, getting each invoice validated by IRB, and obtaining a QR code before entering the invoice into the system and informing the purchaser. The purchaser in turn needs to validate and accept the invoice within 72 hours. Any changes done beyond 72 hours will need a separate set of transactions involving a credit note/debit note/reissue of invoice.
All information will be stored in IRB’s database, which we have been assured will be confidential and secure.
The information required under e-invoicing is extensive. There are about 60 fields of information required which include information on the supplier and the purchaser. It goes beyond income tax information and requires information around sales and service tax.
What is covered?
E-invoicing covers all transactions including trade, non-trade transactions, capital purchases, intercompany charges, and any revenue items such as contra entries, payments in kind, etc. It will cover both domestic and foreign transactions. When it comes to foreign transactions, it appears that the local party will need to self-create the invoices on behalf of the foreign suppliers, unless the foreign supplier is already in IRB’s system.
There are many issues that are still not clear. An example would be where an agent bills and collects monies on behalf of the principal, and the money flows do not enter the profit and loss account but remain in the balance sheet. There may be many other items that are going through the balance sheet without going into the profit and loss statement, and these are areas which IRB may need to look into.
What should you do?
If you are in the first batch to comply by June 1 2024, you need to start by identifying your transactions that will be affected by the e-invoicing system and get your software aligned to IRB’s portal. In the course of implementing the e-invoice, it will give you an opportunity to examine the tax treatment of the various items, and if necessary, to correct any errors. There is a lot of work to be done.
The IRB’s team are ready and always willing to help all taxpayers.
This article is contributed by Thannees Tax Consulting Services Sdn Bhd managing director SM Thanneermalai (www.thannees.com).