Edited by Rivermore Academy
The Inland Revenue Board of Malaysia (IRBM) has announced the phased implementation of digital taxation, namely the E-invoicing system, starting in June next year.
This digital taxation initiative is taken by the Malaysian government to enhance the efficiency of tax administration and support the growth of the domestic digital economy, in alignment with the Twelfth Malaysia Plan.
What is an E-Invoice?
An e-Invoice is a digital representation of a transaction between a supplier and a buyer. It replaces paper or electronic documents such as invoices, credit notes, and debit notes.
The e-Invoice contains the same essential information as traditional documents, including details of the supplier and buyer, item description, quantity, price excluding tax, tax, and total amount, recording transaction data for daily business operations.
It's important to note that the Inland Revenue Board of Malaysia has specific regulations regarding the format:
Benefits of e-Invoice
1. Streamlined Invoicing Process
By simplifying the transaction document creation process and electronically submitting data to the tax authorities, a unified invoicing process can be achieved. When transaction data is automatically recorded, it significantly reduces manual efforts and human errors.
2. Efficient and Accurate Tax Reporting
Through the e-Invoice system, tax return filing can be done seamlessly, ensuring efficient and accurate tax reporting.
3. Optimized Operational Processes
For larger enterprises, e-Invoicing improves efficiency through automated workflows, seamless data integration, and enhanced invoice management, resulting in time and cost savings.
4. Digitalized Financial Reporting
For micro, small, and medium-sized enterprises (MSMEs), the phased implementation of the e-Invoice system provides a gradual and manageable transition, enabling alignment of financial reporting and processes with industry standards. This ensures that MSMEs can adapt over a longer period and mitigates potential risks.
Phases of e-Invoice System Implementation
No. | Targeted Taxpayers | Implementation Date |
1. | Taxpayers with an annual turnover or revenue of more than RM100 million | 01 June 2024 |
2. | Taxpayers with an annual turnover or revenue of more than RM50 million and up to RM100 million | 01 June 2025 |
3. | Taxpayers with an annual turnover or revenue of more than RM25 million and up to RM50 million | 01 June 2026 |
4. | All taxpayers and certain non-business transactions | 01 June 2027 |
E-Invoice Transmission Mechanisms
To facilitate taxpayers' transition to e-Invoice, taxpayers can choose the most suitable mechanism for transmitting e-Invoices to the Inland Revenue Board of Malaysia (IRBM) based on their specific needs and business requirements.
IRBM has developed two distinct e-Invoice transmission mechanisms, each catering to different scenarios:
1. MyInvois Platform
Enables individual generation through a comprehensive form and the option for batch generation through spreadsheet upload for processing multiple transactions
Accessible to all taxpayers.
Suitable for micro, small, and medium-sized enterprises (MSMEs).
May not be efficient for handling large volumes of data.
Applicable for businesses that need to issue e-Invoices but the API connection is unavailable.
2. Application Programming Interface (API)
Allows businesses to conveniently transmit a high volume of transactions.
Requires upfront investment in technology and adjustments to existing systems. API connections can be established directly with IRBM or through intermediary technology providers.
Ideal for large taxpayers or businesses with substantial transaction volumes.
Digital Taxation Becomes the New Norm for Businesses
The introduction of the e-Invoice system marks a significant step in Malaysia's digital tax management. Besides streamlining the entire tax process, it also helps to prevent tax loopholes caused by fraudulent invoices, ensuring greater fiscal security for the country.
However, businesses may encounter some challenges during the initial stages. The e-Invoice system involves technical and security knowledge, requiring businesses not only to invest in system adjustments but also to train employees and upgrade equipment to prevent data breaches.
Nevertheless, as per the timeline set by the Inland Revenue Board of Malaysia, all businesses will gradually transition to the e-Invoice system within the next five years, making it the new norm for tax compliance.
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