Implementation of e-Invoicing in Malaysia

LHDN has announced that e-invoicing will be implemented in phases starting from June 2024.

What is e-Invoicing?

An e-invoice is an invoice generated in a specific, standardized format, involving creating, sending, and receiving invoices electronically. It facilitates the automated exchange of invoices between businesses and organizations in a structured digital format.

The structure of the digital format for e-invoice should be in either XML or JSON format, which will be provided by LHDN, facilitating data exchange between organizations regardless of the accounting system they use.

Objective of e-Invoicing

The National E-Invoicing Initiative aims to drive interoperable e-invoicing by digitalizing how businesses send invoices to other businesses, allowing different accounting software and Enterprise Resource Planning (ERP) systems to send and receive e-invoices in a system-to-system manner.

Timeline for Implementation

e-Invoicing will be implemented in phases starting from June 2024. Implementation is based on annual turnover starting with businesses having annual revenue of RM100 million or more.

Process Flow

When a supplier issues an invoice, credit note or debit note, it first needs to be submitted to LHDN for validation via their portal.

Once the invoice has been validated, LHDN will provide a Unique Identifier Number for the document.

The supplier then needs to embed this Unique Identifier Number, in the form of a QR code on the invoice before forwarding it to their customer.

Note that at this point, the status of the invoice will be pending.

The customer then has the option to either accept or reject the invoice within 72 hours.

If the customer does not accept the invoice, then the status will be changed to approved.

If the customer rejects the invoice, they need to provide a reason, and the seller will be notified, and can resubmit an amended invoice.

If the invoice is rejected after approval, then the seller will need to issue a credit note to cancel it.

The credit note will need to go through the same process as the invoice, submit to LHDN for validation, get a Unique Identifier Number, and forward to the customer.

With the implementation of e-invoicing, buyers will only be able to claim an expense if it is supported with an invoice that has been validated through the portal and has a valid QR code.

How to Submit?

LHDN has provided two methods of transmitting e-invoices:

◈ By accessing the MyInvois Portal directly

Enables generating a single invoice by completing and submitting a form

You will also be able to process multiple transactions by uploading a spreadsheet

However, this medium of submission is more suited to smaller business that only have a few invoices to process

◈ Application programming interface(API)

Enables the direct communication with LHDN's portal by an application such as Sage 300 to submit one or more invoices

Bigger businesses will find this method more efficient and less time consuming as the application will do the submission when the invoice is issued

Tax Identification Number (TIN)

In both cases, you will require a digital certificate that would need to be incorporated with the submission.

The digital certificate is issued by LHDN and will have an initial validity period of three(3) years

The TIN is included in the digital certificate along with other relevant business information

You can either check your TIN or register your business for one by visitng MyTax portal