Everything You Need to Know about Consolidated e-Invoicing
Mastering Consolidated e-Invoices
E-Invoicing is being rolled out in phases and will soon be mandatory for all businesses, except micro enterprises with annual sales below RM150,000. It brings many benefits, such as improved efficiency, better transparency, and smoother operations.
Although businesses may need time to adjust to the new rules, Consolidated e-Invoices can make the process easier. These allow multiple transactions to be combined into one digital invoice, reducing paperwork and simplifying the workload.
Combining multiple transactions into a single e-Invoice for the month is only allowed in specific cases approved by the Inland Revenue Board of Malaysia (LHDN). Certain sectors are completely excluded from this option. A Consolidated e-Invoice can only be issued if the buyer does not request individual e-Invoices.
Since e-Invoices serve as proof of revenue for sellers and proof of expenses for buyers, most buyers will request individual e-Invoices to claim expenses or tax relief. The only exceptions are buyers who cannot claim these benefits, i.e., retail consumers who are not running a business.
Common Challenges in Issuing Consolidated e-Invoices
Consolidated e-Invoices aim to simplify processes, but businesses — especially those without digital systems — may face these challenges:
Meeting Deadlines
Businesses must issue Consolidated e-Invoices within 7 days after the month ends. This can be tough without e-Invoicing software to streamline the process.
Keeping Accurate Records
Accurate transaction records are crucial. Details like receipt reference numbers must be documented carefully to avoid mistakes.
Ensuring Compliance
Following LHDN’s specific rules, including providing required information and accurate figures, is critical to avoid penalties.
Handling Technical Issues
Businesses using the manual invoice creation method may struggle with technical challenges when entering data into the system.
Although these tasks are manageable, they can become overwhelming. To avoid errors and the risk of non-compliance, businesses should consider adopting e-Invoicing systems. Automating the process not only saves time but also ensures efficiency and long-term sustainability.
When Can You Use Consolidated e-Invoices?
You can issue Consolidated e-Invoices for transactions where the buyer does not ask for individual e-Invoices. However, some transactions cannot be included:
- Automotive: Sale of motor vehicles.
- Aviation: Sale of flight tickets or private charters.
- Luxury Goods & Jewellery: Allowed for now, pending more details.
- Construction: Contracts under the Income Tax (Construction Contracts) Regulations 2007.
- Construction Materials: Sales of materials listed under the CIDB Act 1994.
- Betting & Gaming Pay-outs: Excludes pay-outs from casinos and gaming machines.
- Agent/ Dealer/ Distributor Payments: Payments from companies as defined under Section 83A(4) of the Income Tax Act 1967.
What About Self-Billed e-Invoices?
Generally, Consolidated e-Invoices don’t apply to self-billed transactions, except in these cases:
- Purchases from individuals not conducting a business.
- Interest payments to the public.
- Payments like claims or compensation to non-business individuals.
Submission Deadlines
- Monthly Submission: All un-invoiced transactions must be consolidated and submitted to LHDN within 7 days after the month-end for validation.
- The same deadline applies to Consolidated Self-Billed e-Invoices.
Methods for Consolidation
LHDN allows suppliers to consolidate transactions using these methods:
- Line Items by Receipt: Each transaction is a separate line in the invoice.
- Continuous Receipt Numbers: Chain of receipts with uninterrupted running numbers are listed in sequence, with new chain of receipts forming new line items if there are gaps.
- By Branch/ Location: Transactions are grouped by outlet or location.
Sharing Consolidated e-Invoices with Buyers
There’s no need to share validated Consolidated e-Invoices with buyers since they opted out of individual e-Invoices.
How to Submit Consolidated e-Invoices
- Confirm Buyer’s Needs: Check if they want individual e-Invoices.
- Issue Receipts: Provide normal receipts for each transaction.
- Retrieve Data: Collect all receipt data for the month.
- Generate Consolidated Invoice: Fill in the required fields manually or with e-Invoicing software.
- Submit to LHDN: Submit for validation within 7 days after month-end.
Handling Changes
If a buyer requests an individual e-Invoice within the same month, that receipt must be removed from the consolidated list to avoid duplicate revenue postings. An e-Invoicing system can automate this process.
Validation and Use
Once LHDN validates the Consolidated e-Invoice, it serves as proof of income for the supplier (or proof of expense for self-billed invoices).
Adopting an e-Invoicing solution can streamline the process, ensure compliance, and save time.
Start Your Seamless e-Invoicing Now
Understanding and complying with consolidated e-Invoicing requirements are vital for ensuring smooth business operations and legal compliance. As of today, we have a total of 110 phase 1 clients who have gone live with us and 150+ phase 2 clients on board.
If you are looking for e-Invoicing solutions that can help you to stay ahead in the competitive market, contact IFCA software at [email protected], or WhatsApp us at +6016-201 5011 now.
