Is your company ready for E-invoicing?

Mastering E-Invoicing: Monetary Payment to Agents, Dealers and Distributors

Mastering E-Invoicing Monetary Payment to Agents, Dealers and Distributors_Cover-min

E-Invoicing is revolutionising Malaysian business operations, bringing enhanced transparency and efficiency into transaction, income and expenditure reporting for tax purposes.

E-Invoices function as a Proof of Income for the issuer and a Proof of Expenses for the recipient when it comes to tax filing. As it will be implemented gradually beginning August 2024, we are eager to assist business owners and managers in understanding this change better.

Previously, our ongoing series of articles have covered topics such as the intricate workflow of e-Invoicing, and the issuance of e-Invoices in certain scenarios based on the Guideline issued by the Inland Revenue Board of Malaysia (LHDN). In this article, we continue to empower your smooth transition by tackling transactions involving payments by sellers to their agents, dealers, and distributors.

Monetary Payments to Agents, Dealers or Distributors

One particular type of e-Invoicing concerns the payments made to agents, dealers, or distributors. In many businesses such as real estate, automobile, electrical appliances and many more, agents, dealers, or distributors play a crucial role in bringing your products or services to customers, and earn commissions on sales or services for their effort. Recognising their involvement in your supply chain is key to ensuring greater success of your business.

Under common practice, the e-Invoices for this kind of transactions are always issued by the seller, instead of the agent, dealers or distributors (Think of purchasing a terrace house or an apartment, it’s sold by the developer, not the real estate agent they engaged).

Anyway, according to LHDN regulations, e-Invoices are only issued upon request by the customers in B2C (Business-to-Customer) transactions. This is because for many consumers, such purchases neither qualify for claims nor tax relief, therefore the need for e-Invoice (as a proof of expenses) doesn’t arise.

Where the customer does not request for e-Invoice, the seller just has to issue a standard receipt as per current practice. However, at the end of every month, the seller has to aggregate all the receipts into a Consolidated e-Invoice and submit it to LHDN, as a proof of transaction. This is to ensure the accurate recording of total transactions, and has to be accomplished latest by the 7th of the upcoming month.

Upon completion of the transaction, the agent, dealer or distributor will be entitled to their commission. As these intermediaries usually don’t issue invoices to request for their payment, or issue receipts once the payment is received, the seller will have to issue a Self-billed e-Invoice to record the expenses.

Take note that Monetary Payment to Agents, Dealers and Distributors is among those types of transactions where Consolidated e-Invoice is prohibited. Therefore every single transaction must be e-Invoiced individually, even when the recipient is the same person (where an agent closes multiple sales in the same month and thus is entitled to several commissions).

Example: Monetary Payments to Agents, Dealers or Distributors

Parties involved:

1. Seller: Dynamic Development Bhd. (property developer)
2. Agent: Aisyah
3. Buyer: Belinda

Aisyah works as an agent for the property developer Dynamic Development Bhd. On 8 August 2024, Aisyah sold an apartment unit in Dynamic Development’s flagship project, Residensi D’Classic to her buyer Belinda for RM300,000, hence earning a 2% commission amounting to RM6,000.

Within a week, Dynamic Development paid its sales agent Aisyah the commission. Since Aisyah the agent is not issuing an e-Invoice to the developer for receiving this payment, Dynamic Development issues a Self-billed e-Invoice to record this expense.

Self-billed e-Invoice

Issuance of Self-billed e-Invoice by the seller (Dynamic Development Sdn. Bhd.)

Gearing Up for E-Invoicing Readiness

With the implementation of e-Invoicing looming large, there is certainly no time to waste for businesses to build up their e-Invoicing readiness. It is now the high time for business owners and managers to start contemplating the following key considerations to ensure a smooth transition:

1. Understanding the Implementation Requirement: Begin by assessing the processes required as stipulated in the e-Invoicing Guideline published by the Inland Revenue Board (IRB), and what are the improvements needed based on your current workflow and software. Being aware of the gaps will help you strategise your approach and allocate resources efficiently in a timely manner.

2. Engaging Key Stakeholders: Initiate conversations with crucial stakeholders within your organisation, such as Finance and IT teams, who will be directly impacted by the e-Invoicing implementation. Their insights and collaboration are essential for a successful transition, ensuring a holistic understanding of the changes across various departments.

3. Analysing the Invoicing Processes: Gain a comprehensive understanding of your Accounting, Billing and Invoicing processes. This step is crucial for identifying potential areas of improvement and streamlining workflows to align with the new e-Invoicing requirements seamlessly.

4. Assessing Current ERP Software: Evaluate the ERP or business software currently utilised by your organisation. Understanding the capabilities and limitations of your existing system will guide you on choosing the right solution to ensure business continuity.

By proactively addressing these considerations, your organisation can pave the way for a successful implementation of e-Invoicing, ensuring compliance with the upcoming regulations and leveraging the benefits of a more streamlined and efficient invoicing process.

Embrace Efficient E-Invoicing with IFCA Software

With the dawn of the e-Invoicing era, all business owners and managers have to master these detailed manoeuvring of e-Invoicing to ensure an uninterrupted and sustainable business operation. The ideas are not exactly complicated, it is a new normal for us to get accustomed to. Please stay tuned for more insights as we conquer the digital frontier together.

Over the past 3 decades, IFCA Software have assisted many real estate developers, construction contractors, hoteliers and HR practitioners in digitally transforming their businesses, and the numerous awards we have received over the years are the best testimonials to our tireless endeavour.

By integrating our Enterprise Resource Planning (ERP) systems such as PropertyX, ContractX, HotelX, HRX, AccountX or RentX with LHDN servers directly through a cutting-edge Application Programming Interface (API), users may now bypass manual submission and send e-Invoices in a hassle-free manner. The earlier you are onboard, the earlier you will achieve legal and tax compliance, besides a more streamlined and efficient operation for your business!

Contact us to find out more about e-Invoicing today, as we want to spare you from all the technical complexities, so you can focus your time and resources on developing your business and propelling it to greater heights.