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Embracing e-Invoicing for Property Developers in Malaysia: A Comprehensive Guide

Embracing E-Invoicing for Property_Cover

With Malaysia progressing towards business digitalisation, the commencement of e-Invoicing on 1 August 2024 signifies a notable advancement. This effort is geared towards improving transaction record accuracy, ensuring precise taxation, and enhancing financial transparency.

As Malaysia’s business owners are preparing for e-Invoicing compliance according to the E-Invoicing Guideline published by the Inland Revenue Board (LHDN), many are still unclear on the specific e-invoicing treatment for their industries. Today, let’s explore such scenarios in the Property Development industry as advised by industry experts.

Booking Deposit

Booking Deposit
For property developers, booking deposits play a crucial role in securing sales. According to the FAQ on the Implementation of e-Invoicing in Malaysia published by LHDN:

In cases where the deposit is refundable, the issuance of e-Invoice is not required. However, if the deposit is non-refundable, issuance of e-Invoice is required.

In view of this, for refundable booking deposits, a Conventional Receipt can be issued; whereas for non-refundable booking deposits, an e-Invoice will be issued during the first progressive billing, which includes the amount of the non-refundable booking deposit.

According to the Schedule of Payment of Purchase Price, as stipulated in the Schedule G (landed properties) or Schedule H (building with strata titles) of Housing Development (Control & Licensing) Regulations 1989, 10% of the purchase price is payable immediately upon the signing of the Sales & Purchase Agreement (SPA). The booking deposit is therefore part of it, and can be invoiced together.

Progress Billing

Progress Billing

Progress or Milestone Billing refers to the practice where the developer in a housing project invoices the buyer (or the bank where the buyer obtains his housing loan) in stages, based on the completion of specific construction milestones, ensuring that payments are aligned with the progress of development.

In Malaysia, the amount billed at every stage is based on the Schedule of Payment of Purchase Price, as stipulated in the Schedule G (landed properties) or Schedule H (building with strata titles) of Housing Development (Control & Licensing) Regulations 1989.

The party that the developer invoices depends on whether the buyer is buying with loan or cash, and whether the buyer is a business entity or an individual:

– For the majority of buyers (individual or business) that purchases with loans, the developer has to invoice the financiers (instead of the buyer) for the release of progress payment, therefore, issuance of e-Invoices are necessary. E-invoice are addressed to the buyers while the progressive billing will be issued to the financiers.

– For cash buyers that are business entities, and individuals who require an e-Invoice, an e-Invoice must be issued.

– Whereas for other individual cash buyers who do not require an e-Invoices, the developer may just issue the progressive billing as per existing practice, and aggregate all such Receipts into a Consolidated e-invoice latest by the 7th day of the following month.

Penalty for Late Completion (LAD)

Penalty for Late Completion (LAD)

Liquidated Ascertained Damages (LAD) are pre-determined monetary penalties specified in a construction contract, which will be invoked when a project is not completed within the time frame to deliver Vacant Possession (VP) as stipulated in the Housing Development (Control & Licensing) Regulations.

Under the Schedule G of the Regulation, VP of landed properties should be delivered to the buyer within 24 months; whereas under the Schedule H, VP of buildings with strata titles (flats, apartments, and condominiums) should be delivered to the buyer within 36 months.

However, if the project hasn’t obtained the Certificate of Completion and Compliance (CCC) by the time of Vacant Possession, LAD should be calculated until the date of CCC issuance.

As stipulated in Schedules G & H of the Housing Development (Control & Licensing) Regulations:

“The Vendor shall be liable to pay to the Purchaser liquidated damages calculated from day to day at the rate of ten per centum (10%) per annum of the purchase price from the expiry date of the delivery of vacant possession in subclause (1) until the date the Purchaser takes vacant possession of the said Parcel. Such liquidated damages shall be paid by the Vendor to the Purchaser immediately upon the date the Purchaser takes vacant possession of the said Building.”

Whenever the developer is required to pay LAD to the buyers, the developer has to issue Self-Billed e-Invoices to record the expenditure, since the buyers who receive the payment are not going to issue any e-Invoice to the developer.

Commission Payment to Property Agents

Commission Payment to Property Agents

Just like in many businesses, agents play a crucial role in finding buyers for the products, and it is especially so in real estates. These agents earn commissions on sales, and recognising their effort is the key to ensuring greater success for the developer’s business.

Upon completion of the transaction, these individual agents will be entitled to their commission. As they do not typically issue an invoice to request for their payment, or issue receipts upon the commission payment, the developer will have to issue a Self-billed e-Invoice to record the expenses.

Rebates

Driving-Revenue-Growth

Rebates are often offered by a developer as a financial incentive to sweeten the deal, ensuring that the property offers greater affordability than other competitors’ projects in the surrounding area. It can either be a fixed sum or a percentage of the advertised price.

Whenever Rebates are given, such a transaction should be recorded with the following documents to document the reduction of income for the developer:

– e-Credit Note: If the amount is deducted from the purchase price, without involving any cash payment.

Rental Income from Unsold Units/ Units Kept as Investment Properties

Developers often retain some units as investment properties in their project. Together with unsold units, the developer may rent them out for rental income.

For rental income from such units, again the usual e-Invoicing treatment applies:

– e-Invoice: For business tenants, or individual tenants that require e-Invoice.
– Conventional Invoice: For individual tenants that do not require an e-Invoice.

Stay Efficient & Compliant Always

Stay Efficient & Compliant Always

The introduction of e-Invoicing in Malaysia represents a significant shift towards more transparent and efficient business operations. For property developers, understanding the specific e-Invoicing requirements for various scenarios is crucial for compliance and operational efficiency. The IFCA e-Invoicing Solution is directly integrated with LHDN seamlessly via API (Application Programming Interface), thus providing an efficient way to navigate the new business landscape.

Embrace the future of invoicing with IFCA Software and streamline your property development operations with our comprehensive e-Invoicing solution. To ensure that your property business stays ahead in this digital transformation, contact us and prepare for a smooth transition to e-Invoicing today. Visit https://bit.ly/e-invoice-sm-july24 today.