Understanding the Workflow of E-Invoicing
As a business owner in Malaysia, the buzz about the upcoming implementation of e-Invoicing beginning 2024 has likely reached you in recent months. This revolutionary initiative promises to streamline transaction reporting and reform tax administration.
Before you dive into this digital adventure, let’s learn about the vital role that your Tax Identification Number (TIN) and Digital Certificate play in this transformative journey.
What are TIN and Digital Certificates for?
Think of your Tax Identification Number (TIN) as the digital passport for your business. Much like your passport for international travel, your TIN serves as the key identifier in the realm of e-invoicing transactions. Issued by the Inland Revenue Board of Malaysia (LHDN), it allows authorities to recognise your business as an e-Invoice issuer, ensuring the legitimacy of your e-Invoices.
Now, picture a secure rubber stamp that certifies your business and verifies the authenticity of your invoices. That’s the role of your Digital Certificate! This unique document acts as a virtual guarantee that your e-invoices are secure, authentic, and trustworthy, adding an extra layer of security to your transactions.
Acquiring Your TIN and Digital Certificate in A Breeze!
The good news? Obtaining your TIN and Digital Certificate is a straightforward process.
1. Retrieve Your TIN:
a. MyTax Portal:
– Log in to the MyTax Portal in LHDN website (https://mytax.hasil.gov.my), and access your business information including TIN conveniently.
b. e-Daftar Platform:
– For those unable to find their TIN on MyTax, fret not! Follow these simple steps to obtain a TIN:
i. Log in to MyTax Portal.
ii. Click “e-Daftar” (https://mytax.hasil.gov.my/ezHasil?data=e-Daftar).
iii. Fill in the required fields.
iv. Click “Search” to register your TIN.
2. Get Your Digital Certificate:
Once ready with your TIN, acquiring your Digital Certificate is seamless. It’s automatically issued by LHDN and linked to your unique TIN, and will be valid for 3 years.
This certificate ensures the authenticity, integrity, and non-repudiation of your e-invoices, offering peace of mind for both you and your clients.
Choosing the Right Submission Mechanism
Now that Malaysia gears up for the imminent implementation of e-Invoicing, businesses face a critical decision: choosing the suitable submission mechanism.
LHDN presents two distinct mechanisms: manual submission via the MyInvois Portal, and automatic submission via software with Application Programming Interface (API), which is a code that links your business software to the LHDN server and allows them to communicate directly.
Which one aligns with your business goals? To decide which submission mechanism is more suitable for you, let’s look at the intrinsic difference between these 2 mechanisms.
Factors to Consider in Choosing a Submission Mechanism
Also, kindly bear in mind the your specific needs while deciding on the submission mechanism:
Transaction Volume: If processing a large number of invoices daily, the automated submission through Software embedded with API might be the better fit.
Technical Expertise: Are you comfortable with operating the Software that features direct connection to LHDN?
Budget: While the Software with API requires upfront investment, it is more efficient and convenient in the long run, thus more beneficial to businesses.
Crucially, business owners should choose a secure mechanism that ensures legal compliance and offers sufficient technical support, in order to run your business with a total peace of mind.
E-Invoicing Workflow: A Step-by-Step Guide to Success
Ready to embark on the journey e-Invoicing? The following comprehensive guide will decode the essentials, and illustrate the workflow of a seamless e-Invoicing operation through Direct API Integration.
Step 1: Submission of e-Invoice by the Supplier
Upon completing a transaction, the suppliers will issue an e-Invoice. The e-Invoice can be submitted to LHDN via either MyInvois Portal or Software with Direct API Integration for validation.
Step 2: Validation by LHDN
The server of LHDN will validate the e-Invoice in near real-time. Upon successful validation, the supplier receives a validated e-Invoice with a unique LHDN identification number, validated date and time, as well as an validation link.
Whereas if there is any error, it will be flagged and communicated through an error message.
Step 3: Notification by LHDN
Both the supplier and buyer receive automatic notifications from LHDN regarding the validation status of the e-Invoice. This ensures transparency and timely communication throughout the process.
Steps 4: Sharing the E-Invoice by the Supplier
After the e-Invoice is validated, the supplier should embed the validation link provided by LDHN as a QR Code into the e-Invoice, and share the validated e-Invoice with the buyer. This QR code allows the buyer to verify the existence and status of the e-Invoice via MyInvois Portal.
Steps 5: Request for Rejection by the Buyer (if necessary)
The buyer may reject the e-Invoice within 72 hours of the validation by LHDN if any information contained inside is incorrect. The rejection request should specify the reason for rejection, as well as the unique identifier of the e-Invoice.
Step 6: Request for Rejection by the Supplier (if necessary)
If the supplier is satisfied with the reason provided, he will submit the Request for Rejection of the e-Invoice to LHDN.
Steps 7: Cancellation Notification by LHDN (if necessary)
Upon successful cancellation, the buyer will be notified accordingly. The whole process including rejection and cancellation must be done within 72 hours from the validation.
In case the rejection by buyer or the cancellation by supplier is not carried out within 72 hours, the e-Invoice cannot be cancelled anymore. A fresh e-Invoice (credit note, debit note or refund note) must be issued to rectify the error.
Steps 8: Storage of e-Invoice
Steps 9: Reporting and Dashboard Services for Taxpayers
Source: E-Invoice Guideline (Version 2.1) published by the Inland Revenue Board of Malaysia (LHDN), 2.4 e Invoice model via API, pg 29 – 40 (https://www.hasil.gov.my/media/iqzj1llk/irbm-e-invoice-guideline-version-21.pdf)
IFCA Solutions: The Game Changer You Need
So you are now acquainted with the whole e-Invoicing process, what you need is a compatible software. As explained earlier, it is more convenient for businesses with larger transactions to login and transmit the e-Invoice details through an Enterprise Resource Planning (ERP) software that offers Direct API Integration.
IFCA ERP systems including PropertyX, ContractX, HotelX and more are exactly the tools you need. Embedded with IFCA API for direct integration with LHDN servers, these digital solutions come in handy to reduce your workload by digitally transforming and automating your business operation, including the e-Invoicing process. Think of it as a flyover that allows you to bypass the congestion, offering you more time to develop your business:
Turbocharged Efficiency: Ditch the manual batch submission with spreadsheets. Let the API handle the heavy lifting, automatically transmitting your invoices to LHDN servers for instant validation. Every click saved is a productivity power-up.
Error-Proof Automation: Forget the typos and misplaced commas that haunt manual data entry. With Direct API integration, your data flows seamlessly, minimising errors and maximising accuracy.
Unlimited Potential: Your business isn’t built for bottlenecks. As your transaction volume skyrockets, the API scales effortlessly, ensuring your invoicing keeps pace with your growth.
Securing an ERP System with Direct API Integration for e-Invoicing is like getting a personal pit crew during the race. It’s about streamlining your workflow, minimising errors, and freeing you to focus on what you do best – building a thriving business.