As announced in the recent Budget 2024, e-Invoices will be implemented in Malaysia by stages effective 1st August 2024, based on the annual revenue or turnover thresholds of businesses. By 1st July 2025, all businesses regardless of size will be required to issue e-Invoices in order to enjoy the greater accuracy, business efficiency and productivity it provides. For full compliance, it’s time to ensure that your software is compatible and ready for integration.
In the bustling realm of modern business, where every second counts and accuracy is paramount, the conventional digitalised invoicing systems are insufficient to meet the modern needs of transparency and accuracy. Enter e-Invoicing with centralised Continuous Transaction Control (CTC), a digital revolution that is reshaping the way businesses send and receive invoices. Let’s explore what e-Invoicing is and why it has emerged as a game-changer in the business world.
An e-Invoice is a digital representation of a transaction between a supplier and a buyer, replacing paper-based or electronic documents including Invoices, Credit Notes, Debit Notes and Refunds.
Just like its conventional counterparts, an e-Invoice contains the same essential information, for instance, the details of the supplier and buyer, item description, quantity, price excluding tax, tax, and total amount, recording transaction data for daily business operations.
1. Proof of Income: E-Invoice is issued whenever a sale or other transaction is made to recognise it as an income of the taxpayers.
2. Proof of Expense: This type of document covers purchases made or other expenditure by taxpayers, as well as returns and discounts. It can also be issued to correct or subtract an income receipt previously documented. Moreover, there are certain circumstances where taxpayers would need to issue a self-billed e-Invoice to document an expense such as overseas transactions, where the foreign supplier does not come under the e-Invoice ecosystem of Malaysia.
Initially proposed in the Budget 2023 tabled in October 2022, e-Invoicing with centralised Continuous Transaction Control (CTC) was slated to be implemented in Malaysia from 1st June 2024 onwards, covering both domestic and cross-border transactions, be it Business to Business (B2B), Business to Consumer (B2C) or Business to Government (B2G).
And the good news is, in the Budget 2024 tabled in October 2023, the first phase of e-Invoicing was postponed by 2 months to 1st August 2024, offering more time for businesses to get ready.
For clarity, taxpayers required to issue e-Invoices included Corporations, Partnerships, Limited Liability Partnerships (LLPs), Branches, Representative Offices, Regional Office, Trusts, Business Trusts, Unit Trusts, Real Estate Investment Trusts (REITs), Co-operative Societies, Association, or any Body of Persons that are tax-paying.
Do note that Rulers and their consort, former Rulers and their consort, as well as Federal, State and Local Government as well as their agencies, Statutory Bodies, Diplomatic Missions, Consular Officials and their employees are exempted.
Nevertheless, taxpayers can opt to participate voluntarily at an earlier date, regardless of their annual turnover or revenue.
Besides providing seamless experience to businesses, the National e-Invoicing Initiative also improves business efficiency and increases tax compliance.
The e-Invoicing initiative unifies the invoicing process through the streamlining of transaction document creation, and the transmission of data digitally to the Inland Revenue Board (LHDN). This elimination of data entry for all transactions reduces manual efforts and minimises the risk of human errors. As a result, businesses will save precious time and resources, allowing their workforce to focus on more value-added tasks.
E-Invoicing systems are designed to facilitate automatic tax return filing through seamless system integration for efficient and accurate tax reporting. Automated checks and validations ensure that invoices are accurate and compliant with regulations. No more sleepless nights worrying about discrepancies or compliance issues.
For larger businesses, the adoption of e-Invoice enables the streamlining of operations, resulting in enhanced efficiency, as well as significant time and cost savings through automated processes, seamless data integration, and improved invoice management.
For micro, small and medium-sized enterprises (MSMEs), the phased implementation offers a progressive and manageable transition to e-Invoice, allowing MSMEs to align their financial reporting and processes to be digitalised with industry standards. This longer transition period ensures that MSMEs can mitigate any potential disruptions that might arise.
E-Invoicing solutions are equipped with robust encryption and authentication mechanisms, ensuring the confidentiality and integrity of your financial data. This level of security is akin to having a high-tech vault for your sensitive information, offering peace of mind on a silver platter.
Governments around the world are recognising the benefits of e-Invoicing and mandating its use in various industries. In Malaysia, LHDN has made e-Invoicing obligatory for businesses. Compliance with LHDN regulations helps businesses to avoid penalties and stay on the right side of the law.
Tax revenue is the main source of income for countries to fund various development projects. Countries around the world are harnessing the potential of digitised business documents, to lower tax cost and improve tax efficiency, and Malaysia is no exception.
In a world where the pace of business is accelerating, e-Invoicing emerges as a beacon of efficiency, cost-effectiveness, accuracy, and security. As LHDN gears up for the implementation of e-Invoicing, businesses must recognise not only the importance of this digital evolution but also the undeniable advantages it brings to the table.
So, why should you embrace e-Invoicing? Because it’s the bridge to a brighter, more streamlined future for your business, allowing you to focus on what truly matters – growing your business besides being compliant with LHDN regulations.
As the American business magnate and philanthropist John D. Rockefeller said, “Don’t be afraid to give up the good to go for the great”. E-Invoicing is the great leap forward, and it is high time you get ready for it. Contact us to ensure that your business is compatible with the latest taxation rules by visiting https://bit.ly/IFCA-E-Invoicing today.