What do you need to do to get your business ready for e-Invoicing?
Firstly, understand the requirements and process involved.
Requirements
Required fields
With the implementation of e-Invoice, certain information about your company, customers and suppliers are required to be included when submitting your invoice for validation to LHDN.
While, in general, we already have most of the information, some additional fields like the Tax Identification Number (TIN), Malaysia Standard Industrial Classification (MSIC) Codes are now mandatory.
You can review these in our previous article e-Invoice required fields.
Start by ensuring you have the required information.
Mapping of fields
LHDN have specified a number of standard codes that should be used when submitting invoices for validation.
Depending on whether you are opting for manual submission, or will be using an e-Invoice compliant accounting solution, you would need to either change or map these codes to those specified by LHDN.
For example, with inventory, we may be using pc or pcs for piece, whereas LHDN follow the standard codes recommended by The United Nations Economic Commission for Europe (UNECE) and use H87 instead.
See LHDN’s list of List of unit of measurement types for UOM codes.
Expenses
An e-Invoice would be required for expenses incurred by employees on behalf of the business.
Expenses include travelling, accommodation, petrol, toll, parking, purchase of refreshments, stationery, etc.
As these are Business to Consumer or B2C transactions, generally, a normal invoice would be issued.
Normal invoices would then be consolidated and submitted to LHDN for validation by the 7th of the following month.
However, as part of the e-Invoicing implementation in Malaysia, an e-Invoice would be required to support the business expense.
LHDN may disallow expenses that are not supported with a validated e-Invoice.
The employee would therefore need to request for an e-Invoice from the vendor at the time of purchase or before the 7th of the following month,
When requesting an e-Invoice, the employee can either provide his or her own details such as IC number and personal TIN, or the company’s details instead.
Ensure that your employees understand these requirements and, if preferred, they know the company details that need to be provided when requesting for an e-Invoice.
Also, ensure that your employee handbook or appointment letter clearly states that they are entitled to make these claims for the expenses incurred,
Process
As mentioned in our previous article, e-Invoice submission process, LHDN has provided two channels for submitting.
You can either submit manually through LHDN’s MyInvois Portal, or if you are using an e-Invoice compliant accounting solution, submit directly from there to LHDN via their Application Programming Interface (API).
Once you have submitted and the invoice has been validated:
Notification
LHDN will notify both parties, the supplier that the invoice has been validated, and the customer that there is an invoice for them.
Note that LHDN does not forward the invoice to the customer.
Sharing of e-Invoice
The supplier will need to forward the invoice to the customer.
The invoice must have a QR code embeded.
The QR code essentially contains a link to the e-Invoice details on LHDN’s MyInvois portal.
This is to enable the buyer to verify that the invoice has been validated.
Rejection
Either the seller or the buyer has the option to reject the invoice within 72 hours from the time of validation.
Rejection could be due to incorrect information like wrong quantity or amount, etc.
Rejection is done through the MyInvois portal, and both parties will be notified.
Do note that the stipulated 72 hours includes weekends and public holidays.
Cancellation
Once an invoice has been validated, it should not be edited or modified.
If there is an error, the seller should reject the invoice and re-issue a new one.
After the stipulated 72 hours, if an invoice needs to be amended for any reason, then the supplier should issue a credit note cancelling the invoice and issue a new one.
Do note that credit notes also need to be submitted to LHDN for validation.
Self billing
Self billing is the process of submitting purchase invoices to LHDN for validation.
Self billing is required for:
- Purchases from overseas suppliers.
- Payments to agents, dealers, distributors.
- Distribution of profits.
- e-Commerce transactions.
- Purchase of goods or services from individuals who are not engaged in business.
- Interest payments, excluding:
- Businesses (e.g., financial institutions, etc.) charging interest to the public
- Interest payments from employee to employer
- Interest payments from foreigners to Malaysian taxpayers
Most importantly
If you are not using any solution, or if your current solution is NOT e-Invoice compliant, reach out to us.
It takes time to get your solution ready, and despite the fact you may not need to comply with e-Invoicing until July 2025, it’s good to get a head start and be ready before time.
We are ready with a solution that will ease your transition and is already fully compliant with the requirements of e-Invoicing.