LHDN E-Invoice

It is a common misconception that e-invoicing is complex and requires specialised technicians to operate. In fact, e-invoicing via ABSS is designed to simplify the invoicing process and make it easier for businesses to comply with tax compliance requirements.

While it's true that e-invoicing requires some technical preparation and staff training, most businesses are capable of adapting to the change. 
Here are some key points that show that e-invoicing is not as complicated as it seems.

Organisations should choose to start implementation early and not wait till the last minute. Part of this will be to think about the following:

• Assess the readiness of their current systems and processes, if you are on an older version of ABSS with no 0nline connectivity you will need toi transition to ABSS Accounting or Premier Connect.
• Develop an implementation plan, including staff training and system upgrades, we can help with this and have FREE training available.
• Communicate with suppliers and customers about when you will be adopting-Invoicing. Refer to the LHDN implementation guideline for your business. 
• Understand e-invoicing requirements and best practices
• Onsite support and roll-out can organised via one of our Approved Partners. You can find one close to you by visiting the partner section of our website.

By proactively preparing and seeking support, organisations can overcome concerns about the complexity of e-invoicing, make a smooth transition to a new way of invoicing, achieve compliance and improve operational efficiency.

The notion that only large enterprises are required to issue e-invoices and that small businesses are exempt is a common misconception. In reality, all businesses in Malaysia, regardless of their size, are required to implement e-invoicing by the prescribed timeline set by the Inland Revenue Board of Malaysia (IRBM).

According to the e-invoice guidelines, the implementation of e-invoicing will be carried out in phases based on the company's annual turnover:

• Businesses with an annual turnover exceeding RM 100 million must implement e-Invoicing from 1 August 2024.
• Businesses with an annual turnover exceeding RM 25 million but not exceeding RM 100 million must implement e-Invoicing from 1 January 2025.
• All other businesses must implement e-Invoicing from 1 July 2025.

This phased approach ensures that all businesses, including small and medium enterprises (SMEs), have sufficient time to prepare for the implementation of e-invoicing and adjust their systems and processes as needed.

It is important to note that there are no exemptions for small businesses. All businesses, irrespective of their size or industry, are required to comply with the e-invoicing requirements once the implementation date for their turnover category comes into effect.

Failure to comply with the e-invoicing requirements may result in penalties and legal consequences, as the law stipulates.
Small businesses should take proactive steps to understand the e-invoicing requirements, assess their readiness, and make necessary preparations to ensure a smooth transition to the e-invoicing system. 

This may include:

• Updating your ABSS accounting systems ABSS Accounting / Premier Connect. These new products will allow you to easily facilitate e-invoicing in a system and process you are used to.
• Training staff on the e-invoicing processes and requirements, this can be booked oun the ABSS website and is FREE of change.
• Communicating with suppliers and customers about the changes in invoicing practices
• Seeking guidance from tax professionals if required

By dispelling the misconception that small businesses are exempt from e-invoicing, all businesses can ensure timely compliance and avoid potential penalties. Embracing e-invoicing will help businesses streamline their invoicing processes and contribute to the overall digitalisation of the Malaysian economy.

The statement that e-invoicing must be done in real-time is a common misconception.

While it is a good practice to issue e-invoices in real time, Malaysia's e-invoicing guidelines do not make it mandatory for businesses to do so.

Below are some key points regarding the timing of e-invoicing:

Normal Issuance Time: 

• According to the e-invoicing guidelines, businesses should issue e-invoices as soon as possible after the sale or transaction is completed. This usually means within a few days of the transaction date or delivery date. However, the exact invoicing time may vary depending on the industry and type of transaction.
• Consolidated e-invoices: For customers who have not requested an e-invoice, businesses have the option of issuing a consolidated e-invoice. The consolidated e-invoice summarises all transactions with these customers within a month and the consolidated e-invoice is issued and submitted to the Inland Revenue Board of Malaysia (IRBM) for validation within the 7th day of the following month. 
• Self-Billed e-invoice: Under certain circumstances, such as purchases of goods or services from foreign suppliers, businesses are required to issue self-billed e-invoices. Depending on the type of transaction, the time for issuing a self-billed e-invoice varies, but it should normally be issued within a reasonable time after the transaction has been completed.
• Credit and debit notes: Businesses need to issue credit or debit notes when the original e-invoice needs to be corrected or adjusted. These notes should be issued as soon as possible after the adjustment amount is determined to reflect the change in the transaction.
• Technical constraints: In some cases, due to technical constraints or system failures, an enterprise may not be able to issue e-invoices in real time. In such cases, businesses should issue e-invoices as soon as possible after the issue is resolved and retain relevant documentation for tax audits.

While real-time e-invoicing is ideal, businesses should issue e-invoices within a reasonable timeframe based on their business processes and industry practices.

Here are some tips to ensure timely e-invoicing:-

• Establish a clear invoicing process and timeline and communicate it to employees
• Automate the invoicing process as much as possible to reduce manual intervention and delays
• Monitor and review invoicing regularly to ensure adherence to schedules
• Communicate with suppliers and customers to ensure that information required for electronic invoicing is available in a timely manner
• Maintain documentation and take timely corrective action in the event of technical issues or delays
• In conclusion, while real-time e-invoicing is a desirable goal, Malaysia's e-invoicing guidelines do not mandate organisations to issue e-invoices in real-time. 
• Businesses should issue e-invoices within a reasonable timeframe based on their business needs and industry practices, and take steps to ensure the timeliness and accuracy of the invoicing process.

It is incorrect to say that for every transaction on an e-commerce platform, the seller (Merchant) must issue an e-invoice to the buyer (Buyer). This is a common misconception.

According to the e-invoicing guidelines, on e-commerce platforms, the e-commerce platform provider (e.g. Shopee, Lazada, etc.) has the responsibility to act as a vendor and e-invoice each transaction when the buyer requests an e-invoice.

When a buyer purchases goods or services on an e-commerce platform, the e-commerce platform provider is required to issue an e-invoice to the buyer rather than the seller issuing an e-invoice directly to the buyer.
If the buyer does not request an e-invoice, the e-commerce platform provider can aggregate all the transactions that did not request an e-invoice within a month and issue a consolidated e-invoice to be submitted to the Inland Revenue Board of Malaysia for validation within seven (7) calendar days after the end of the month.

The e-commerce platform provider must issue a self-billed e-invoice to the seller to record the revenue the seller receives from selling goods or services on the platform. This self-billed e-invoice serves as proof of the seller's revenue.

Finally, the e-commerce platform provider needs to e-invoice the seller to record the fees paid by the seller for using the platform's services, such as commissions, promotional fees, and so on.

Therefore, on e-commerce platforms, sellers are not required to issue e-invoices directly to buyers. This responsibility lies with the e-commerce platform provider. The seller only needs to receive a self-invoiced e-invoice from the e-commerce platform provider as proof of his income.
This arrangement simplifies the e-invoicing process in e-commerce transactions and ensures compliance while reducing the administrative burden on sellers.

The e-commerce platform provider, as the supplier, is responsible for collecting the buyer's information, issuing the e-invoice and submitting the invoice data to the Malaysian Inland Revenue Board for validation.
Sellers should maintain communication with the e-commerce platform provider to understand the platform's e-invoicing policy and ensure timely receipt of self-invoiced e-invoices from the e-commerce platform for the purpose of tax filing and responding to tax audits.

It is incorrect to say that expenses paid on behalf of a company must be invoiced electronically in the employee's name?

According to the e-invoicing guidelines, when an employee pays expenses on behalf of a company, they should be invoiced electronically in the company's name wherever possible. This allows the company to claim these costs directly as a business expense.

However, in some cases, issuing e-invoices in the company's name may not be feasible. The Inland Revenue Board of Malaysia has provided concessions in such cases.

Where an e-invoice in the company's name is impossible, the employee may request an e-invoice or any existing supporting document.
The company can use the e-invoice issued in the employee's personal name or any existing supporting document issued by the suppliers as proof of business expenses.

To prove that the expenses were incurred for the company's business, the company needs to prepare relevant documents, such as

• Employee reimbursement forms
• Company's expense reimbursement policy
• Other supporting documents such as minutes of meetings, travel itineraries, etc.

Therefore, when an employee pays an expense on behalf of the company, the priority should be to obtain an e-invoice in the company's name. Suppose an e-invoice in the company's name is not available. In that case, an e-invoice in the employee's personal name or any existing supporting document issued by the suppliers can also be used as proof of business expenses as long as the company can provide the relevant documentation to prove that these expenses were incurred by the employee in question for the company business.

Companies should have a clear expense reimbursement policy and communicate it to employees to ensure that they follow the correct process when making payments on behalf of the company. Where possible, employees should obtain e-invoices in the company's name, e-invoices in their personal name, or any existing supporting document issued by the suppliers for the company's tax deduction purposes.

It is a common misconception that businesses in Malaysia do not need to issue e-invoices when purchasing goods or services from foreign suppliers. However, this is not true.

According to the e-invoice guidelines, when a Malaysian company purchases goods or services from a foreign supplier, it is required to issue a self-billed e-invoice to document the expense for tax purposes. This requirement applies even if the foreign supplier does not issue a Malaysian e-invoice.

Here's how the process works:

• The foreign supplier issues a commercial invoice or receipt to the Malaysian company for the goods or services.
• The Malaysian company, as the buyer, is required to issue a self-billed e-invoice based on the commercial invoice or receipt from the foreign supplier.
• In the self-billed e-invoice, the Malaysian company should include all the necessary details as per the e-invoice guidelines, such as the foreign supplier's name, address, and registration number (if available), as well as the details of the goods or services purchased.

If certain required details are unavailable or not applicable to the foreign supplier, the Malaysian company should input "NA" or the appropriate alternative information specified in the e-invoice guidelines.

The self-billed e-invoice must be submitted to the Inland Revenue Board of Malaysia for verification, as per the e-invoice submission procedures.
The verified self-billed e-invoice serves as proof of the Malaysian company’s expenses for tax deduction purposes.

Malaysian businesses need to maintain proper records of all transactions with foreign suppliers, including commercial invoices or receipts, self-billed e-invoices, and supporting documents, in case of a tax audit or review by the authorities.

In summary, the misconception that businesses do not need to issue e-invoices for purchases from foreign suppliers is false. Malaysian companies must issue self-billed e-invoices for such transactions to comply with the e-invoice requirements and facilitate accurate tax reporting.

According to the e-invoice Guideline, businesses are still responsible for issuing e-invoices for all transactions, even if customers do not request e-invoices. This ensures the integrity and transparency of transactions and assists the tax authorities in tax management.

However, if B2C customers do not request e-invoices, businesses may choose to issue consolidated e-invoices instead of individual e-invoices for each transaction. Consolidated e-invoices summarise the transactions of customers who did not request e-invoices within a month. Businesses are required to issue consolidated e-invoices within 7 calendar days after the end of the month and submit them to the Inland Revenue Board of Malaysia for validation.

For example, 

• ABC Retail Company made the following sales to customers who did not request electronic invoices in July 2024:
  Store A: 1,000 transactions, receipt numbers from 1001 to 2000, total amount RM50,000
  Store B: 1,500 transactions, receipt numbers from 5001 to 6500, total amount RM75,000
• ABC Retail Company can issue the following consolidated e-invoices for July 2024:
  Issue a consolidated e-invoice for Store A, listing the range of receipt numbers (1001 to 2000) and total sales amount (RM50,000).
  Issue a consolidated e-invoice for Store B, listing the range of receipt numbers (5001 to 6500) and total sales amount (RM75,000).

These consolidated e-invoices must be issued before August 7, 2024 (i.e., within 7 calendar days after the end of July 2024). Although individual e-invoices are not issued for each transaction, consolidated e-invoices can still be proof of company income for tax purposes.

Therefore, businesses cannot refrain from issuing e-invoices because customers do not request them. They must issue e-invoices for all transactions. However, they can choose to issue consolidated e-invoices for customers who do not request e-invoices to streamline the process and reduce administrative work.

The requirement for issuing an e-invoice for the disposal of fixed assets depends on whether a sale or transfer of ownership is involved.

If the fixed assets are sold to another party and ownership is transferred in exchange for consideration (e.g., money), an e-invoice should be issued to document the sale. The e-invoice should include the details of the fixed assets, the selling price, and any applicable taxes.

However, if the fixed assets are written off due to obsolescence, damage, or other reasons, and no sale or transfer of ownership is involved, an e-invoice is not required. In such cases, the write-off should be recorded in the company's accounting system, and appropriate documentation should be maintained for audit and tax purposes.

The notion that businesses do not need to issue e-invoices when selling goods or services to government agencies is a misconception. In fact, businesses are required to issue e-invoices for all commercial transactions, including those with government entities, unless specifically exempted by the e-invoicing guidelines.

Here are some key points that clarify this misconception:

• e-Invoicing applies to B2G transactions: e-Invoicing requirements apply to Business-to-Government (B2G) transactions, just as they do to Business-to-Business (B2B) and Business-to-Consumer (B2C) transactions. Businesses must issue e-invoices when supplying goods or services to government or government agencies.
• No general exemption for government transactions: The e-invoicing guidelines do not provide a general exemption for transactions with government entities. Businesses are expected to follow the same e-invoicing process and requirements for government customers as other customers.

Government procurement systems: Some government agencies may have their own procurement systems or portals that require suppliers to submit invoices in a specific format. In such cases, businesses should clarify with the government agency whether e-Invoices will be accepted or if a different invoicing process is needed.

By understanding that e-invoicing requirements generally apply to sales made to government or government agencies, businesses can ensure compliance and avoid potential penalties. It is crucial to stay informed about the specific exemptions and requirements related to government transactions and to seek clarification when needed.