Announced last year, Malaysia’s upcoming e-invoicing system will unite the many tax reporting workflows across the country under one streamlined platform as part of the government’s efforts to improve transparency and efficiency in tax reporting,
In other words, it’s going to be much harder to evade or underdeclare taxes.
As MISHU serves many SMEs, we often get approached by business owners asking how they will be impacted by e-invoicing in the short and long-term.
If you’d prefer primary sources, here are official documents we’ve used as references:
If government lingo gives you indigestion, we’ve distilled the documents into seven key things Malaysian SMEs need to know about our incoming e-invoicing system.
- 1. It uses a reporting framework called PEPPOL
- 2. You need PEPPOL-compliant software
- 3. Tax reporting will get much easier
- 4. Not ALL transactions need e-invoices
- 5. You need e-invoices for internal processes
- 6. SMEs don’t have to start until 2025
- 7. There’s a RM50,000 tax deduction for e-invoicing
- Let MISHU handle your accounting
1. It uses a reporting framework called PEPPOL
You’ll hear and see this word a lot in discussions about e-invocing, and it’s not Europeans pronouncing ‘people’ funny.
PEPPOL stands for Pan-European Public Procurement On-Line and is an internationally recognised network for reporting and recording transactions.
Members of the PEPPOL network can send e-documents to each other in a standard format – and because the network is global, LHDN has a clear overview of company revenue whether it is from domestic or international buyers.
1.1 MDEC is Malaysia’s PEPPOL Authority
PEPPOL Authorities are appointed with the approval of OpenPeppol (the NGO that oversees its global implementation) to facilitate the adoption of PEPPOL on a national level while staying fully compliant with international standards.
For Malaysia, that responsibility falls on the Malaysia Digital Economy Corporation.
2. You need PEPPOL-compliant software
Eventually, whatever invoicing system your business uses must be accredited by MDEC as PEPPOL-compliant, which means it generates e-invoices that meet reporting standards.
Currently, service providers in Malaysia are in the process of updating their internal processes and submitting them for review and approval, and you may find official working documents here and here.
3. Tax reporting will get much easier
Here’s a screenshot from LHDN showing the workflow of an average e-invoice.
Because each e-invoice immediately gets sent to LHDN, businesses can report taxes in real time instead of compiling and submitting it seasonally.
For SMEs, this can prevent missed opportunities for tax rebates or accidentally underdeclaring taxes due to missed invoices.
4. Not ALL transactions need e-invoices
For many B2C businesses dealing in multiple smaller transactions (think F&B outlets), unless the customer specifically requests for an e-invoice, you can issue them with a regular receipt or invoice.
A buyer who initially does not request an e-invoice has 30 days to request one, after which your business may decline their request.
However, you must aggregate all such transactions on a monthly basis and submit a consolidated e-Invoice to LHDN within seven days after the month’s end.
4.1 Some transactions do require e-invoices
Certain businesses dealing in high-value transactions are required to issue e-invoices for each transaction. Here is the current list as of January 2024:
|Types of Activities/Transactions Where Consolidated e-Invoice is Not Allowed
|Sale of any motor vehicle.
|1. Sale of flight ticket 2. Private charter
|Luxury Goods & Jewellery
|Details yet to be confirmed.
|Construction contractor undertaking construction contract, as defined in the Income Tax (Construction Contracts) Regulations 2007.
|Wholesalers & Retailers of Construction Materials
|Sale of construction materials as defined under the Lembaga Pembangunan Industri Pembinaan Malaysia Act 1994, regardless of volume sold.
|Payment to Agents/Dealers/Distributors
|Payments made to agents, dealers, or distributors.
Anyone planning on laundering money by buying Rolexes, best think of something else.
5. You need e-invoices for internal processes
Company expenses related to staff benefits, compensation, and anything that involves cashflow will require e-invoices to substantiate the expense before tax deductions can be made.
Whenever possible, invoices that will be used as tax deductions should contain the company’s information as the buyer rather than the employee.
6. SMEs don’t have to start until 2025
LHDN and MDEC plan to implement e-invoicing in three phases, starting with the largest income earners:
|Annual turnover or revenue of more than RM100 million
|1 August 2024
|Annual turnover or revenue of between RM25 million and RM100 million
|1 January 2025
|1 July 2025
However, just because you don’t have to do it now, doesn’t mean you shouldn’t at least look into it, considering our last point.
7. There’s a RM50,000 tax deduction for e-invoicing
We touched on this in our Ekonomi Madani business takeaways, but in summary, under Malaysia’s Ekonomi Madani, there is a proposed SME tax deduction up to RM50,000 per year for expenses incurred e-invoicing implementation.
Not every business qualifies for this, and of those that do, there’s probably not enough to go to each, so here’s your little dose of FOMO to get moving!
Let MISHU handle your accounting
MISHU’s certified accountants are here to assist you with professional services at affordable prices. Our plans cater to organisations of every size – talk to us to find your perfect fit.