Malaysia is on the way to implementing the e-invoicing mandate, and for now, it’s made compulsory only for businesses or enterprises with turnover over RM100 million. But that’s just the start. The e-invoicing timeline will extend to companies with sales revenue of more than RM50 million and up to RM100 from 1st January 2025. Further, the e-invoicing mandate in Malaysia will be live for all by 2026.
So, the mandate is inevitable. The only way to align the businesses with the mandate is to implement the practice right from the start. Of course, challenges will occur. It’s a long road to perfection. Mastering the process requires understanding the mandate and workflow, aligning with vendors, equipping teams with the necessary technology, and training finance and tax teams with the right knowledge.
But we must recognize the importance of e-invoicing!
It’s the way to bridge the gap between data and transactional reporting and tax compliance in Malaysia. In fact, e-invoicing mandate in Malaysia is the starting point of your tax handling. For any organization, transactions generate the need for taxes, and once you establish a proper system for reporting and recording all transactions, reporting taxes via returns and computing the liable taxes becomes easy.
Real-time reporting
Real-time reporting provides tax authorities with invoice data immediately or shortly after the invoice issuance. It helps businesses enhance their overall compliance. E-invoicing is the digital exchange of invoices in a structured, computer-readable format, enabling seamless processing.
The nature of e-invoicing in Malaysia is quite complicated.
You have to complete many steps under the LHDN e-invoicing guidelines before the e-invoice clearance in real-time by the IRBM portal (MyInvois) and also accepted or rejected by the Buyer/ vendor. Not to ignore the many changing legislations and regulations of the Malaysian e-invoicing by the government. There are multiple sets of regulations for both the API integrations and Peppol. Also, cross-border businesses have their own set of regulations to deal with.
Even after considering the difficulties in e-invoicing, real-time reporting is still the way forward for most businesses that want to achieve stress-free tax compliance in all the countries in which they operate.
Read more:- Know All About Peppol Integration and Details of MY-PINT
Also, non-compliance is not an option.
There are risks and penalties involved for not following the e-invoicing mandate in Malaysia that include –
- Financial penalties– Monetary fines for non-compliance vary from fixed amounts to a percentage of the invoice value, and you have to pay these fines to the national financial authorities.
- Legal repercussions– Lawsuits or prosecution from legal authorities also come loaded with associated penalties and court costs.
- Reputational damage—A non-compliant business is more likely to lose the trust of its suppliers, customers, or partners, who may be made anxious by the organization’s non-compliance.
Advantages of E-Invoicing Adoption
The benefits of adopting e-invoicing extend beyond mere compliance. Here are some additional advantages-
1. Leaving No More for Tax Errors
The biggest mistake one can make while handling compliance is entering incorrect data in the filed returns. This process starts with manually entering the data from respective Excel files and other sources. With paper invoices, it’s even more cluttered because the invoices get lost, or, in case of errors, the rework takes too much time and effort.
What e-invoicing does is remove these redundancies by making the process automated with smart validation checks from the time the data is extracted from the Excel file to the time the e-invoice is being generated.
2. Real-Time Data Access
The turnaround time for invoicing verification plays a major role in compliance handling. Paper invoicing’s TAT is huge, ranging from 15 days to even more. But smart e-invoicing reduces this time to real-time, giving the taxpayer the option to immediately handle their tax for the transactions done.
This helps maintain up-to-date records and ensures timely compliance with tax regulations. Also, the format of e-invoices is standardized to help taxpayers automate the generation of tax returns.
3. Improved Audit Readiness
E-invoicing ensures that all transaction data is recorded and stored digitally, making it easier for businesses to prepare for audits. The availability of detailed and accurate records simplifies the audit process and reduces the time and resources required for audit preparation. Plus, with features like digital signatures, verifying that an e-invoice belongs to the right party is easier while auditing.
4. Cost Savings
While it might seem that e-invoicing is costing you more today, as it’s the first-time businesses are going for the e-invoicing mandate in Malaysia, that’s not the case. The technology and training you invest in today will save you 10X more in the future. The return from technology to the cost of paper invoices is a lot higher. Not forgetting the lower administrative costs associated with tax compliance and savings due to reduction in errors and improved efficiency.
5. Faster Reconciliation and Settlement
E-invoicing facilitates quicker reconciliation of accounts and faster settlement of transactions, improving cash flow management. This ensures that businesses have better control over their financial resources.
6. Quick Payment Cycles
Digital invoicing accelerates invoice delivery and approval, leading to quicker payment cycles.
7. Improved Vendor and Supplier Relationships
With a standardized and efficient invoicing process, businesses can ensure timely payments to vendors and suppliers, strengthening business relationships and fostering trust.
How Complyrobo Can Help?
The transfer of this valuable information depends on secure and reliable data transfers. Placing the burden of the transfer itself on the shoulders of a trusted partner like Binary Semantics’ software Complyrobo helps protect sensitive financial information and makes reporting more accurate with techniques like encryption and secure transfer protocols. Businesses across world are using software to simplify this digital transformation and the same applies to the digital transformation in Malaysia.
It’s a cloud-based automation software that connects your system with the IRBM portal (MyInvois) and lets you generate, validate, and send the e-invoices in real-time. Alongside this, our e-invoicing software in Malaysia follows all LHDN and MDEC regulations and keeps itself updated automatically. We provide integration solutions, whether it’s connecting your local system or ERP with IRBM’s portal via API or through Peppol network.
Get an option to fill the required e-invoicing fields automatically while staying in touch with your vendors through a quick email interaction facility right from the dashboard.
Read more blogs:
What are the 53 Mandatory Fields of E-invoice in Malaysia?
