During transactions between buyers and sellers, it’s not just the actual transaction value that’s part of the transaction. There are other expenses involved that also need to be mentioned and dealt with in the E-Invoice. These exchanges between buyers and sellers extend beyond the primary value of goods or services. The IRBM has developed guidelines for treating expenses, which are also called disbursement and reimbursement.
Understanding Disbursement and Reimbursement
What is E-Invoicing Reimbursement
Reimbursements refer to the recovery of out-of-pocket costs incurred by the seller (payer) on behalf of the buyer (payee). For instance, if a seller purchases materials or pays for services required to fulfill a buyer’s order, the seller might later seek reimbursement for these expenses from the buyer.
What is E-Invoicing Disbursement
Disbursements, on the other hand, are out-of-pocket expenses paid by the seller for services or goods that directly benefit the buyer, and these costs are passed on to the buyer as part of the transaction.
Current Practice in Malaysia
Malaysian e-invoicing standards clearly state that sellers are responsible for reporting such expenses in their invoices when they are issued to buyers. This process is designed to align with e-invoicing Malaysia guidelines, ensuring transparency and compliance.
Key Terminologies
To clarify our discussion –
- Supplier 1- The primary supplier involved in the transaction.
- Supplier 2- A third party or intermediary.
Scenario 1- Supplier 1 Issues E-Invoice to Buyer
In this scenario, there is a middle party (Supplier 2) who makes the payment to Supplier 1 on behalf of the buyer. The invoice is sent directly to the buyer for goods or services provided, but the payment settlement is being made by Supplier 2, acting on behalf of the buyer.
Supplier 2 –
- Handles the transaction and makes payment on behalf of Buyer
- Issues an e-invoice excluding the payment made on the buyer’s behalf.
Steps Involved-
1. Agreement– Supplier 2 agrees with the buyer to supply goods or services and handle payments on their behalf.
2. Issuance of E-Invoice– After completing a sale, Supplier 1 issues an e-invoice to the buyer, following the requirements specified in the e-invoice Guideline Appendices 1 and 2, and submits it to the Inland Revenue Board of Malaysia (IRBM) for validation.
3. Payment by Supplier 2– Supplier 2 makes a payment to Supplier 1 on behalf of the buyer and obtains payment proof.
4. Final E-Invoice by Supplier 2– Supplier 2 issues an e-invoice to the buyer for the goods or services, excluding the payment made on the buyer’s behalf.
Example-
Parties Involved
- Buyer – ABC Electronics
- Supplier 1 – Local Farmer
- Supplier 2 – Caterer
ABC Electronics (buyer) hired a catering service for a corporate event on December 15, 2024. The caterer (Supplier 2) purchased fresh produce from a local farmer (Supplier 1) on December 1, 2024. The farmer issued an e-invoice directly to ABC Electronics for the produce. The caterer then paid the farmer RM3,000 on behalf of ABC Electronics on December 10, 2024. The caterer also issued an e-invoice for their catering services, excluding the payment made to the farmer.
Scenario 2- Supplier 2 Issues E-Invoice to Buyer
In this scenario, Supplier 1 invoices Supplier 2 for goods or services intended for the buyer. Supplier 2 then issues a separate e-invoice to the buyer detailing the services and any disbursement or reimbursement.
Supplier 2 to buyer –
Issues an e-invoice to the buyer including details of payments made
Steps Involved-
- Agreement– Supplier 2 agrees to provide goods or services to the buyer and manage payments on their behalf.
- Issuance of E-Invoice by Supplier 1– Supplier 1 issues an e-invoice to Supplier 2, adhering to the e-invoice Guideline Appendices 1 and 2, and submits it to IRBM for validation.
- Payment– Supplier 2 pays Supplier 1 and obtains proof of payment.
- Final E-Invoice by Supplier 2– Supplier 2 issues an e-invoice to the buyer, listing service fees and disbursements as separate line items.
Example-
Parties Involved
- Buyer – XYZ Marketing
- Supplier 1 – Tech Company
- Supplier 2 – Conference Organizer
XYZ Marketing (buyer) organized a conference on January 20, 2025. The conference organizer (Supplier 2) rented an audiovisual system from a tech company (Supplier 1), incurring RM20,000 in costs. The tech company issued an e-invoice to the conference organizer for the rental. The organizer then issued an e-invoice to XYZ Marketing, itemizing both the service fee and the audiovisual system rental as separate line items.
In Case of Settled Payments Between Buyer and Supplier 2
XYZ Manufacturing Ltd. (buyer), a subsidiary of Global Holdings Inc. (supplier 2), engaged TechRecruit Solutions (Supplier 1) for IT recruitment services costing RM10,000 on August 1, 2024. TechRecruit Solutions issued an e-invoice to XYZ Manufacturing. Global Holdings paid TechRecruit Solutions on behalf of XYZ Manufacturing and recorded the amount receivable in its accounts. XYZ Manufacturing reimbursed Global Holdings on November 30, 2024. No additional e-invoice was required between TechRecruit Solutions and Global Holdings or between Global Holdings and XYZ Manufacturing.
Suppose Global Holdings charges an intercompany fee to XYZ Manufacturing for payment. In that case, Global Holdings must issue an e-invoice to XYZ Manufacturing for income verification (for Global Holdings) and expense documentation (for XYZ Manufacturing).
Conclusion
Understanding the distinctions disbursement vs reimbursement and their processing within Malaysia’s e-invoicing system is crucial for ensuring compliance and clarity in financial transactions. By adhering to the outlined steps and scenarios, businesses can maintain accurate and efficient e-invoicing practices.
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