Understanding IRBM E-Invoice Rejection and Cancellation in Malaysia

An e-invoice is very much prone to errors whether it may be the wrong input of transaction details, skipping the filling of any mandatory details, not following the approved structure of IRBM authority, and many more reasons. These mistakes can be from both ends’ suppliers and buyers. So, now what happens in case an e-invoice does not pass the validation or gets rejected whether from the buyer’s side or via the IRBM authority? Since e-invoicing is very new to Malaysian businesses and finance teams it is safe to say that understanding the e-invoice rejection and cancellation process is crucial at this point. This article talks about IRBM e-invoice rejection and cancellation, offering insights into the process and strategies to minimize such occurrences.

Read more:- What are the 53 Mandatory Fields of E-invoice in Malaysia?

The E-Invoicing Journey- From Creation to Acceptance

Before we explore rejection and cancellation, let’s briefly outline the e-invoicing process in Malaysia-

1. Generation and Submission– Businesses create e-invoices individually or in batches.

2. Validation – The tax authority performs real-time validation.

3. Notification – Both parties receive status updates.

4. Sharing – The seller shares the e-invoice with the buyer with a QR code for final validation.

5. Buyer Review – The recipient examines the e-invoice for accuracy.

6. Rejection/ Cancellation – The buyer affirms acceptance or rejection of the e-invoice within 72 hours.

7. Storage – Validated e-invoices are stored in the LHDN’s database, and taxpayers are advised to keep these records.

8. Reporting and Dashboard Services – Taxpayers can request and retrieve e-Invoices in various formats through the MyInvois Portal.

Why E-Invoices Face Rejection

E-invoices can be rejected at two stages- during initial validation by the tax authority (LHDN/ MyInvois Portal) and upon review by the buyer. Let’s examine the common e-invoice rejection and cancellation reasons for each-

Tax Authority Rejection

1. Structure Non-Compliance

The e-invoice must comply with the specified XML or JSON formats, maintaining the correct structure and hierarchy of the document. Incomplete or Incorrect Core Fields- Missing or inaccurate information in any of the 55 essential fields, including TIN, addresses, and product descriptions, will result in rejection.

2. Invalid Digital Signature

A valid digital signature is necessary to ensure the authenticity of the invoice.

3. Taxpayer Validation

The taxpayers mentioned in the invoice must be valid at the time of issuance.

4. Invalid Reference Documents

Using invalid reference documents, such as previous invoices or contracts, can cause rejection.

5. Incorrect Code Usage

Codes for currency, tax types, and similar categories must be accurately applied.

6. Duplicate Submissions

Invoices with duplicate information will be rejected by the IRBM portal.

Reasons for Rejection by the Buyer

Even if the e-invoice clears IRBM validation, the buyer has up to 72 hours to reject it if discrepancies are found. Common reasons for rejection include-

1. Incorrect Details – Mistakes in item descriptions, quantities, quality, or supplier information.

2. Discrepancies in Agreed Terms – Differences in price, discounts, or payment conditions.

3. Purchase Order Mismatches – Variances from the original purchase order specifications.

4. Unauthorized Charges – Addition of fees or charges that were not approved.

5. Tax Information Errors – Inaccurate tax rates or incorrect tax details.

6. Late Submission – Submitting the e-invoice beyond the agreed deadline.

Reasons for IRBM E-Invoice Cancellation by the Supplier

Suppliers might need to perform IRBM e-invoice cancellation due to several reasons, including-

1. Errors in Invoice Details – Mistakes in pricing, quantities, or other critical information.

2. Duplicate Invoices – Issuing multiple invoices for the same transaction.

3. Changes in Terms – Adjustments to transaction terms after the invoice was issued.

4. Customer Request – The buyer requests cancellation due to errors or changes in the order.

5. Regulatory Changes – The changing regulations that might impact on the invoice’s validity.

The IRBM E-Invoice Rejection and Cancellation Process

In the system of e-invoice Malaysia, one is allowed a 72-hour window post-validation. This is the e-invoice rejection and cancellation timeline set by IRBM.

• Buyer Rejection – Within 72 hours, buyers can request IRBM e-invoice rejection, specifying the reason.

• Supplier Cancellation – Suppliers can cancel e-invoices within the same timeframe, providing justification.

After this period, any adjustments whether rejection or cancellation require new corrective e-invoices, such as a credit note, debit note, or refund note.

Strategies to Minimize IRBM E-Invoice Rejections

For suppliers and buyers, the ideal situation is when the e-invoice processes smoothly in one go without any mistakes or scope of change. It not only saves their time but also the financial team’s extra efforts. So, how do you optimize your e-invoicing process and reduce rejections? Here is a quick guide –

1. Invest in comprehensive staff training on e-invoicing regulations and best practices.

2. Implement robust and reliable billing system, Point of Sale (POS), and Enterprise Resource Planning (ERP) systems that automate data fetching and feeding, reducing human errors.

3. Automate data transmission from systems using the API e-Invoicing model to minimize manual entry errors.

4. Establish rigorous pre-submission verification protocols.

5. Maintain open communication channels with buyers to address potential issues proactively.

6. Consider partnering with specialized e-invoicing solution providers for enhanced accuracy and compliance. These providers integrate your ERP or POS systems with the MyInvois System, adding data checkpoints, anomaly detection, and additional security measures.

Complyrobo Solutions – Complyrobo software is one such solution that can help you quickly adopt e-invoice Malaysia and free you from any extra efforts of constant IRBM e-invoice rejection and cancellation. With advanced features like 200+ data entry and validation checks, it’s much more convenient to clear e-invoices in one go. From swift data extraction to one-click e-invoice submission, make your transactional process streamlined with Complyrobo software.

Embracing the Future of Digital Taxation

As Malaysia continues to digitize its tax processes, understanding and adapting to e-invoicing requirements becomes crucial for businesses. By staying informed about IRBM e-invoice rejection and cancellation procedures and implementing preventive measures, companies can ensure smoother operations and compliance in Malaysia’s developing digital tax space.

Remember, while the goal is to minimize rejections and cancellations, they are sometimes unavoidable. The key is to handle them efficiently when they occur and learn from each instance to improve your e-invoicing processes continuously.