In recent years, Malaysia has embraced the digital transformation wave with the adoption of e-invoicing. The new e-invoicing system in Malaysia is aimed at streamlining the generation, transmission, and recordkeeping of transaction documents.
This blog aims to explore the various scenarios and types of e-invoices prevalent in the Malaysian landscape.
Scenarios Requiring E-Invoice Issuance:
Lembaga Hasil Dalam Negeri Malaysia (LHDN) has laid down scenarios in which e-invoice generation is mandatory. The transactions that fall under e-invoice implementation are discussed below,
1. Proof of Income:
E-invoices are issued as a testament to income recognition whenever a sale or transaction takes place. This plays a crucial role in documenting the financial activities of taxpayers, providing a transparent view of their income sources.
2. Proof of Expense:
This type of e-invoice is generated to record purchases, spending, returns, and discounts by taxpayers. It serves as a comprehensive document, including instances where taxpayers must issue self-billed e-invoices for foreign transactions.
For example, when dealing with a foreign supplier not using Malaysia's MyInvois System, taxpayers are required to issue self-billed e-invoices to document expenses.
Types of E-Invoices:
Mentioned below are the types of e-invoices categorized by the Inland Revenue Board of Malaysia.
1. Invoice:
The fundamental e-invoice, this commercial document meticulously itemizes and records transactions between a Supplier and Buyer. It not only serves as proof of a transaction but also includes instances where self-billed e-invoices are issued to document expenses, especially in the context of foreign transactions.
2. Credit Note:
Suppliers issue credit notes to rectify errors, apply discounts, or account for returns in previously issued e-invoices. The purpose is to reduce the value of the original e-invoice, addressing situations where the reduction doesn't involve returning money to the Buyer.
3. Debit Note:
This type of e-invoice indicates additional charges on a previously issued e-invoice. Debit notes play a crucial role in ensuring that any additional costs are accurately documented and communicated to the concerned parties.
4. Refund:
A refund e-invoice is issued by a Supplier to confirm the refund of the Buyer's payment. This becomes relevant in situations where there's a return of money to the Buyer, providing a clear record of the transaction.
Types of Transactions
The e-Invoice system encompasses various transaction types, including B2B, B2C, and B2G.
The e-invoice mandate applies to all entities engaging in commercial activities in Malaysia. This requirement extends to individuals and legal entities, including associations, bodies of persons, branches, business trusts, cooperative societies, corporations, limited liability partnerships, partnerships, property trust funds, property trusts, real estate investment trusts, representative offices, regional offices, trust bodies, and unit trusts.
For specific B2C transactions where end consumers do not necessitate e-invoices for tax purposes, suppliers have the flexibility to issue regular receipts or invoices based on current practices. However, within a defined timeframe, suppliers must aggregate these normal receipts or invoices and issue a consolidated e-invoice to support transactions conducted with end consumers.
In the case of B2G transactions, the e-invoice process mirrors that of B2B.
Conclusion:
E-invoicing in Malaysia is a strategic move towards efficiency, accuracy, and transparency in financial transactions. Understanding the scenarios requiring e-invoice issuance and the various types of e-invoices is crucial for businesses and taxpayers navigating this digital landscape.
Embracing these practices not only ensures compliance with regulatory guidelines but also fosters a more robust and accountable financial ecosystem in Malaysia. With an efficient and compliant e-invoicing solution, your business can easily navigate through the complexities of the e-invoicing mandate.