e-Invoicing 6 months of flexibility: TRATAX FAQ

Following the Inland Revenue Board of Malaysia (“IRBM”)’s media statement last Friday, 26th July 2024, we provide our take and responses on six (6) popular questions.

(1) Is the implementation of e-invoice deferred by 6 months?

There is no deferment. The initial 6-month period simply offers additional flexibility with regards to the use of consolidated e-Invoice feature. The flexibilities are as follows:

1. Applicable to all industries (including industries such as automotive, aviation & construction for which the consolidation approach is not permitted in the long term, i.e. beyond the 6-month period);
2. Consolidated e-Invoice is permitted on all kinds of self-billed e-Invoices (including in respect of transactions such as importation of goods and services, and incentives to local Agents, Dealers & Distributors (“ADDs”), for which consolidated e-Invoice is not permitted in the long term);
3. Flexibility on the “Description of Product or Service” used for the purpose of consolidated e-Invoice. Upon the lapse of the initial 6-month period, the invoice/bill/receipt number of every transaction encompassed in the consolidated e-Invoice is required to be tracked and reported as part of the consolidated e-Invoice; and
4. The business is not compelled to issue transactional e-Invoice amid request from customer during this period. Note that the customer should be given the invoice/bill/receipt as per current practice, and such documentation should suffice for them to claim tax deduction/relief.

Where the consolidated e-Invoice approach is used, all transactions within the respective month must be ‘registered’ as a consolidated e-Invoice by 7th of the following month (except for importation, for which the deadline is by the end of the following month).

Hence, companies with annual turnover in excess of RM100 million must ensure the first compliance obligation is fulfilled no later than 7th September 2024.

(2) My company’s annual turnover is between RM25 million and RM100 million. What should I do?
Subject to further guidance from IRBM, it appears that the company may choose to either perform:

1. a ‘full implementation’ from 1st January 2025; or
2. limited implementation based on the flexibilities effective from 1st January 2025, and switchover to ‘full implementation’ not later than 1st July 2025.

For companies pursuing approach (b) above, two rounds of change management would be required, amid the flexibilities offered. Among other things, impact assessment must be performed prior to 1st January 2025 to determine the right document type for transactions with ADDs. Also, mechanism for data collection to perform self-billed requirements for transactions with foreign vendors etc. must be put in place by 1st January 2025.

Should the company perform ‘full implementation’ from 1st January 2025, it would be eligible for accelerated capital allowances for purchase of ICT equipment and computer software packages incurred during the years of assessment 2024 and 2025. This is not an additional allowance, but existing allowances are granted on an accelerated rate within 2 years to provide cash flow benefits to taxpayers.

Hence, the management should make an informed decision after carefully weighing the pros and cons of both approaches.

(3) My company’s annual turnover is above RM100 million, and we are somewhat prepared to implement e-Invoicing as per the original guidelines. What should we do?
If there is sufficient readiness, the company may proceed to implement full compliance from 1st August 2024. Where IRBM’s validation cannot be obtained for some transactions due to factors such as system issues or incomplete / incorrect customer data, the company may resort to issuance of consolidated e-Invoice only for those transactions. Say, during August 2024 a company has 500 sale transactions but succeeded to issue transactional e-Invoice only on 450 transactions, the company may continue to issue normal invoice per current billing practice for the other 50 transactions and report the aggregate values [of the 50 transactions] to IRBM via the ‘consolidated e-Invoice’ approach at the end of the month.

Alternatively, if there are concerns over the overall readiness, you may adopt the flexible approach for August 2024 and switchover to full implementation any time before 1st February 2025 (i.e. anytime within the 6-month period). Despite the flexibilities, some adaptations to the billing, accounting, operational and/or payment practices may still be necessary from 1st August 2024 onwards.

For companies that perform ‘full implementation’ by 1st August 2024, accelerated capital allowances are granted for purchase of ICT equipment and computer software packages during the years of assessment 2024 and 2025.

(4) What is a consolidated e-Invoice?

The term ‘invoice’ is generally for transactions between two specific parties. The same is not true for the case of ‘consolidated e-Invoice’.

‘Consolidated e-Invoice’ is a technical term which refers to aggregation of multiple transactions with various customers for the purposes of validation by IRBM. There is no requirement to state particulars of each customer involved, and hence ‘consolidated e-Invoice’ may be regarded as a single-party reporting of transactions within a period for which e-Invoice was not issued transaction-by-transaction.

The same approach is also applicable for aggregation of transactions with foreign vendors / ADDs etc. during the initial 6-month period.

Consolidated e-Invoice may also be used to aggregate credit notes and debit notes within a period.

(5) What are the particulars required for consolidated e-Invoice for sale transactions during the initial 6-month period?

While the particulars of vendor are readily available, simplification applies with regards to customer data, as follows:

Buyer Name: General Public
Buyer TIN: EI00000000010
Buyer Business Registration: NA
Buyer SST Number: NA
Buyer Email: NA
Buyer Address: NA

The reference number of the invoice/bill/receipt issued to the customer is generally required to be compiled for reporting as ‘description of product or service’ in the consolidated e-Invoice, but [as stated earlier] taxpayers are given the flexibility to not compile and report the invoice/bill/receipt reference number within consolidated e-Invoice during the initial 6-month period.

The total values from various invoices/bills/receipts issued to multiple customers during the period may be compiled and reported as a single line in the consolidated e-Invoice. Where within a given month the company has a combination of sale transactions without tax and transactions with either sale or service tax, the consolidated e-Invoice would involve more than one line item.

The consolidated e-Invoice may be raised through middleware or MyInvois portal. The latter can be done by way of manual data entry or by uploading spreadsheet (Microsoft Excel file per IRBM’s template).

(6) Why should I act on e-Invoicing requirements given there is a 6-month penalty-free period?
Penalty would not apply only if a company complied with the requirements by either issuing transactional e-Invoices or a consolidated e-Invoice (at least on a monthly basis) both for its sale transactions and certain expenses (such as payments to ADDs or acquisitions from foreigners) on timely basis. There is no blanket exemption from the requirement to issue e-Invoice.

Should a company not issue any e-Invoice during the initial 6-month period, penalty amounting to RM200 to RM20,000 applies for each non-compliance.

Disclaimer: This e-Alert include our opinion and views based on our interpretation based on information available at the time of writing. Strictly no liability assumed. Kindly seek case-specific consultation prior to any action.