e-Invoicing: TRATAX FAQ guidance

Here are our view and guidance on the five (5) most popular questions raised to us with regards to e-Invoicing implementation.

With just over 2 weeks for go-live date for companies with annual turnover above MYR 100 million, we hope you find these as useful tips.

(1) What to do if I do not receive my customer’s Taxpayer Identification Number (“TIN”) or poor response rate for survey forms to update customer particulars which are essential for issuance of e-Invoice from 1 August 2024?

One possible approach is to presume the customer does not want an e-Invoice and proceed to issue normal invoice as per current billing practice. The value of such ‘normal invoice’ must be included in the monthly consolidated e-Invoice (first due date being 7 September), for which the customers particulars are not required.

While this approach may be pursued as an interim measure for business continuity in the initial month(s), businesses should ideally continue the efforts to complete gathering of customer particulars and generate transactional e-Invoice for all B2B and B2G transactions for simpler and more efficient billing practices in the long run.

Reference: Chapter 3.6 of IRBM’s e-Invoice Specific Guideline

Notes:

1. The consolidated e-Invoice stated above is not permitted for sale of automotive, sale of flight ticket, private charter, construction and sale of construction materials.
2. As for self-billing requirement on payments, consolidated e-Invoice is not permitted for payout to winners of betting and gaming activities and for payments to agents, dealers and distributors (ADDs), but a generic TIN may be used for the transactional e-Invoice on these transactions if the payee is an individual and his/her NRIC or passport number is validated.
3. Likewise, consolidation is not permitted for self-billed e-Invoice on payments to foreign vendors (for acquisition goods/services), but a generic TIN is permitted for the purpose of the transactional self-billed e-Invoice.

(2) How to setup API for either direct integration of ERP system or submissions via a middleware?

This must be done via MyInvois portal which shares the same login credentials as MyTax portal. There is no login credential assigned to a company. Instead, the credentials of the company’s director (or an authorised representative) must be used.

While not all directors as per SSM records are automatically recognised in IRBM’s portal, it is likely that at least one of the directors of your company would have registered for such a role in IRBM database via MyTax portal in the past years to accommodate appointment of authorised representative for either annual tax compliance or the ongoing Monthly Tax Deduction (MTD/PCB) compliance.

Should you wish to setup an API integration directly with your ERP system, a Client ID and two Client Secrets would have to be generated from one of the director’s MyInvois portal to facilitate the connection. This process may also be done by an authorised representative (e.g. HR or finance personnel) if the scope of permissions granted by the director (via IRBM’s portal) allows the representative to do so.

Alternatively, if the approach for API is via a middleware, the middleware (aka. intermediary) entity’s name, business registration number (BRN) and TIN must be obtained in advance to allow the director/authorised representative to appoint them via his/her MyInvois portal.

Kindly note separate access points (login page) are applicable for the sandbox (aka. testing/pre-production) environment and for the live/production environment.

Should you wish not to trouble the director with these requests repeatedly, you may guide the director to perform a one-time appointment of one or more authorised representative from the finance team or in-house IT team. This should be done both for the pre-production environment and production environment. Be mindful to check the right boxes in the authorisation process to empower the representative to appoint other representative, manage ERP, manage intermediary (i.e. middleware) etc.

There is flexibility granted by IRBM, and businesses should make conscious decisions in setting up the scope of permissions granted to the authorised representatives to balance the needs on ease of operations (i.e. without the need for frequent actions by directors), confidentiality and control (considering possible staff movements over time).

Reference: IRBM’s MyInvois portal

(3) Is there a time limit within which in e-Invoice is required to be issued for sale transactions?

Many jurisdictions have specified time limits within which e-Invoices are required to be issued. For example, European Union prescribe e-Invoice to be issued within 10 days (previously, 2 days) from delivery of goods etc.

Given that the Malaysian e-Invoice is an income tax initiative (unlike many other jurisdictions whereby e-Invoice is a VAT initiative), there is no express requirement to issue of e-Invoice within a certain number of days from delivery of goods or provision of service.

It is envisioned that businesses would raise e-Invoice within a reasonable time to facilitate revenue recognition and/or collection from customers.

Where businesses choose to rely on normal invoice, bill or receipt for commercial and/or accounting purposes, such invoice/bill/receipt must be reflected in the consolidated e-Invoice submitted within 7 days from end of the respective month in which the invoice/bill/receipt is raised. It is worth emphasising that the timing for consolidated e-Invoice is still based on the month in which any invoice/bill/receipt is raised, which is not necessarily the same as the month in which service is performed, goods are delivered, or advances are collected.

This feature may be particularly helpful for some businesses to manoeuvre in the event of system glitch or minor delays in completion of the e-Invoice implementation project.

Reference: Income Tax Act & IRBM’s guidelines

(4) Can my company perform self-billed e-Invoice for purchase of goods from foreign vendor at the absence of import declaration (K1) (e.g. drop shipment arrangement)?

In our view, the self-billed e-Invoice shall be generated whereby the additional mandatory field for Customs Reference Number is either left blank or stated as ‘NA’.

(5) Would there be penalty if my company fails to issue e-Invoice or issue e-Invoice with incorrect particulars?

The law prescribes a penalty of RM200 to RM20,000 for each instance of non-compliance.

From experience, one may expect the Government to adopt an advisory-based approach (instead of penalty-based approach) in addressing any compliance gap that inevitably arise among dutiful taxpayers in the initial few months despite bona fide efforts to comply. Such an approach is commonly expected given the new regime’s far-reaching implications on various aspects of an entity’s operations and its systems amid the complexity of the larger businesses in the first phase of implementation.

Of course, the Government is likely to penalise (or even apply the full force of law) on entities which are completely negligent or fail to demonstrate reasonable efforts to comply.

This view of ours is subject to further announcement and confirmation by the relevant Government agencies.

Disclaimer: This e-Alert include our opinion and views based on our interpretation and experience. Strictly no liability assumed. Kindly seek case-specific consultation prior to any action.