Countdown to e-Invoicing

Be honest: are you ready for e-Invoicing?

e-Invoicing has become a ubiquitous topic of discussion, especially with the forthcoming phased mandatory implementation. In a recent informative webinar, I had the privilege of moderating discussions with Dr. Rasyidah Che Rosli, Director of Tax Operations Department, Inland Revenue Board (IRB), En. Saiful Izwan Mohd Shazali, Director of Digital Industry Development Division of Malaysia Digital Economy Corporation (MDEC), and Ng Wei Wei, e-Invoicing Lead Partner, KPMG in Malaysia. 

• Expansion of scope for self-billed e-invoice and data fields.
• Malaysians’ NRIC and foreigners’ passport numbers may be input as the Tax Identification Number for e-invoicing purposes.
• Users may extract their records from their MyInvois account.
• The 72-hour grace period acts as a convenience for businesses to reject or cancel.  Businesses that opt not to use this feature can still follow their business-as-usual practice to issue a credit or debit note for any adjustment.  It refers to actual hours, i.e., includes non-workdays/hours.
• A Sandbox environment will be available for testing by users by end of April 2024.
• MyInvois portal should be ready before 1 August 2024.
• The Inland Revenue Board’s (IRB) system should be able to cater for a single credit/debit note which relates to multiple e-invoices.
• Seller is required to send the validated e-Invoice with the QR code to buyer while visual presentation/printed invoice will be optional.

During the session, En. Saiful, in his comprehensive overview of the Peppol framework, emphasized the benefits of Peppol in Malaysia as the strategic gateway towards global interoperability. He advised businesses to opt for Peppol-enabled solutions to safeguard against potential changes in e-invoicing requirements in the future.

Meanwhile, Wei Wei delineated some of the key challenges that businesses may encounter in transitioning to e-invoicing adoption, emphasizing the importance of conducting proper gap analysis and implementing standard operating procedures (SOPs) to mitigate risks effectively. One illustrative scenario highlighted how concession is given for certain businesses, exempting them from the obligation to issue an e-invoice for each sale but to issue a consolidated invoice instead, so as to minimize administrative burden to the businesses.

However, she also shed light on a potential pitfall: businesses unaware of customers’ right to request for an individual e-invoice may inadvertently prepare consolidated invoice using running number for the receipt. When a customer requests for a separate e-invoice, the business may be caught off guard and potentially disrupt the chain of its invoice reference number. Such oversight carries risks of double counting of income due to lack of proper tracking system on the individual receipt reference number, as well as non-compliance for missing the deadline in fulfilling the request (unaware).

Timing also emerged as a critical consideration in e-invoicing issuance, with Wei Wei emphasizing the non-feasibility of backdating an e-invoice as it must be affixed with the current date and time of issuance. Further, she stressed a crucial procedural nuance: the e-invoicing system requires a credit/debit note to refer to an earlier e-invoice and, therefore, should not be issued as the first document. This holds particular significance for businesses accustomed to the practice of issuing credit/debit note for intercompany transactions, warranting careful attention and adjustments to established practices.

Additional notes to consider:

• Although foreign suppliers are exempted from issuing an e-invoice in the country, Malaysian businesses are required to issue a self-billed e-invoice.  It is important that the current internal business processes are aligned with the requirement of self-billed e-invoicing requirement and the relevant stakeholders are equipped with knowledge on the requirement and SOPs in place.
• During the transitional period before e-invoicing is in full force, buyers need not check whether the supplier is subjected to e-invoice obligation and is allowed to accept invoices issued as usual by suppliers as proof of expense.  For foreign suppliers, businesses are expected to have the supplier invoice, underlying payment document and the self-billed e-invoice as proof of expense.

The way forward

To support businesses during their transition, both IRB and MDEC have taken proactive steps by establishing dedicated microsites and inquiry channels for e-invoicing, Software Development Kit, and Peppol.

While there is no indication of a further deferment to the deadline, it is hoped that the IRB will issue the updated Frequently Asked Questions (FAQs) soon to facilitate early preparation. However, any potential extensions will be evaluated on a case-by-case basis by the IRB, subject to the unique challenges faced by businesses.

With the deadline for implementation approaching, it is imperative for businesses to take action promptly – delay no longer! As echoed by all the panelists: “When in doubt, consult.”. Businesses must begin engaging with their tax and IT consultants to kick start the preparation, identify the gaps in the system, evaluate the impact on their day-to-day process flow, and assess the most optimal solutions.