E-invoicing, the digital evolution of traditional billing, is reshaping the landscape of business transactions in Malaysia. This progressive move towards online invoicing offers speed, cleanliness, and accessibility – a departure from the conventional paper bills, making it a game-changer for businesses in the country.

It’s crucial to note that the mandatory implementation of e-invoicing for all companies looms on the horizon, starting July 2025. In this blog, we delve into the details of e-invoicing in Malaysia and highlighting the significant role of a fully integrated ERP system for seamless and efficient financial processes.

E-Invoicing Malaysia – What is Continuous Transaction Control (CTC) Model

As Malaysia embraces e-invoicing, businesses, especially mid-sized ones, must prepare for a substantial change facilitated by the Continuous Transaction Control (CTC) model. This framework, introduced by the Malaysian government, aims to modernize invoicing practices and enhance adherence to tax regulations. Businesses will transition from traditional paper-based invoicing to a digital format, creating, sending, and storing electronic invoices in a specific and approved standardized layout defined by regulatory authorities.

In simpler terms, the CTC model is a set of rules established by the government to ensure businesses use a common and approved method for handling electronic invoices. As businesses gear up for e-invoicing in Malaysia, understanding and aligning with the CTC model becomes crucial for successfully navigating this transformative transition.

Why use CTC E-Invoicing Model in Malaysia and what are its business benefits?

1. Improved Efficiency and Accuracy:

E-Invoicing under the CTC Model significantly boosts operational efficiency by digitizing the invoicing process. This automation accelerates the overall invoicing cycle, minimizes delays associated with manual tasks, and ensures accurate and consistent data, ultimately enhancing overall productivity.

2. Enhanced Transparency and Traceability of Transactions:

E-Invoicing introduces a new level of transparency, with the CTC Model digitizing and recording every step of the invoicing process. Real-time visibility into the status of invoices enables businesses to track the journey from generation to validation, fostering accountability, and minimizing misunderstandings, disputes, and payment delays.

3. Simplified Compliance with Tax Regulations:

The CTC Model streamlines tax compliance by standardizing the format and process of electronic invoices. Operating under this model ensures automatic incorporation of relevant tax information, generating tax-compliant invoices that adhere to regulatory requirements. This simplification not only saves time but also contributes to maintaining a consistent and accurate record of financial transactions, aligning with regulatory expectations.

 

E-Invoicing Malaysia

How to Prepare for E-Invoicing Malaysia

By August 2024, E-Invoicing will become mandatory for all B2B (Business-to-Business), B2G (Business-to-Government), and B2C (Business-to-Consumer) transactions. The implementation will roll out in phases. The implementation dates shared by Inland Revenue Board (IRBM/ LHDN) are as follows:

1 August 2024 : Businesses with an annual turnover or revenue of more than RM100 million

1 January 2025 : Businesses with an annual turnover or revenue of more than RM25 million and up to RM100 million

1 July 2025 : All businesses

Steps to Prepare for E-Invoicing Malaysia under the CTC Model:

1. Evaluate Your Current Invoicing Processes:

  • Assess existing procedures for improvement or digitization.
  • Align e-invoicing with current practices and systems, such as SAP ERP.

2. Choose a CTC-Compliant E-Invoicing Solution:

  • Select a certified solution compliant with Malaysia’s CTC regulations.
  • Ensure seamless integration with existing ERP systems, like SAP.

3. Implement Necessary Infrastructure Changes:

  • Upgrade IT infrastructure to support secure transmission and storage.
  • Ensure systems handle increased electronic transactions efficiently.

4. Train Your Team:

  • Provide comprehensive training on the new e-invoicing system.
  • Educate employees on CTC model requirements and compliance.

5. Stay Informed About Regulatory Updates:

  • Keep abreast of changes in e-invoicing regulations.
  • Ensure the e-invoicing solution remains compliant with standards.

6. Test and Validate the E-Invoicing System:

  • Conduct thorough testing to ensure compliance and functionality.
  • Validate accuracy and integrity through testing processes.


Begin your invoicing processes transformation by clicking on this page to learn more!

 

The Invoicing methods in Malaysia – MyInvoisPortal Vs. API

In Malaysia, businesses can generate e-invoices through two methods – MyInvoisPortal and API. The choice between the two depends on factors such as business size, technical capabilities, and integration preferences.

MyInvoisPortal

Application Programming Interface (API)
A web-based platform hosted by LHDN where you can create invoices following a pre-defined template. A set of programming code that enables direct data transmission between the software and MyInvois system (LHDN)
  • Free option for those without any software
  • Requires manual entry
  • Not user-friendly when you need to bulk create invoices
  • Need to invest in a software that supports the integration.
  • Existing software users: IT support & extra cost might be needed for upgrades
  • More user-friendly
  • Support bulk invoicing

E-Invoicing Malaysia method via API – SAP ERP Integration

For businesses seeking a comprehensive solution, SAP ERP seamlessly connects with government-approved e-invoicing APIs. This integration ensures regulatory compliance, reduces errors, and enhances transparency, making it a strategic choice for businesses in Malaysia. SAP Document and Reporting Compliance (DRC), Cloud Edition, plays a pivotal role in achieving seamless integration and ensuring adherence to regulatory standards.

SAP DRC, Cloud Edition

SAP Document and Reporting Compliance (DRC), Cloud Edition is a solution offered on SAP Business Technology Platform, designed to facilitate the exchange of electronic documents and reports between business systems (such as SAP ERP) and external parties.

This cloud edition ensures compliance with legal requirements by providing a harmonized experience for online document exchange in various business scenarios across multiple countries/regions. The platform offers seamless integration with multiple processes, reducing complexity in meeting diverse local requirements.

Key features include the exchange of electronic documents (e.g., customer invoices), submission of statutory reports, and monitoring document exchange with external parties in the Peppol network. Prerequisites for using this service include having an enterprise global account on SAP Business Technology Platform, and specific integration steps are required based on the business system and process involved.

Step-by-Step Guide to Document and Report Exchange with SAP DRC

Document and Report Exchange with SAP DRC : E-Invoicing MalaysiaSource: SAP

 

1. Identify Document/Report Type:

  • Determine the type of documents or reports you intend to exchange.

2. Connect with Specific Process:

  • Based on the identified document/report type, connect with a corresponding process within SAP DRC.

3. Integration Steps:

  • Within the chosen cloud edition process, perform integration steps.
  • These steps link the business system (SAP ERP) with the SAP DRC.

4. Configure Communication:

  • Set up communication between the SAP DRC and external communication parties.
  • Tailor configuration based on the specific requirements of the chosen process.

5. Peppol Network Documents:

  • If exchanging documents with the Peppol network, utilize the Peppol Exchange process.
  • Configure participants involved in the document exchange within the Peppol network.

6. Other Document Types:

  • For documents not involving the Peppol network, configure communication with the respective external communication party.
  • Adapt settings to align with the requirements of the chosen external communication party.

 

Why do you need ERP for E-Invoicing Malaysia?

In the dynamic realm of e-invoicing, the implementation of a fully integrated Enterprise Resource Planning (ERP) system emerges as the optimal solution, particularly for mid-sized companies. As businesses transition from simple finance software, the limitations become evident in 2024, making the robust capabilities of ERP systems indispensable.

1. Seamless Integration: ERP systems seamlessly integrate with the e-invoicing infrastructure, providing a unified platform for efficient data transmission and management.

2. Compliance and Accuracy: Mid-sized companies must adhere to Malaysian e-invoicing regulations. A fully integrated ERP system ensures compliance, minimizing errors and enhancing accuracy in the invoicing process.

3. Automation for Efficiency: ERP systems automate invoicing procedures, significantly reducing manual efforts, and increasing operational efficiency.

4. Enhanced Transparency: Real-time visibility into the invoicing workflow ensures transparency for both businesses and customers, fostering trust and reducing misunderstandings.

E-Invoicing Malaysia Workflow

The e-invoicing process involves the generation, issuance, validation, and storage of e-invoices, contributing to a streamlined financial ecosystem:

  1. Sale or transaction occurs, prompting the supplier to generate an e-Invoice.
  2. The supplier issues the e-Invoice through either MyInvois Portal or API.
  3. The e-Invoice travels through the system.
  4. The e-Invoice undergoes validation.
  5. Validated e-Invoices are stored in the IRBM’s database.
  6. Taxpayers gain access to their historical e-Invoices for viewing purposes.

Workflow of E-Invoicing Malaysia
Source: Official Portal Inland Revenue Board Of Malaysia

 

The Simplified Version of E-Invoicing Malaysia workflow:

E-Invoicing Malaysia workflow

 

E-Invoicing Malaysia Guideline by IRBM

To facilitate the transition from conventional to digital invoicing, the Inland Revenue Board of Malaysia (IRBM) has implemented comprehensive e-invoice guidelines (Publication Date : 9 Feb 2024).

These guidelines cover unique identification, product and service specifics, taxation details, payment and financial fields, shipping and customs information, and terminology clarification.

1. Unique Identification

IRBM Unique Identifier Number

Each e-invoice must possess a distinct identifier, provided by the IRBM. This ensures the singularity and authenticity of each transactional document.

2. Product and Service Specifics

  • Classification:

The e-Invoice mandates that all products or services be appropriately classified, be it medical expenditures, general expenses, or charitable donations.

  • Description of Product or Service:

Clarity is paramount. Every e-Invoice should lucidly detail the nature of the product or service in question.

  • Unit Price:

For transparency, the cost per unit of the offered product or service must be distinctly mentioned on the e-invoice.

3. Taxation Details

  • Tax Type and Rate:

The e-invoice should categorically specify the nature of the applicable tax – be it sales tax, service tax, or any other variant. Additionally, the corresponding tax rate should also be recorded.

  • Tax Amount:

This pertains to the precise tax value derived from the stipulated rate and the overall billable sum.

  • Tax Exemption Details:

In instances where tax exemptions are applicable, the e-invoice should enumerate the specifics of the exemption and quantify the exempted amount.

4. Payment and Financial Fields

  • Subtotal and Totals:

The e-invoice is required to exhibit both the pre-tax subtotal and the aggregate amounts, both excluding and including relevant taxes.

  • Quantity and Measurement:

If relevant, the e-invoice should state the quantity of the product or service and any pertinent measurements.

  • Discount Details:

Should any discounts be applicable, the e-invoice needs to state both the rate of the discount and its absolute monetary value.

  • Payment Information:

The chosen payment methodology, be it cash, cheque, e-wallet, etc., should be detailed. Supplementary details might include the supplier’s banking particulars, stipulated payment conditions, and pertinent reference numbers.

5. Shipping and Customs Information in the Annexure

  • Shipping Recipient Details:

For transactions involving third-party recipients or alternate addresses, comprehensive details including name, address, and registration credentials should be incorporated.

  • Customs and Export/Import Details:

E-Invoices that pertain to international trade should provide requisite details such as customs form numbers, relevant product tariff classifications, and pertinent trade agreement clauses.

6. Terminology Clarification

To ensure uniformity and comprehension, the guidelines also elucidate specific terminologies. This ensures that all stakeholders have a comprehensive understanding of terms integral to the e-invoicing process, like B2B, B2C, ERP, QR code, and more.

With these guidelines, businesses can adeptly navigate the e-invoicing ecosystem in line with the expectations set forth by the IRBM. Going digital with e-invoicing is a big win for Malaysia. It’s like upgrading to a faster, smarter phone. It helps businesses, saves trees, and makes life simpler.

55 required fields for e-invoicing

 

12 additional fields for e-invoicing

Conclusion:

Transitioning to e-invoicing is a strategic move for Malaysia, offering businesses an opportunity to upgrade their financial processes. For mid-sized companies, the adoption of a fully integrated ERP system is crucial in navigating the complexities of e-invoicing, ensuring compliance, and staying ahead in the digital era. As businesses in Malaysia embrace e-invoicing, the synergy of technology, compliance, and efficiency becomes paramount, ushering in a new era of simplicity and sustainability.

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