Why is Malaysia's Integration with Global E-Invoicing Networks a Game Changer?

Since 2015, issuing electronic invoices has been possible but optional for Malaysian taxpayers. However, buyers must provide written consent or authorization to receive an e-invoice.

Later, in 2022, the government introduced TIN (Tax Identification Number), an initiative to support electronic invoicing in the country further.

The Inland Revenue Board of Malaysia (IRBM) recently released guidelines for implementing mandatory e-invoicing. Malaysia is joining the growing list of nations adopting electronic invoicing for more effective tax processes.

The new system will not be limited to domestic transactions but will allow business owners to conduct business with foreigners seamlessly. Furthermore, the guidelines also state that taxpayers can use PEPPOL, a global e-invoicing network.

Malaysia has integrated its system into PEPPOL, one of the most reliable international networks with over 60 members. This network is secure and allows faster payments internationally and locally.

In this post, we’ll discuss how integrating Malaysia’s e-invoicing system will help bolster business operations. We’ll also look at how e-invoicing in Malaysia works, its benefits, and how to prepare for it.

Is electronic invoicing mandatory in Malaysia?

Malaysia is about to implement mandatory e-invoicing starting in August 2024. This national e-invoicing initiative will include three phases, with the last date set for July 2025. Each phase will target a specific business group according to their annual turnover.

E-invoicing has been possible in Malaysia since 2015, but it is not mandatory. The Inland Revenue Board of Malaysia intends to digitalize invoicing to help curb tax fraud and evasion and enhance business operational efficiency.

Benefits of Malaysia's integration with global e-invoicing networks

The PEPPOL network is expanding at a very high rate due to its numerous benefits to public and private businesses. These include:

Facilitating global trade

Whether you’re a large or small business owner, integration with an international e-invoicing network means access to global markets, offering businesses a chance to transact with foreign companies without having to adopt different e-invoicing systems.

With over 60 member countries, Malaysian taxpayers can conduct business with any company listed on the network. This is great for small businesses that may find it challenging to transact with foreign organizations.

Lower risk of tax fraud

PEPPOL authorities mandate various regulations, technical standards, and service specifications to help keep the network safe. Many governments have confidence in the network's transparency and security.

Companies using the network must be authenticated using their business numbers, minimizing the risk of fraudulent transactions.

It is safer than sending invoices via email, which is easy for scammers to infiltrate, and doctor invoices to reroute payments to their own accounts.

Increased efficiency and faster payments

When using an international e-invoicing network like PEPPOL, your invoice is guaranteed to reach its intended recipient. The electronic documents transmitted through the network have a structured data file that does not require manual entry.

The automation process makes it easier and quicker to generate, issue, and process e-invoices. It also helps in minimizing errors that could be made through manual efforts.

PEPPOL requires all invoices to conform to specific standards. This means the data quality is better, and no information is missing.

Cost savings due to automated processes

Paper invoicing or using an e-invoicing solution that requires manual entry is time-consuming and costly. Processing one paper invoice costs businesses between $15 and $40.

The process is also slow and error-prone and may involve underutilizing workers who could be more beneficial to a company performing other tasks.

The introduction of PDF invoicing in Malaysia was an improvement, but it is still not the best option.

An automated e-invoicing network eliminates the cost of paper, printing, mailing, manual handling, accounting, and balancing. The system also allows archiving and storage, minimizing related costs.

Seamless SAP PEPPOL access point integration

Malaysian companies that use a SAP (Systems, Applications, and Products in Data Processing) solution can now access PEPPOL without purchasing new software.

They can use an established access point provider like Storecove to connect to their existing software. Businesses do not have to worry about hosting or obtaining additional certificates for integration.

What type of transaction is covered by e-invoicing in Malaysia?

As per the guidelines issued by the Inland Revenue Board of Malaysia, there are two types of transactions that all taxpayers will have to issue electronic invoices for:

Proof of income

When a supplier supplies goods or services to a buyer, they must file an e-invoice to show the sale income. They must also file an e-invoice to recognize taxpayer earnings from ‘other transactions.’

The IRBM has yet to issue the laws regarding ‘other transactions’.

Proof of expenses

When a taxpayer purchases a product or service, they incur expenses. They must ensure that they receive an e-invoice from the supplier. This document can also be used in cases of returned goods or discounts.

If a Malaysian taxpayer transacts with a foreigner, they issue a self-invoice to recognize the expenses.

What are the e-invoicing methods in Malaysia?

Transitioning to an e-invoicing process can prove challenging for most business owners. That is why the IRBM has created two methods to ease the process.

Let us discuss the two methods:

1. MyInvois portal

The MyInvois portal by the Inland Revenue Board of Malaysia is free and accessible to all taxpayers. However, it is only ideal for small and medium-sized enterprises.

This portal only allows manual data entry, which is cumbersome for businesses with large volumes of invoicing data.

2. Application Programming Interface (API)

The IRBM also allows API use, either in XML or JSON format. This method is ideal for large organizations that generate and process multiple invoices daily.

However, adopting API requires businesses to invest in technology and modify current systems. This may not be a challenge for a large organization capable of allocating adequate funds to enable mandatory e-invoicing practices.

How does e-invoicing work in Malaysia?

Malaysia's new e-invoicing CTC (continuous transaction control) system will actively involve the tax authorities, who will receive and validate invoices in real time.

Before issuing an e-invoice to the buyer, a supplier must generate it and send it to the IRBM through MyInvois or API integration.

The invoice must include information for all 53 entry fields at this stage. After approval, the buyer and supplier receive a digital certificate to verify the invoice.

The supplier is then required to embed the QR code provided by the IRBM on the invoice before issuance.

Under the new guidelines, Malaysian taxpayers must issue various types of invoice documents in electronic format, including invoices, credit notes, debit notes, and refund notes.

Customers will be provided with a specific time frame to request the rejection of an invoice, while suppliers can cancel the invoice when necessary.

After completing the transaction, both parties must store an invoice for at least 7 years.

How can I prepare for e-invoicing in Malaysia?

Malaysian businesses should appreciate digital invoicing as it will help in tax compliance and improve business operations.

But how do you prepare for e-invoicing in Malaysia to ensure seamless integration?

Familiarize yourself with the new e-invoicing process and guidelines

The updated guidelines from the Inland Revenue Board of Malaysia are available for taxpayers to read and understand. Take time to read the guidelines and find ways you may implement mandatory e-invoicing in your organization.

You can also find an expert from the IRBM to help you understand the e-invoice guideline.

Initiate implementation early for seamless integration

After understanding the guidelines, begin implementation early to avoid a last-minute rush. You and your team must invest adequate time in understanding and getting used to operations post-mandatory e-invoicing.

As implementation continues, also set dates to review your team's process. This way, you can identify errors and rectify them before your deadline.

Have a well-rounded team

Successful e-invoicing implementation for your business relies on your team. You may need to hire trainers to educate your employees using e-invoicing software.

Equipping them with the right skills allows an easy transition from current invoicing processes to digital transformation.

Incorporate reliable hardware and software

Adopt hardware and software that generate invoices that meet Malaysian-regulated standards. Sometimes, you may need to overhaul your current system completely to enable digitized invoicing processes.

Choose the right PEPPOL access point provider

Most large businesses will avoid using the MyInvois portal due to the manual entry and opt for an API. This means your organization has to ensure compliance when generating and issuing e-invoices.

Having a reliable partner, such as Storecove, will help you ensure you use the right software and generate compliant invoices that meet local and international standards.

PEPPOL access point providers eliminate one of the most challenging aspects of e-invoicing, allowing you to focus on other important tasks.

What are the factors to consider when choosing an e-invoicing Solution in Malaysia?

If you use the MyInvois portal in Malaysia, you don’t need to worry much about your invoicing software since you must manually enter the data. However, if you intend to use PEPPOL, you need to consider various factors regarding your ERP system.

There’s diversity among e-invoicing solution providers, with some excelling in functionalities that others fail.

Their systems may specialize in different features, making it difficult to know which solution suits your business.

Here, we discuss the most critical factors to consider to help you choose a comprehensive solution:

Compliance with Malaysian e-invoicing regulations

Businesses must prioritize conformity to preserve their reputation and trust among customers. Buyers will often abandon companies that face legal problems, which may be due to non-compliance with tax laws and e-invoicing standards.

Your e-invoicing system should be capable of generating e-invoices that comply with Malaysia’s laws and regulations. The system must generate them in the required XML format, among other requirements.

Easy integration with your existing systems

How well does the e-invoicing solution you want integrate with your current enterprise resource planning (ERP) system? Can it work with your accounting software to make financial transactions more straightforward?

While some businesses often require incorporating not only software but also hardware for a smooth transition, this does not always have to be the case.

Acquiring new hardware to enable e-invoicing in Malaysia can be costly. Instead, you can find solutions that do not rely on new technology.

Some software companies can customize ERP systems to allow integration with the Malaysian e-invoicing system.

Bulk functionality

Large businesses engage in many daily transactions and, therefore, need a way to generate, issue, and process bulk invoices. Reliable invoicing software should be able to perform this to help quicken business operations.

A company that makes about 50 transactions per day could possibly take hours to generate and process each invoice individually.

Understand your business situation to determine how many invoices you would like your software to process at once.

Your software should also be able to embed the QR codes received from the IRBM on all the invoices without error.

User-friendly interface

Introducing new software to your employees mainly requires training to help them familiarize themselves with its functionalities. If the system has a complicated user interface, it may take them a long time to grasp how to operate it.

The easier the user interface is, the quicker your employees will acclimate it to their daily operations. Find a system that is easy to use to reduce errors and prevent invoice rejections or delays.

An easy-to-use system is easy to operate even without much training. It should be easy for your team and clients to access various features of the solution.

Security and data protection

In this digital era, data theft is still rampant and a worry for Malaysian taxpayers. When choosing an e-invoicing solution, look for effective security techniques, verification, and transfer procedures.

Safeguarding financial data, such as payment information, and preventing unauthorized access should be your top priorities.

Flexibility and scalability

As your company grows, so should your system. Choose a scalable system that can withstand modifications to procedures, such as adding or removing currencies and payment methods.

A system that allows expandability guarantees your business long-term sustainability.

Cost and return on investment (ROI)

Is your e-invoice solution’s total cost of ownership (TCO) proportional to the expected return on investment (ROI)?

Consider account setup and subscription charges, if any, and compare them to variables such as decreased errors, better cash flow, and time savings. Go for a solution that provides the best value for your company.

Takeaway: International transactions in Malaysia have been made easier with mandatory e-invoicing

Malaysia’s adoption of a new e-invoicing framework will be a game-changer for businesses. This will only get better as the system is integrated with PEPPOL, a popular international e-invoicing network with over 60 member states.

Businesses will find it easier to import products and services while ensuring tax compliance. They will also be forced to switch from traditional paper-based invoicing and adopt automated systems that will make it easy to issue e-invoices.

At Storecove, we’re willing to be your partners as you embrace e-invoicing. We can help you ensure you generate compliant invoices for quick validation and processing.

Ready to join the thousands of businesses using a global e-invoicing network? Contact Storecove today to get started.

More information about E-Invoicing in Malaysia?

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