Malaysia

E-invoicing guidelines published by IRB Following the announcement of the implementation timeline for the e-invoicing mandate, the Inland Revenue Board of Malaysia (IRBM) has issued the first version of the E-invoice Guideline Year 2023 which contains additional clarifications and instructions on the upcoming e-invoicing mandate in July 2024.  The mandate will follow a CTC clearance model, where suppliers must transmit their invoices and have them approved by the government platform before sending them to their buyers.    According to the guideline, suppliers can connect directly with the government portal, or integrate their invoicing system via API connections. The invoices transmitted to the platform must be in XML, or JSON format. After successfully "clearing", the official platform will send back the cleared invoice with a Unique Identifier Number and QR code data.   Suppliers can share the invoice in PDF format provided the UIN number and QR code are presented. In addition, the guideline outlines 53 mandatory invoice fields. For more details, we advise you to check the full guideline via this link. 

Phase I e-invoicing roll-out targets 4.000 businesses Following our previous release on Malaysia's e-invoicing timeline, the Malaysian Inland Revenue Board (IRBM) has formally announced that 4,000 businesses will be included in the first phase of the implementation, where taxpayers with an annual revenue of RM100M are required to abide by the e-invoicing requirements.  The first phase is scheduled to commence in June 2024.   As part of the Continuous Transaction Controls (CTC) Clearance model, invoice files must be submitted to IRB's central platforms for real-time verification. IRB will assign a Certificate Serial Number to invoices and provide suppliers with an URL link containing a QR code as an output of verification. The QR code should be attached to the invoice before it is shared with the buyer. Small and medium businesses without an e-invoice system can use IRB's free web-based solutions that require manual input of data.   The IRB are expected to issue detailed guidelines regarding the Malaysian e-invoicing systems for businesses that will join the first phase. Over the next few weeks.   

Launch of the Special Voluntary Disclosure Program 2.0

Malaysia's Inland Revenue Board (IRBM) has announced a Special Voluntary Disclosure Program 2.0 (SVDP 2.0) effective from June 6th, 2023, to May 31, 2024. SVDP 2.0 eliminates penalties/fines for certain voluntary disclosures, such as disclosing undeclared income and paying any tax due within the specified timeframe. The detailed FAQs published by IRBM can help taxpayers understand the categories of accepted disclosures and the assessment years covered by this program. 

 As a result of this initiative, the government encourages taxpayers to come forward voluntarily to declare their income without imposing any penalties or fines. Through this program, taxpayers will be able to increase their level of tax compliance through the AES (Awareness, Education, Services) concept practiced at the Inland Revenue Board of Malaysia (IRBM).  

Update on Malaysian e-invoicing mandate In a recent workshop session, Lembaga Hasil Dalam Negeri Malaysia (LHDNM) confirmed the previously mentioned deadlines for mandating e-invoicing for all businesses between 2024 and 2027. Here is a summary of the confirmed timelines: 

• During 2023, the infrastructure will be prepared, and a pilot project will be launched with selected companies. Companies not selected for the pilot project may voluntarily participate.  
• January 2024 - voluntary e-invoicing implementation 

• From June 2024: Mandatory implementation for businesses with annual sales exceeding RM100 million. 
• From January 2025: Mandatory implementation for businesses with annual sales exceeding RM50 million.  
• From January 2026: Mandatory implementation for businesses with annual sales exceeding RM25 million. 
• From January 2027: Mandatory implementation for all businesses. 

In accordance with the latest information, the model to be implemented would be Continuous Transaction Controls (CTC) where invoices should be cleared with the tax authority. Businesses will submit their e-invoices to LHDNM for verification via API. After the invoice is approved, the LHDNM will generate a Certification Serial Number and send an email to the issuer and recipient. 

E-invoicing implementation in 2024 Malaysia has permitted e-invoicing since 2015 but it is not widely used. According to the 2023 Budget, the Ministry of Finance intends to adopt nationwide e-invoicing to boost revenues and reduce unreported transactions.    The Inland Revenue Board (LHDN) recently announced plans to implement e-invoicing in phases, starting in early 2024. LHDN's chief executive officer, Datuk Dr Mohd Nizom Sairi, stated that the e-invoicing platform will allow taxpayers to upload and store their purchase records online with LHDN. As a result, receipts no longer need to be kept on paper since they are already available electronically.   Malaysia is one of Tungsten's key compliant territories. We are observing e-invoicing developments in the country to see how we can best serve our Malaysian customers in the future 

PM Anwar confirmed GST will not be re-introduced Malaysia historically adopted the Goods and Services Tax system, which was then replaced by the Sales and Service Tax in 2018. Government ministers and private industries are discussing re-introducing the Goods and Services Tax system, arguing that it is the most effective way to replenish the economy. Ismail Sabri Yaakob, the former prime minister, also backed this proposal.  However, the table has turned, since the new PM Anwar Ibrahim took office in November 2022. According to PM Anwar, GST will not be reintroduced, instead, the government will be looking to reduce subsidies for the wealthy as a measure to increase the country's revenue. 

Adopting PEPPOL for mandatory e-invoicing As stated in the 2023 Pre-Budget statement, the Malaysian Ministry of Finance confirmed to implement e-invoicing as a means of increasing tax revenues and enhancing tax administration. Recently, the Malaysian Digital Economy Corporation (MDEC) and Malaysian Inland Revenue Board (HASiL) signed a Memorandum of Understanding (MoU) as a sign of strategic collaboration for the implementation of the National eInvoice Initiative. The National e-Invoicing Initiative will adopt the PEPPOL framework as its e-invoicing structure. It is anticipated that a "Continuous Transaction Control (CTC)" model will also be introduced following e-invoicing adoption to enable real-time tax control. A tentative timeline has been set for Q3 2023, but this is yet to be confirmed.  

Postponement of sales tax on low value goods imported to Malaysia Malaysian Sales Tax Bill 2022, which imposes sales tax on low value goods (RM500) sold online and imported into Malaysia was passed and scheduled to come into effect in January 2023. However, the Royal Malaysian Customs Department has announced that the implementation date of the sales tax for low-value goods will be postponed by three months, to 1 April 2023.

Impose Sales Tax on imports of low value goods The Malaysian parliament has passed the Sales Tax (Amendment) Bill 2022, which introduces the taxation of low value goods sold online and imported to into Malaysia.   Currently, taxes are not imposed on imports of low-value goods (RM500). It results in an unfair treatment of local traders since local produced goods are subject to sales taxes.  As of 1 Jan 2023, 10% of SST (Sales and Service Tax) will apply to low valued goods (LVG) sold online and imported into Malaysia by vendors based in or outside of Malaysia. The Minister of Finance will determine low-value goods based on the class and price of goods, and the channel used to import the goods into Malaysia.  

Looking to implement e-invoicing gradually in 2023 According to the 2023 Pre-Budget statement, the Malaysian Ministry of Finance intends to implement e-invoicing as a means of increasing tax revenue and digitalizing tax administration in the country. The e-invoicing initiative will also support the use of the TIN (Tax Identification Number) in Malaysia, which will be implemented in 2022. The Statement points out that e-invoicing will be introduced in stages from 2023. However, no specific timeline has been mentioned. We are closely monitoring the developments in Malaysia and will continue to keep our customers informed.

Planning to reintroduce GST to replace SST The Malaysian government implemented GST in 2015, replacing the existing SST system, as part of its tax reform program to enhance the capability, effectiveness and transparency of tax administration and management. GST was, however, abolished in 2018 when the Pakatan Harapan government took over the reins, due to the public widely views GST as having contributed to a spike in living costs. The country has since returned to the SST system. In a recent interview, current Prime Minister Datuk Seri Ismail Sabri Yaakob revealed the intention to reintroduce GST as the country has lost RM 20 billion (Est 4.5 billion $) in revenues when the GST was abolished and replaced with the old SST. he explained that the government is aware of the perception of GST however has limited options for replenishing the country’s coffers. The Prime Minister reassured the nation that the GST reintroduction would be handled carefully. The government will aim for a GST rate that is not so high as to burden the people, nor too low that it “defeats the purpose of expanding tax revenue”, and to formulate ways to educate the public on the importance of GST and transparent tax collection.