The Malaysian Inland Revenue Board (IRB) has introduced the use of e-Invoices and is set to implement them starting 1 August 2024. As the nation continues moving toward digitalisation, local SME owners might wonder what the real purpose of e-Invoicing is and how it benefits SMEs.
While some SMEs have already been preparing invoices digitally and sharing them with customers or receiving them from suppliers in digital form, often via email in PDF or Excel files, this single-sided operation requires recipients to re-enter the invoice details into their own accounting systems (e.g., accounts payable). However, the e-Invoice system introduced by IRB is something entirely different. With e-Invoicing, invoices are prepared and shared within a standardized system using formats such as XML and JSON. When both the sender and receiver are on the same platform, the data can be shared and transmitted more quickly in a standardized and uniform structure. The e-Invoice system enables validation and storage of transactions, accommodating Business-to-Business (B2B), Business-to-Consumer (B2C), and Business-to-Government (B2G) transactions.
There are two mechanisms for suppliers to create e-Invoices and share them with IRBM for validation: the MyInvois Portal and API.
| MyInvois Portal | VS | API |
|---|---|---|
| Enter one by one or bulk upload using a template | Creation | System auto-generated in XML or JSON |
| Low volume of e-Invoices | Compatibility | High volume of e-Invoices |
| None | Integration | Yes, between 3rd party system and IRBM |
| Low | Cost | Yes, due to integration |
| Download PDF from portal | Sharing e-Invoice | Embed QR code in e-Invoice |
| Download reports from portal | Data Access | Retrieve data from API |
Based on current information, MyInvois is a better choice for businesses with a small number of invoices, limited funds, or those unable to use APIs. However, it is anticipated that MyInvois may not be flexible enough to perform actions such as invoice customization.
APIs are ideal for SMEs handling high invoice volumes, given the requirement for suppliers to issue invoices within 7 days. APIs save SMEs time on manual invoice creation. SMEs should also evaluate whether the API can seamlessly integrate with their existing accounting systems to ensure efficiency.
So how does the entire process of sending and receiving e-Invoices work, and how long does the validation process take?
While it involves a series of complex procedures to ensure safe digital transactions between suppliers and buyers, most of the processes are conducted within the system and do not require user intervention. According to LHDN, the validation process is conducted electronically and can be completed instantly or near-instantly.
The e-Invoice process begins when a sale or transaction is made (including e-Invoice adjustments). The supplier or sender creates the e-Invoice and shares it with IRBM via the MyInvois Portal or API for validation. For accounting solutions such as AutoCount, this feature is connected through APIs. By integrating e-Invoicing within the system, users can have a more complete and automated invoicing process without frequently accessing the portal to send or receive invoices.
As the submitted data needs to be validated before release, the e-Invoice must meet the necessary standards and criteria. According to information provided by LHDN, the validation process by IRBM is conducted in real time or near-instantly.
After validation, the supplier will receive a Unique Identifier Number from IRBM within the platform they operate on. This number allows IRBM to trace transactions and reduce instances of tampering with e-Invoices, further strengthening transaction safety and transparency.
After e-Invoice validation, IRBM will notify both the supplier and buyer either through the MyInvois Portal or APIs.
Upon validation, the supplier is obliged to share the validated e-Invoice with the buyer, with a QR code embedded. The purpose of the QR code is to verify the existence of the e-Invoice by enabling users to check or view it in the official MyInvois Portal.
After the e-Invoice has been issued, a stipulated period of time is given to allow the buyer to request rejection of the invoice or for the supplier to cancel the e-Invoice. At this stage, any rejection or cancellation request must be accompanied by justifications.
While there may seem to be a series of complex procedures involved in sending and sharing invoices, solutions such as AutoCount simplify the process. The e-Invoice feature is embedded within the system, allowing users to generate invoices by selecting or entering basic details, while the system automates the rest and keeps users updated. Integrating official e-Invoicing within the system also maintains better data integrity, accuracy, and security.
When invoices are transmitted in a uniform and standardized format, document preparation and transmission time are reduced, improving efficiency and ensuring tax compliance. What other benefits does e-Invoicing provide?
Egida Software, based in Johor Bahru, provides SMEs with accounting and business software, including E-Invoice, POS, payroll, and medical clinic systems, with full support and training. Contact us today to streamline your business operations.