Why the switch to e-Invoice?
In an effort to modernise and streamline the invoicing process, the Lembaga Hasil Dalam Negeri Malaysia (LHDN) has introduced an e-Invoice system, which is set to go live on 1 August 2024.
This initiative is part of a broader strategy to enhance tax compliance, reduce fraud, and improves business efficiency.
What is e-Invoice?
An e-invoice is an invoice delivered electronically in a specified standardised format. This uniform format ensures that both the sending and receiving systems can share and recognise the data seamlessly.
Furthermore, because e-invoices contain structured invoice data, they can be automatically imported into the buying organisation’s accounts payable system.
Why switched to e-Invoice?
The primary goal of the e-Invoice system is to create a more efficient and transparent invoicing process. By digitising invoices, LHDN aims to:
- Improve Accuracy and Efficiency: Automated processes reduce errors and streamline operations.
- Reduce Paperwork and Costs: Digital invoices eliminate the need for physical storage and handling.
- Enhance Transparency and Traceability: Every transaction is recorded and traceable, reducing the risk of fraud.
- Faster Processing and Payment Cycles: Digital invoices can be processed and paid more quickly, improving cash flow for businesses.
Submission Process
To ensure consistency and compatibility across various systems, e-invoices must adhere to a standardised format.
Typically, this format is either Extensible Markup Language (XML) or JavaScript Object Notation (JSON).
This standardisation facilitates seamless integration with different accounting and invoicing software, making it easier for businesses to comply with the new requirements.
There are two options for the e-Invoice transmission mechanisms:
- MyInvois Portal
- A portal hosted by LHDN.
- Accessible to all taxpayers at no cost.
- Also accessible to taxpayers who need to issue e-Invoice where Application Programming Interface (API) connection is unavailable.
- Application Programming Interface (API)
- An API is a set of programming code that enables direct data transmission between the taxpayers’ system and MyInvois system.
- Requires upfront investment in technology and adjustments to taxpayers existing systems.
- Ideal for large taxpayers or businesses with substantial transaction volumes.
Here’s the e-Invoice workflow: Starting from the moment a sale is made or a transaction is undertaken, the supplier issues an e-Invoice via the MyInvois Portal or API.
This process continues until the validated e-Invoices are stored in LHDN’s database, allowing taxpayers to view their respective historical e-Invoices.
To learn more about the e-Invoice system, you can read LHDN’s FAQs here.
