by Associate Professor Dr Nor Shaipah Abdul Wahab
E-invoice, an electronic document, serves to ease the exchange of invoice information between suppliers or vendors and purchasers or buyers, and to allow for near real time storage of transaction details. The e-invoice requires validation by the authority before it can be exchanged to ensure efficient and accurate tax reporting. In Malaysia, the implementation of e-invoicing comes into effect in stages, depending on the threshold of annual revenue or turnover of the businesses.
For taxpayers with annual revenue or turnover exceeding RM100 million, full implementation of e-invoicing is required by 1 August 2024. Taxpayers with annual revenue or turnover between RM25 million and RM100 million have more time, with implementation required by 1 January 2025, while the remaining taxpayers have the longest transition period, with a deadline of 1 July 2025. On a broader scale, the shift from traditional invoicing to e-invoicing is essential given the complexities of modern business operations, which are increasingly technology-driven, global, and borderless. In addition to ensuring efficient information exchange and storage of transactions involving business-to-business (B2B) and business-to-government (B2G) dealings, e-invoicing can also help the government increase its tax revenue through improved compliance and efficiency in tax administration.
The period from 1 August 2024 to 1 July 2025 is crucial for reaping the benefits of e-invoicing, including streamlined processing and enhanced compliance. As e-invoicing mandates the use of digital invoices, the document exchange process becomes faster, leading to quicker payment cycles and improved cash flows for businesses.
The automation process can also reduce errors associated with manual data entry. Additionally, compliance among taxpayers can be significantly improved as the tracking and reporting of invoices are executed effectively and seamlessly. Consequently, the streamlined e-invoicing process reduces the authority’s investigation time and efforts, benefiting both businesses and the government.
However, the rapid implementation of e-invoicing may present challenges for taxpayers and authorities alike, particularly in terms of system integration. The involvement of multiple parties in the process can complicate the integration of e-invoicing systems with existing systems, software, or platforms. This may result in compatibility issues, especially for businesses with large transaction volumes, numerous customers, suppliers, and compliance requirements. Such compatibility issues can, in turn, lead to concerns related to data exchange within systems, necessitating careful consideration and rigorous scrutiny during the planning and testing stages.
Businesses can mitigate the risks associated with the fast implementation of e-invoicing by ensuring robust planning, with risk mitigation measures in place. To minimise the risks of poor planning, businesses should establish detailed key milestones, allocate resources accordingly, and set internal timelines leading up to the main deadline set by the authorities. Additionally, effective stakeholder engagement is crucial, involving the IT team, finance department, and procurement unit, whose concerns should be addressed promptly during the process.
It is also essential for businesses to be meticulous in selecting vendors with a good track record and scalability. Businesses must ensure the vendor’s competency in integrating the current system with the new e-invoicing system. At the early stage, data entry, validation, cleansing, and piloting are key, as errors at this stage can lead to issues during the implementation of e-invoicing.
Through thorough testing and piloting, the implementation can be assessed with a small group of transactions before full deployment. Furthermore, adequate training is essential for personnel in charge, ensuring adaptability and readiness for change. Frequent compliance monitoring is also important to ensure that regulatory changes are addressed and reflected in a timely manner.
In conclusion, regarding the implementation of e-invoicing in Malaysia, the costs may outweigh the benefits for both taxpayers and the government. To reap the benefits of this pace of implementation, taxpayers must ensure that risk mitigation measures are in place while regularly monitoring compliance with e-invoicing regulations.
Associate Professor Dr Nor Shaipah Abdul Wahab, CPA (Australia), is the Head of School, School of Accounting and Finance, Taylor’s University. Taylor’s Business School is the leading private business school in Southeast Asia for Business and Management Studies based on the 2024 QS World University Rankings by Subject and has received accreditation from the Association to Advance Collegiate Schools of Business (AACSB).
