Contents
In October 2022, the Inland Revenue Board of Malaysia (IRBM, also known as Lembaga Hasil Dalam Negeri (LHDN)) and the Malaysian Digital Economy Corporation (MDEC) announced their intention to join the E-Invoicing trend.
With the introduction of mandatory B2B, B2C and B2G E-Invoicing requirements, the government aspires to stimulate the growth of the digital economy, to strengthen the digital services infrastructure and to digitalise the tax administration.
The legal requirements for Malaysia
Malaysian businesses must start issuing electronic invoices in line with a phased implementation plan, commencing on 1 August 2024. At this point in time, B2B E-invoicing will become mandatory in Malaysia for taxpayers with an annual revenue or income exceeding RM100 million (approximately €19.631.590). Subsequently, on 1 January 2025, E-invoicing will become mandatory for taxpayers with an annual revenue or income exceeding RM25 million (approximately €4.907.900). Finally, the mandatory implementation of E-Invoicing will be extended to all taxpayers in Malaysia starting 1 July 2025. Ahead of the deadline for mandatory E-Invoicing, businesses are nevertheless allowed to submit electronic invoices to the Malaysian government on a voluntary basis (starting May 2024).
Currently all taxpayers undertaking commercial activities in Malaysia are subjected to the E-Invoicing requirements, with no applicable exemptions based on industry. Only for certain B2C transactions where the end consumer does not need an e-invoice for tax purposes, will a non-electronic invoice format also be allowed. The mandatory issuance of e-invoices is not limited to transactions in Malaysia, but also applicable to cross-border transactions. Malaysian businesses that fail to adhere to the legislation, will be penalised with a fine between RM200 and RM20,000 or imprisonment for a period of up to six months, or both.
How does the SAP DRC solution work?
SAP launched their solution for B2B electronic invoicing on 31 May 2024, as part of their SAP Document and Reporting Compliance (DRC), Cloud Edition license. SAP DRC is an integrated solution that strives for long-term end-to-end compliance with various country-specific legal requirements all over the world (e.g. e-Factura Romania, KSeF requirements Poland, e-invoicing Israel, SAF-T).
In Malaysia, e-invoices must be validated by the MyInvois system before they are sent to the customer. After receipt of the government-approved invoice (via PEPPOL, mail or via direct access to the MyInvois system), the customer can reject (or supplier can cancel) the e-invoice within the next 72 hours. The submission of the e-invoice itself must occur in near real-time to allow the Inland Revenue Board of Malaysia (IRBM) to exercise effective control (or within 7 calendar days after month end for consolidated e-invoices). There is no timeframe restriction when issuing any e-invoice adjustments, such as a credit note or a debit note. Taxpayers are at liberty to follow their own company policies.
SAP’s solution supports the automatic generation of eDocuments in the correct XML format (OASIS UBL 2.1), direct integration with the MyInvois system via a DRC Cloud connection (e.g. to obtain the QR code upon government approval), and a connection to the customer via e-mail and/or the PEPPOL network. The following document types are supported by the SAP DRC solution:
- Invoices (Proof of Income and Proof of Expense)
- Credit memos and debit memos
- Buyer Issued Invoices (Self-Billing)
- Consolidated invoices (summary of all documents that did not require an electronic invoice to be sent to the buyer, which is sent to the government on a monthly basis)
- Cancellations (only allowed within 72 hours of validation)
The SAP document outgoing process flow for e-Invoicing compliance in Malaysia
To adhere to the Malaysian E-Invoicing requirements, SAP provides the standard ‘SAP Document Compliance for Malaysia’ solution. The following graphic illustrates the different end-to-end process steps that are implemented in SAP Document Compliance to achieve compliance with the Malaysian regulations for E-Invoicing.
- You create an SAP SD billing document or SAP FI invoice in your SAP ECC or SAP S/4HANA system, which is relevant for transmission to IRBM.
- An SAP eDocument is automatically triggered in the SAP eDocument Cockpit (EDOC_COCKPIT transaction).
- The SAP Application Interface Framework triggers the mapping of the transactional data into the by the Malaysian IRBM tax authority required XML format.
- SAP DRC Cloud then triggers an additional technical validation check to ensure compliance with the official Malaysian communication requirements. After a successful validation, the XML file is transmitted to the Malaysian MyInvois Portal.
- Upon reaching the Malaysian MyInvois Portal, the invoice XML will be officially validated against the requirements of the Malaysian government (IRBM or LHDN). A response (approval or rejection, and when applicable a rejection reason) will be returned by the government.
- SAP DRC Cloud receives the feedback information from the MyInvois Portal and converts this information into a system “consumable” format by decoding and mapping the results.
- In the last step, SAP DRC Cloud transmits the converted feedback information to the SAP eDocument Cockpit, which will take care of updating the SAP eDocument. This updated information is then visible in your SAP eDocument Cockpit (e-invoice status, IRBM unique identifier number, QR code containing a validation link to the visual representation of the validated invoice in the IRBM’s system).
- If the eDocument is approved, you will be able to provide it to the customer (by e-mail or via the PEPPOL network).
- If the eDocument is rejected, IRBM sends a rejection message in response. Depending on the rejection message (rejection reason), you could choose to cancel the invoice or to correct the errors and resubmit.
A similar process has been foreseen for self-billing invoices (in step 1, the eDocument generation will then be triggered by relevant MM (invoice verification) or FI vendor invoices).
For Consolidated invoices, SAP allows you to mark certain customers or individual invoices as being relevant for consolidation. All these marked documents can subsequently be combined into the government-required consolidation format by execution of a dedicated transaction.
Why choose PIKON as your partner for your compliace project?
At PIKON, we have established a Competence Center for Legal Requirements, where our team of expert consultants stay on top of the latest developments and requirements, regarding both local legislations and the applicable SAP Document Compliance solutions. We combine our SAP expertise and in-depth knowledge of the legal requirements with experience gained over many projects, to help you with your strategic roadmap to digital transformation and compliance with country-specific legal requirements.
Schedule a web meeting
Do you have any further questions about Malaysia´s legal requirements?
Simply fill out the contact form or leave us a comment at the end of the article.
You are currently viewing a placeholder content from Active Campaign. To access the actual content, click the button below. Please note that doing so will share data with third-party providers.
More Information