THE electronic invoice, set to undergo a pilot project in May this year, with the first phase starting on Aug 1 and full implementation scheduled for July 1, 2025, has become one of the hottest topics recently.
Various seminars and training sessions on e-invoicing are being held fervently.
However, many individuals, after attending these sessions and gaining basic knowledge of e-invoicing, have raised more questions.
One major concern is whether their current accounting software can continue to be used, or if switching software will lead to additional financial burdens.
First and foremost, it is crucial to understand that implementing e-invoicing does not necessarily require changing your accounting software in many cases.
If a software supplier claims that you must replace your entire accounting software to link with the Inland Revenue Board’s (IRB) MyInvois system, then what you need to do is change your supplier instead.
The software supplier’s role is simply to build an application programming interface (API) to link your software with the IRB’s system.
Essentially, they are constructing a bridge and ensuring that the data input and output align correctly without any connectivity errors.
Of course, this process requires multiple tests and validations to ensure data accuracy on both ends. Businesses should also prepare by organising the required information on electronic invoices to input and test promptly once the system is live.
To alleviate the financial burden on businesses, the government came up with financial assistance.
From 2024 to 2027, companies engaging in e-invoicing can receive the environmental, social and governance (ESG) tax relief up to a maximum of RM50,000 for costs incurred, including software or related consultancy fees.
In addition, businesses can apply for up to RM5,000 in digitalisation assistance through software vendors.
Some banks also offer loans to help businesses in alleviating their financial pressures.
Starting from Aug 1, businesses with annual turnover exceeding RM100mil will be the pilot e-invoicing users.
However, the IRB only initiated sandbox testing on April 10, with access to the MyInvois system for businesses and service providers granted on April 22 for testing system connectivity via the API.
With less than four months remaining, businesses across different sectors not only need seamless system integration but also must ensure accurate input of required data on invoices.
This is not a simple task, especially considering that any errors found along the way will require time to rectify.
The government should not rush the full implementation of e-invoicing, or it may lead to the similar chaos witnessed in 2015 during the implementation of the goods and services tax (GST), confusing businesses and consumers.
In conclusion, the implementation of e-invoicing is only a matter of time as it is an inevitable trend.
Aside from facilitating management, similar to tax invoices during the previous era of the GST, the main advantage of e-invoicing is transparency.
It also helps reduce human errors and minimises tax revenue leakages.
According to data released by the IRB in 2023, the shadow economy comprises approximately 20% of the country’s gross domestic product (GDP), resulting in an annual tax revenue loss of RM70bil.
This shadow economy includes smuggling, other criminal activities and the informal sector, such as self-employed individuals, gig economy workers or roadside traders.
One of the most effective methods to reduce tax leaks in this area is through e-invoicing implementation.
The Finance Ministry has previously stated that from 2000 to 2009, the shadow economy accounted for about 30.2% of Malaysia’s GDP, reducing to 21.2% from 2010 to 2019.
A significant reason for this decline was the implementation of the GST in 2015, introducing tax invoices and plugging some tax loopholes.
More comprehensive
When comparing tax invoices from the GST era with the planned e-invoicing system, it becomes evident that e-invoicing requires more comprehensive and detailed information.
This indicates that the IRB can gather more data to monitor transactions between businesses (B2B) and businesses and consumers (B2C), further sealing tax loopholes and increasing national revenue.
This is why many countries have either begun or planned to implement e-invoicing.
Advanced countries like the United States, Canada and Europe have begun mandatory or voluntary implementation.
Asian countries such as India, China, Japan and South Korea have adopted e-invoicing, while within the South East Asian region, Indonesia, Vietnam and the Philippines have implemented it.
Singapore and Thailand are participating voluntarily.
In general, countries across the globe are gradually or fully implementing e-invoicing, especially those implementing consumption tax or value-added tax.
Hence, Malaysia’s progress is not considered fast, and due to the cancellation of the GST, the country has fallen behind other regional nations.
Don’t be hasty
However, we should not hasten the implementation of e-invoicing simply because other countries are ahead.
As mentioned earlier, insufficient testing time and limited samples cannot guarantee system perfection.
We must also consider that, unlike tax invoices during the GST era, e-invoicing requires over 50 data items to be filled, with more than 30 mandatory fields.
Businesses need to obtain this information from suppliers or customers and keep it secure to prevent leaks.
Moreover, the government must ensure the safety of the vast amount of data collected by the system to avoid the risk of leakage.Additionally, the government must ensure that businesses are fully knowledgeable about e-invoicing – what needs to be done, what should be avoided, how to adjust their accounting practices and others.
Still unclear
Education takes time. However, it seems that even the IRB has many details left unclear.
Just on the IRB’s website, five versions of general guides have been published.
Just when everyone has understood the details of the previous version, a new one is released, requiring further study to identify updates.
Not to mention the specific guides that have also seen multiple versions.
Furthermore, there are currently only FAQs for five industries on the IRB’s website, with many industries awaiting guidance.
In this scenario, we hope the government can adjust the current schedule, allowing the IRB more preparation time, and enabling more industries and types of businesses to participate in the pilot program to gather more data for system improvement.
This will also allow ample time for educating businesses, giving software vendors more time to test their systems, and enabling business owners to adequately prepare and train their staff.
Only then can we reduce confusion during implementation and prevent resistance from businesses and the public towards this initiative.
Datuk Koong Lin Loong is the managing partner of Reanda LLKG International. He is also treasurer general cum chairman of SMEs committee, the Associated Chinese Chambers of Commerce and Industry of Malaysia. The views expressed here are the writer’s own.
