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.
With annual revenue or turnover of more than RM100 million, the taxpayers are to fully implement e-invoicing on 1st August 2024. While taxpayers whose annual revenue or turnover in between RM25 million to RM100 million have been given more time for the e-invoicing implementation, i.e. 1st January 2025, the remaining taxpayers have the longest transition timeframe until 1st July 2025. At the macro level, the move from the conventional way of invoicing to the electronic invoice is crucial given the modern business operations, which can be complicated, technology-driven, global and borderless. Thus, in addition to ensure efficient exchange of information and storage of transactions involving business-to-business (B2B) and business to government (B2G), e-invoicing can also help the government grow its tax revenue due to expected increase in tax compliance and efficiency in tax administration.
The 1st August 2024 till 1st July 2025 timeframe is crucial to reap the benefits of e-invoicing, including processing and enhanced compliance. As the implementation of e-invoicing allows only digitalised invoices to be utilised, the process of document exchange becomes faster, leading to quicker payment cycles and hence, can improve the businesses’ cash flows.
The automation process can reduce the errors during the manual data entry. Similarly, compliance among taxpayers can be significantly improved as the tracking and reporting of invoices can be executed effectively and seamlessly. Thus, the streamlining of the e-invoicing process between businesses and authority reduces the authority’s investigation time and efforts which can benefit the businesses and the government simultaneously.
The speed of e-invoicing implementation can cause challenges to both the taxpayers and the authority, in terms of system integration. As the implementation involves many parties, complication arises when integrating the e-invoicing system with the existing systems, software or platforms. This can possibly induce compatibility issues, especially among businesses with large number of transaction value and volumes, customers, suppliers and requirements to abide to. Consequently, the compatibility issue can trigger other concerns related to data exchange within systems, which requires careful consideration and intense scrutiny during the planning and testing stage.
Businesses can reduce the risks of fast implementation of e-invoicing by ensuring robust planning, with risk migration measures in place. To reduce risks of poor planning, businesses should lay down detailed key milestones, planned allocated resources and internal breakdown timelines towards the main deadline set by the authority. In addition, effective stakeholder engagement should be carried, including with IT team, finance department and procurement unit, whose concerns are to be addressed quickly during the process.
Businesses must also be meticulous in selecting vendors with good track record and scalability. Businesses must ensure the competencies of the vendor in integrating the current system with the new system. At the early stage of the data entry, data validation, data cleansing and piloting are key, without which, errors might occur during the e-invoicing implementation.
Through testing and piloting, the implementation can be tested within a small group of transactions before the full fledge deployment is scheduled. Furthermore, adequate training is essential for personnels in-charge to ensure adaptability and readiness for change. Also, frequent compliance monitoring is important for businesses to ensure the change of regulations is addressed and reflected upon in a timely manner.
To conclude, in terms of e-invoicing’s implementation in Malaysia, the costs may outweigh the benefits to both the taxpayers and the government. In reaping the benefits of such pace of implementation, taxpayers are to ensure risk mitigation measures are in place while monitoring the compliance with e-invoicing regulations regularly.
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 the Association to Advance Collegiate Schools of Business (AACSB) accreditation.
