Feb 7 – D-day for e-Invoicing

THE implementation of e-Invoicing, which began on Jan 1, is an important digitalisation step by the Inland Revenue Board (IRB) to benefit from data transparency and real-time information on business transactions.

It is a crucial step to improve the tax-to-GDP (gross domestic product) ratio with “compliance by design” of tax laws.

For entities with an annual turnover between RM25 million and RM100 million, e-Invoicing became mandatory on Jan 1.

However, Feb 7 will be a key date.

As a leeway for taxpayers, IRB has provided a relaxation period for six months, whereby businesses are allowed to continue issuing normal invoices (without IRB validation) but must submit a consolidated e-Invoice to IRB for all transactions by the seventh day of the following month.

This is why customers may find some businesses issuing e-Invoices to them in January, while others may simply get conventional invoices.

A consolidated e-Invoice allows a vendor to aggregate multiple transactions with multiple customers and report the total sum to IRB without having to collect or provide customer- specific information.

In simple terms, if there are 100 sales transactions totalling RM5mil in January, the vendor is required to submit a single consolidated e-Invoice by Feb 7 for the total sum of RM5mil without having to collect or report to IRB customer particulars, such as Taxpayer Identification Number.

However, it may not be as simple as a single consolidated e-Invoice each month for businesses that transact in multiple currencies. In such cases, a consolidated e-Invoice is advisable for each currency in which the business transacts.

The requirement to perform consolidated e-Invoices does not stop at sales transactions.

Feb 7 is also the deadline for businesses to perform consolidated self-billed e-Invoice (“SBeI”) on payments to individuals, such as rental payments to individual landlords, payments to freelancers, or incentive payments to customers pursuant to a customer-refer-customer campaign.

Also, Feb 7 is the deadline to perform SBeI on payments to agents, dealers and distributors (ADDs), regardless of whether the ADD is an individual or a company.

Likewise, SBeI is required for intragroup interest payments. If SBeI was not issued for interest payments in January, businesses may issue a consolidated SBEI by Feb 7.

When it comes to payments to foreign vendors for the import of goods and services, SBeI must be done by Feb 28. This is required to be transactional (i.e., one SBeI for each vendor). However, there is a relaxation for the initial six-month period.

For transactions with foreign vendors in January, a consolidated SBeI can be submitted by March 7 (instead of a transactional SBeI by Feb 28). This relaxation is is applicable only for the initial six months.

For businesses with annual turnover of between RM25mil and RM100mil, the relaxation mentioned above is applicable up to June 30.

From July 1, transactional e-Invoice and SBeI is mandatory for most of the transactions (save for limited exceptions). For businesses with an annual turnover exceeding RM100mil, the relaxations are not applicable for transactions after Jan 31. Businesses with an annual turnover below RM25mil will be entitled to these relaxations for the initial six months, i.e. until Dec 31.

It is vital for businesses relying on the leeway given during the initial six-month period to be mindful of the requirements to perform consolidated invoices and consolidated SBeI in rightful and timely manner for each of the six months.

The IRB has made it clear that penalty waivers are only applicable to taxpayers who perform consolidated e-Invoices as such.

While the consolidated e-Invoice and consolidated SBeI provide significant simplification to allow a ‘soft landing’, businesses should not take it for granted.

Processes should be put in place to ensure timely compliance even during the initial six-month period.

For businesses that involve complexities such as intragroup interest payments and cross-border transactions, it may be appropriate to seek professional advice to ensure compliance.