Malaysia is set to introduce the electronic invoicing system (e-invoicing) in line with the government’s initiative to support digital economic growth and enhance the efficiency of Malaysia’s tax administration.
The Inland Revenue Board of Malaysia (IRBM) has announced that e-invoice will be implemented in three stages, with the earliest phase starting in August 2024 for companies with an annual turnover or revenue exceeding RM100 million.
As the new implementation is approaching, many businesses are unaware of how e-invoice works and how ready they are to adopt digitalization. We spoke to Bryan Cheong, a certified ERP & Accounting Software consultant cum e-invoicing speaker, about the readiness of businesses, especially MSMEs.
The objective of the implementation is clear: to fully replace paper or other electronic documents comprising invoices, credit notes, and debit notes. It’s a new mechanism to issue digital proof of a transaction between a seller and a buyer, approved by the IRBM.
How prepared are business groups, especially MSMEs, for the implementation of e-invoicing?
As the e-invoicing speaker, Bryan is fully aware of the current situation among business operators. Despite the e-invoicing guidelines issued by IRBM, Bryan believes more time and clarification are required to address certain aspects of the guidelines.
“Compared to the introduction of the Goods and Services Tax (GST), e-invoicing impacts a larger spectrum, involving over 1.5 million companies across various industries. And the guidelines do not fit all. So until certain aspects of the guidelines and clarification are addressed, business operators are unlikely to be fully ready for implementation,” he said.
Bryan also acknowledges that a significant portion of smaller enterprises, approximately 99%, lack exposure to the new e-invoicing system. “This is what I observed from my previous seminar. There are still some misconceptions relating to e-invoice where most of them thought it’s an invoice but in a digital format like PDF, etc.,” Bryan explained.
90% of enterprises still don’t fully understand how e-invoicing works
He highlights the challenge faced by businesses, especially those with limited digital literacy, such as hawker operators, who may find the given time insufficient for full compliance.
“There is still room for improvement in explaining the technical complexities and what they should do to ensure they are fully ready for the e-invoicing system.”
However, despite the little concern projected by business operators, he is optimistic about the readiness of larger companies to adopt e-invoicing – given their ample resources and support systems.
He also revealed that the projected worries among businesses predominantly revolve around technological transitions and the initial costs they have to bear.
Transitioning to e-invoicing demands a significant shift from manual invoicing processes to automated systems. Businesses may face difficulties in integrating e-invoicing with the existing systems they are currently using.
E-invoicing will be mandatory for all businesses
“For large enterprises using Enterprise Resource Planning (ERP) systems, upgrades are essential to align seamlessly with the IRBM e-invoicing system. Apparently, not many ERP systems in the market are ready or compatible. So, it’s either they can retain and integrate their current ERP system with e-invoicing software, or invest in system upgrades.”
As an accounting software consultant, he mentioned that many software developers are redeveloping their systems to integrate with the e-invoicing system. However, the given time is quite short, as it requires careful planning to ensure a smooth synchronization with the IRBM system.
Meanwhile, Bryan clarified that this new e-invoicing system will help taxpayers be transparent, as each invoice needs to be approved by IRBM before being sent out to customers.
“If we look at it from another perspective, taxpayers are required to issue and submit e-invoices for IRB’s validation. So, it will enhance transparency and reduce tax evasion,” he explained.
*Disclaimer:
The opinions shared in this article are personal and intended solely for educational purposes. Readers are encouraged to consult their own accountant or financial advisor for any specific queries or concerns related to their financial situations.
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