On 26 July 2024, the Inland Revenue Board of Malaysia (IRBM) announced a significant update regarding the implementation of mandatory e-Invoicing. In their media statement titled, “Flexibility to Submit Consolidated e-Invoices during the Initial Period of Implementation of e-Invoices”, the IRBM introduced a 6-month grace period starting from 1 August 2024. This move is designed to provide businesses with much-needed flexibility as they transition to the new e-Invoicing system.
Key Provisions of the Grace Period:
1. Consolidated E-Invoices: During this grace period, taxpayers are allowed to issue consolidated e-Invoices for all transactions. This includes:
- All activities and industries can issue consolidated e-Invoices, including self-billed e-Invoices.
- Any transaction description can be entered in the “Product or Service Description” field.
- If a buyer requests an e-Invoice, the seller may issue a consolidated e-Invoice without the need to issue an individual e-Invoice for each transaction.
2. Exemption from Penalties: Penalties under Section 120 of the Income Tax Act 1967, which would typically apply for non-compliance with e-Invoicing rules, will not be enforced during this period, provided that the taxpayers adhere to the consolidated e-Invoicing requirements.
Benefits for Early Adoption:
Taxpayers who adopt the e-Invoicing system within the stipulated timeline, without utilizing the grace period, will receive additional incentives. These incentives include a reduced capital allowance claim period for ICT equipment and software packages, shortening from 3 years to 2 years, applicable for the 2024 and 2025 assessment years.
Impact on Businesses:
This announcement is a strategic move by the IRBM to ease the transition for businesses into the mandatory e-Invoicing system. By allowing consolidated e-Invoices and exempting penalties during the grace period, businesses have the opportunity to adapt their processes without the immediate pressure of compliance penalties. Furthermore, the incentives for early adopters encourage a swift transition, potentially leading to faster digitalization of invoicing processes across industries in Malaysia.
The 6-month grace period provides a buffer for businesses to align their operations with the new e-Invoicing requirements. This flexibility, coupled with incentives for early adoption, underscores the IRBM’s commitment to a smooth transition to mandatory e-Invoicing, ultimately fostering a more efficient and transparent tax environment in Malaysia.
