The Inland Revenue Board (LHDN) announced on Friday a six-month grace period for taxpayers transitioning to the mandatory e-Invoicing system, effective August 1, 2024. This measure aims to facilitate a smoother shift, allowing businesses to issue consolidated e-Invoices for all transactions during this period.
During this time, taxpayers will have the following flexibility:
- Taxpayers can issue consolidated e-Invoices for all transactions, including self-billing e-Invoices.
- Any transaction description can be entered in the “Product or Service Description” field.
- If a buyer requests an e-Invoice, the seller can issue a consolidated e-Invoice instead of separate ones for each transaction.
- Businesses will not be penalized under section 120 of the Income Tax Act 1967 for not following e-Invoicing rules, as long as they use consolidated e-Invoices during this period.
This announcement comes as part of a broader focus on improving compliance and oversight In the first half of 2024 alone, the LHDN imposed RM3.7 billion in additional taxes and penalties for non-compliance, underscoring the government’s commitment to tightening tax regulations and ensuring compliance across all sectors.
The new grace period will provide companies with the additional time needed to implement the necessary systems and processes for e-Invoicing compliance,
LHDN Chief Executive Officer Datuk Dr Abu Tariq Jamaluddin stated. “This flexibility extends across all industries and activities, enabling the issuance of consolidated e-Invoices, including self-billed e-Invoices. Transaction details can be specified in the ‘Product or Service Description’ field. Should a buyer request an e-Invoice, sellers may issue a consolidated e-Invoice rather than separate invoices for each transaction,” he elaborated.
Abu Tariq further highlighted significant progress in 2023, with the LHDN achieving a record tax collection of RM183.3 billion, a 4.49% increase from RM175 billion in 2022.
For 2024, the LHDN has set an ambitious target of RM197 billion. A key focus to achieve this target will be addressing tax leakage issues, including discrepancies between individuals’ assets and their tax declarations, as well as unreported income from Malaysia held in overseas accounts.
In line with this, the introduction of e-Invoicing is seen as a strategic move to enhance transparency and efficiency in tax administration. By digitizing invoicing processes, the LHDN aims to reduce opportunities for tax evasion and improve the accuracy of tax reporting. Businesses are encouraged to begin preparations immediately to ensure a seamless transition.
The LHDN has assured that it will provide the necessary support and resources to assist taxpayers in adapting to the new system.
Abu Tariq mentioned that the government has enhanced tax incentives for companies that successfully adopt the e-Invoicing system. These incentives include reducing the capital allowance claim period from four years to three for ICT equipment and computer software packages purchased in the assessment years 2024 and 2025.
The phased implementation of e-Invoicing represents a significant step towards modernizing Malaysia’s tax infrastructure, aligning it with global best practices. As businesses adapt to these changes, the LHDN’s emphasis on compliance and enforcement will be crucial in achieving the desired outcomes of increased tax revenue and enhanced economic transparency.
To learn more about implementing compliant e-Invoicing systems and reaping the business benefits, book a discussion with us today: https://link4.asia/my/
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Footnote: In this article, “e-invoicing” is used interchangeably to refer to electronic invoicing.
