Malaysia’s new e-invoicing a major shift in data flow

The Ministry of Finance has released additional tax proposals related to key areas such as e-invoicing.

The Malaysian government's recent introduction of e-invoicing, as part of Budget 2024, marks a significant shift in the country's approach to digital economy and tax administration. 

According to Victor Cheong, Partner of Audit & Assurance at RSM Malaysia, this initiative is designed to bolster the growth of the digital economy and enhance the efficiency of tax administration in Malaysia.

"This is a major shift in the information data flow," he said, explaining how the Inland Revenue Board of Malaysia (IRB) will transition from a reactive, detective mode to a more proactive, preventive approach. 

He added that this change aims to ensure the integrity and accuracy of transactions recorded by taxpayers, thus closing loopholes in the current process.

The implementation of e-invoicing, scheduled for July 1, 2025, heightened the urgency for businesses to adapt their IT systems to accommodate this new method of transaction processing. 

"The key challenges are educating the public on their tax obligations and simplifying rules and procedures to reduce the burden on legitimate businesses," he said.

In terms of compliance, Victor believed it will take time to resolve initial issues and difficulties. However, he remained optimistic about the long-term benefits, stating that "with time and guidance from various sources, everyone will be able to cope with this new way of doing things."

Victor also discussed how these tax proposals align with Malaysia's broader economic and fiscal goals, particularly in the context of post-pandemic recovery. He said that in Budget 2023, the government focused on supporting small and medium enterprises (SMEs) through various initiatives, including financing, tax cuts, and digitization grants. 

"Such digitization grants and financing will continue to further aid the overall economy to digitalize, enabling businesses to remain relevant," Victor explained.

He emphasised the critical role of SMEs in the Malaysian economy, suggesting that e-invoicing will be an efficient tool for ensuring a compliant tax population. This move is seen as a way to curb unethical tax behaviour and increase the government's taxpayer base.

"This will enable the government to strengthen public finances and rebuild fiscal buffers for long-term fiscal sustainability," Victor concluded.