Malaysia | Employment Tax | MIRB issues updated e-Invoice guidelines

Employment Tax

Malaysia | MIRB issues updated e-Invoice guidelines

Summary
Electronic invoicing, known as e-Invoice, is a digital representation of a transaction between businesses and consumers that replaces conventional paper or electronic documents for invoices, credit notes and debit notes. As part of the Malaysian Inland Revenue Board (MIRB)’s’ digitisation agenda and to facilitate tax return filing through seamless system integration for efficient and accurate tax reporting, e-Invoice is expected to be implemented in stages from 1 August 2024 with the aim of achieving full deployment on 1 January 2027.

The Detail
The MIRB has recently issued the following guidelines on 29 September 2023 which provide additional coverage of the e-Invoice concept and specific, step-by-step guidance on the e-Invoice workflow:

1. e-Invoice Guideline (Version 2.0)
2. e-Invoice Specific Guideline (Version 1.0)
3. e-Invoice Catalogue

While the guidelines mainly cover Business-to-Business (B2), Business-to-Consumer (B2C) and Business-to-Government (B2G) transactions, the MIRB has also confirmed that e-invoices (including self-billed e-Invoices) are not required for employment income and pensions (among other items), though this exemption will be reviewed and updated by the MIRB from time to time.

Notwithstanding the above, e-Invoice Specific Guideline Version 1.0 indicates that to facilitate reimbursement of employment perquisites and benefits, and business expenses to employees, employees would need to get e-invoices issued in the employer’s name to the extent possible (and if not, then to the employees themselves).

Below we set out the salient points of the types of payments that will require an e-Invoice to be issued by the Supplier:

Details	Employees’ Perquisites and Benefits (Section 6)	Certain expenses incurred by employee on behalf of employer (Section 7)
Example	Employees’ pecuniary liabilities Club membership Gym membership Professional subscriptions Allowances	Accommodation fee Toll fee and petrol expenses Telecommunication expense Parking expense Expenses incurred in a foreign country
Purpose of e-Invoice	The e-Invoice plays a vital role to: Validate the employer’s expenses for corporate tax deduction and reporting purposes. Facilitate expense claims from the employer as the validated e-Invoice must be submitted as a supporting document. Substantiate the taxpayer’s individual claim for personal tax reliefs (for expenses which are not reimbursed by the employer).
Additional information	In situations where the employee receives benefits in cash or in kind from employer or third parties of having or exercising the employment In cases involving foreign transactions, both the employer and the employee are exempted from issuing an e-Invoice provided that the prerequisites and benefits are clearly specified in the employer’s policy.	In situations where the employee incurs certain expenses on behalf of the employer In cases involving foreign transaction, both the employer and the employee are exempted from issuing an e-Invoice provided that the employer able to substantiate that the employee is acting on the employer’s interests while incurring the expenses.

Generally, to facilitate the issuance of the e-invoice to the individuals by the suppliers, buyers are required to provide the tax identification number, identity card number (for Malaysians only) and passport numbers (for non-Malaysians only). Additionally, e-invoices must be requested from the supplier within the month of the transaction, otherwise the supplier can deny the issuance of the e-invoice to the buyer. The detailed process on the e-Invoice issuance can be found in the guidance – see version 2.0 and version 1.0.

What this means
In brief, the implementation of e-Invoicing will streamline the tax reporting process and submission of data electronically to the IRB. While this does not impact employment income reporting or employer obligations, it will impact the administrative process of employee claims on the part of both Malaysian employers and employees. As such, employees must possess a thorough understanding of the e-Invoice workflow while the employers are required to strategise the adoption of accounting and payroll software that aligns with the MIRB’s requirements to facilitate the e-Invoice submissions. Consequently, employers may wish to seek guidance and insights to navigate the best practices for different transactions to comply with the MIRB’s requirements.

Contact us
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:

Hilda Liow
Partner

Lim Phing Phing
Partner

Wee Lay Har
Director

Huang I-Hsiang
Senior Manager

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