E invoicing clarifications

E-INVOICING CLARIFICATION

There appears to be some confusion as to when to do self-billing. Another area where several clients have been seeking clarification is what king of entities are exempt from issuing E Invoice and what actions do we take.

Below is my clarification based on my understanding which I hope clarifies the concerns raised.

1. Entities Not Required to Issue E-Invoices (Exemptions)
According to the official IRBM E-Invoice Guidelines, specific entities and individuals are currently exempted from issuing E-Invoices (including self-billed E-Invoices). If a supplier falls into these categories, they are not legally required to provide you with a validated E-Invoice.

  • Rulers and Ruling Chiefs: Includes His Majesty the Sultan, Yang di-Pertuan Besar, Yang di-Pertuan Negeri, and their Consorts.
  • Government Bodies: Federal Government, State Governments, State Authorities, Government Authorities, and Local Authorities.
  • Foreign Diplomatic Officers: Foreign diplomatic or consular officers and international organizations (subject to specific conditions).
  • Individuals Not Conducting Business: Private individuals selling personal assets (e.g., a person selling their used car or personal home) who are not acting in a business capacity.
  • MSMEs (Micro, Small and Medium Enterprises):
    • Revenue < RM150,000: Businesses with an annual turnover of less than RM150,000 are currently exempted from issuing E-Invoices.
    • Revenue < RM500,000 (Deferment): As of late 2025, the government has provided extended relaxation/exemption for MSMEs with revenue below RM500,000, meaning they may not yet be required to participate.

2. Self-Billing Requirements for Non-Compliant/Exempt Entities
Question: If I receive an invoice from an entity not required to comply (e.g., an exempt MSME or government body), am I required to do self-billing?

Answer: Generally, NO.

You are not required to issue a self-billed E-Invoice simply because a local supplier is exempt (e.g., a small hawker or small trader with revenue <RM150k).

  • For Exempt Local Businesses: If you purchase from a local business that is exempt (e.g., turnover < RM150,000), you should collect their standard commercial receipt/invoice. LHDN allows you to use this standard document as proof of expense for tax deductions during the exemption period. You do not need to raise a self-billed E-Invoice for them unless they fall into the specific categories listed in Section 3 below.
  • For “Non-Compliant” Businesses: If a business is required to issue an E-Invoice (e.g., a large corporation) but fails to do so, you cannot simply “fix” it by self-billing. You should insist they provide the E-Invoice. If they still do not provide you are obliged to make the difficult decision of not conducting business with a non-compliant entity. If you continue to accept their invoices (which is a non-E Invoice), then the expense may be disallowed, and you may be charged with a hefty penalty. However, for specific “hard-to-invoice” scenarios approved by LHDN (like foreign suppliers), you must self-bill.

3. Criteria and Conditions Requiring Self-Billing
You are only required (and permitted) to issue a self-billed E-Invoice in specific circumstances defined by LHDN. If your transaction fits one of these seven (7) criteria, you must act as the issuer:

  1. Payment to Foreign Suppliers:
    Condition: When you import goods or acquire services from a foreign company that does not use the Malaysian MyInvois system.
    Action: You must issue a self-billed E-Invoice to document this foreign expense for your own tax records.
  2. Acquisition from Individuals (Non-Business):
    Condition: When you buy goods or services from an individual who is not conducting a business (e.g., renting a premise from a private individual landlord, or buying a used van from a private owner).
    Action: Since the individual cannot issue an E-Invoice, you must issue a self-billed one.
  3. Payment of Commissions to Agents/Dealers/Distributors:
    Condition: If you pay commissions to agents, dealers, or distributors (ADDs) and you (the payer) are the one computing the commission statement.
    Action: Instead of waiting for thousands of agents to bill you, you issue a self-billed E-Invoice for the commission paid to them.
  4. Distribution of Profits (e.g., Dividends):
    Condition: When distributing profits or dividends to shareholders/partners (where applicable under the act).
  5. E-Commerce Transactions:
    Condition: Specific scenarios where the e-commerce platform operator is liable to issue invoices on behalf of merchants (subject to specific platform rules).
  6. Payout to Betting/Gaming Winners:
    Condition: For gaming operators paying out winnings to individuals.
  7. Interest Payments:
    Condition: When paying interest to a party, in circumstances where the recipient does not issue an invoice (e.g., specific financial instruments or inter-company loans where the payer generates the statement).

STANDARD OPERATING PROCEDURE

Accounts Payable E-Invoice Compliance & Self-Billing

Effective Date: Immediately
Department: Finance / Accounts Payable (AP)
Reference: Inland Revenue Board of Malaysia (LHDNM) e-Invoice Guidelines

1. OBJECTIVE
To ensure all incoming invoices and payments processed by the company comply with the Malaysian e-Invoice regulations, specifically regarding:

  • Validating incoming e-Invoices from suppliers.
  • Identifying when to accept normal receipts from exempt entities.
  • Identifying and executing Self-Billed e-Invoices when required.

2. SCOPE
This procedure applies to all purchases of goods, services, asset acquisitions, and commission payments made by the company.

3. DECISION MATRIX (QUICK REFERENCE)
Before processing any payment or booking an invoice, the AP Officer must categorize the transaction into one of three categories:
Category: Standard Compliance
Supplier Type: Local Business (Sdn Bhd, PLT, or Non-Exempt Sole Prop)
Action Required: Request e-Invoice. Reject normal invoice.

  • Category: Exempt Entities
  • Supplier Type: MSME (Rev < RM150k/RM500k*), Gov Bodies, Rulers etc.
  • Action Required: Accept Normal Invoice/Receipt. No e-Invoice required.
  • Category: Self-Billing
  • Supplier Type: Foreign Supplier, Private Individual, Paying Commissions etc.
  • Action Required: Issue Self-Billed E-Invoice. Do not wait for supplier invoice.
    *Note: MSME threshold depends on current phase/deferment status.

4. DETAILED PROCEDURES
4.1 Category A: Standard Local Suppliers (Mandatory Compliance)
Applies to: Most Sdn Bhd, larger suppliers, and GST/SST registrants.

1. Submission Requirement: Inform vendors that only Validated e-Invoices (PDF with QR code or XML/JSON data) are accepted for payment.

2. Validation Step:
– Upon receipt, scan the QR code using the MyInvois app or verify via the LHDN portal.
– Ensure the status shows “Validated”.

3. Data Check: Verify that the “Buyer Details” (Our Company Name, TIN, Address) are correct.
4. Posting: Enter the e-Invoice Reference Number (Unique ID) into the accounting system.

4.2 Category B: Handling Exempt Suppliers
Applies to: Small hawkers, petty traders, government agencies (JPJ, Imigresen), and exempt MSMEs.

1. Verification:
Request a simple Written Declaration or email from the vendor stating they are exempt from e-Invoicing (e.g., “Annual turnover is below RM150,000”).
2. Documentation:
Accept the standard commercial receipt, bill, or handwritten invoice.
Ensure the receipt contains basic details: Date, Supplier Name, Description of Goods, Amount.
3. Action:

  • DO NOT issue a Self-Billed E-Invoice.
  • Process payment using the standard receipt as proof of expense (allowable during the transitional/exemption period).

4.3 Category C: Executing Self-Billed E-Invoices
Applies to: Imports, renting from individuals, paying agents.

Scenario 1: Foreign Suppliers (Import of Goods/Services)
1. Receive the commercial invoice from the foreign supplier (e.g., in USD/SGD).
2. Action: The AP Team must raise a Self-Billed e-Invoice in the MyInvois System/Accounting Software.
3. Required Data:

  • Supplier Name: Foreign Company Name.
  • TIN: Enter EI00000000020 (General TIN for Foreign Suppliers).
  • Address: Foreign Country Address.
  • Currency: Original currency (e.g., USD) and conversion rate.

4. Timing: Must be issued after the supply is received/customs cleared, ideally by the end of the month.

Scenario 2: Purchase from Individuals (Non-Business) Example: Renting a shop lot from Mr. Ali (private owner) or buying a second-hand truck from a private seller.

1. Action: Raise a Self-Billed E-Invoice.
2. Required Data:

  • Supplier Name: Mr. Ali (as per IC).
  • TIN: Enter Mr. Ali’s personal TIN (IG…) or if unavailable, use EI00000000010 (General TIN for M’sian Individuals).
  • IC Number: Mandatory if using General TIN.

Scenario 3: Commission Payments to Agents/Dealers

  1. Calculate the commission due to the agent.
  2. Action: Raise a Self-Billed E-Invoice for the commission amount.
  3. Distribution: Send a copy of the validated Self-Billed E-Invoice to the agent as their proof of income.

5. VENDOR MASTER DATA UPDATES
To facilitate the above, the Procurement/AP team must update the Vendor Master list with the following tags:

  • [COMPLIANT]: TIN Number recorded. Requires e-Invoice.
  • [EXEMPT]: Flagged as MSME/Gov. Accepts normal receipt.
  • [SELF-BILL]: Flagged for Foreign or Individual. System triggers self-bill logic.

6. DISPUTE & EXCEPTION HANDLING

  • Supplier refuses to issue e-Invoice but is not exempt:
    • Action: Hold payment. escalate to Finance Manager. Without a validated E-Invoice, the company cannot claim tax deductions effectively.
  • System Downtime:
    • Action: If MyInvois is down, obtain the commercial invoice first and require the supplier to submit the e-Invoice validation once the system is back online (within 72 hours).
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