A Guide to e-Invoicing Clearance Mandates for Malaysia
By Ioana Ploesteanu, Product Marketing Manager, Tradeshift
A major development is underway for Malaysia’s e-invoicing tax system. Currently, businesses operate under a post-audit system for e-invoices, meaning tax authorities don’t pre-approve invoices before sending them. This is set to change in 2024 by implementing a national e-invoicing system utilising a clearance model. This system aims to improve tax collection efficiency by requiring pre-clearance of invoices for capturing a larger portion of sales tax.
Malaysia is implementing the CTC (continuous transaction controls) clearance e-invoicing model, which signifies a shift toward a more digital and streamlined tax administration process. This initiative will have a broad impact on businesses operating within the country. To ensure a smooth transition and mitigate potential disruptions and data gaps, it’s crucial for businesses to stay informed about Malaysian e-invoicing mandates and take the necessary steps to prepare for imminent changes.
Milestones and Timelines for Malaysia’s e-Invoicing Clearance Mandates
August 1, 2024:
- Mandatory e-invoicing commences: Businesses in Malaysia with an annual turnover exceeding RM100 million must begin issuing electronic invoices for all transactions (domestic and international).
January 1, 2025:
- Mandatory e-invoicing expands: Businesses with an annual turnover between RM25 million and RM100 million become subject to the e-invoicing mandate.
July 1, 2025:
- Full implementation: E-invoicing becomes mandatory for all businesses in Malaysia, regardless of turnover.
Note: The Malaysian Inland Revenue Board (IRD) welcomes voluntary participation from businesses outside the initial mandatory phases.
What is included in the new Malaysian tax and e-invoicing model?
Malaysia’s transition to e-invoicing aligns with a global trend towards modernized tax systems. This movement aims to strengthen tax compliance and improve efficiency. The IRD is still finalizing the specific details of Malaysia’s e-invoicing system, but here’s a general overview of what to expect:
- Mandatory e-invoices: Malaysia’s e-invoicing system mandates electronic invoices (e-invoices) in XML or JSON format for all businesses, replacing paper invoices. All e-invoices require a QR code embedded with a verification link on the IRB website for buyers. Businesses can integrate through an API to the Peppol network to transmit e-invoices or use the MyInvois portal which is more suitable for Micro, Small, and Medium-sized Enterprises. E-invoices must be stored for seven years, with the option for overseas storage upon approval from the Director General of Royal Malaysian Customs.
- Continuous Transaction Control (CTC) model: The new system is likely to utilize a Continuous Transaction Control (CTC) clearance model. This means invoices will be submitted electronically to the IRD for verification before issuance to the customer.
- Electronically issued clearances: Businesses may receive clearances electronically upon fulfilling their tax obligations. These clearances, previously obtained physically, will streamline the tax compliance process.
How Tradeshift can help you prepare for the new Malaysian e-Invoicing mandate
Don’t just stay informed, get prepared . Businesses using forefront and compliant e-invoicing and AP automation platforms, like Tradeshift Pay, gain a significant advantage, especially as more countries adopt clearance models. Such e-invoicing and AP automation platforms, streamline data management, automate e-invoice issuance, and ensure compliance with evolving regulations. Now more than ever, finding a solution that simplifies your tax processes across international borders is critical. .
How to Bridge the Data Gap
Shifting from a post-audit to a clearance model for e-invoicing can create a data gap for businesses. In the post-audit system, companies have more flexibility to collect additional data beyond what’s required for tax purposes. However, clearance models often mandate only the information necessary for tax determination. This means businesses may need to gather supplementary data from suppliers outside the mandated fields to complete internal processes, potentially creating inefficiencies and additional work for accounts payable teams.
With Tradeshift Pay businesses overcome potential data gaps that may surface as they transition to the clearance model. Our solution is updated to enable suppliers to participate in the data enrichment process and deploy automation to further streamline information collection and verification, outside the mandated fields. 
By proactively preparing for Malaysia’s e-invoicing mandates, businesses can ensure a smooth transition and leverage the efficiency of a digital tax system.
This shift reflects a global trend, with over 80 countries having e-invoicing mandates and 50 more planning to follow. By 2030, most VAT regimes are expected to adopt mandatory continuous transaction controls. However, the lack of a universal standard means each country has its own unique requirements, creating a complex landscape for global businesses.
This highlights the need for centralized and streamlined compliance solutions. Supporting new regulations like Malaysia’s is an ongoing commitment for Tradeshift, and we’re here to help businesses navigate the evolving global e-invoicing landscape. Ask us how to become compliant.
