Electronic Invoice Rules Issued
01 October 2024
The Minister of Finance II has issued the
Income Tax (Issuance of Electronic Invoice) Rules 20241 (‘
Rules’) that came into operation on 1 October 2024.
The Rules,
inter alia, provide as follows:
Commencement of electronic invoice
Rule 2(1) of the Rules provides that for any person who carries out a transaction in respect of any goods sold or services performed, the commencement date for issuing an electronic invoice shall be as follows:
- in relation to annual sales of more than RM100 million – from 1 October 2024;
- in relation to annual sales of more than RM25 million but not exceeding RM100 million – from 1 January 2025; or
- in relation to annual sales other than specified in paragraphs (a) and (b) above - from 1 July 2025.
Determination of annual sales
Rule 2(2) of the Rules sets the basis for determining the annual sales turnover for the purposes of rule 2(1) of the Rules:
- if the person has an audited financial statement, the annual sales shall be determined based on the annual income specified in the audited financial statement for financial year 2022; or
- if the person does not have an audited financial statement, the annual sales shall be determined based on the annual income reported in the return for the year of assessment 2022.
Rule 2(3) provides the formula for determining the annual sales turnover where there is a change of accounting period in relation to a person.
Particulars of electronic invoice
Rule 3 provides that the particulars to be included in an electronic invoice shall be as specified in the Schedule to the Rules.
Non-application of the Rules
Rule 4 of the Rules stipulate that the Rules shall not apply to the following:
- a foreign diplomatic office;
- an individual who does not carry on business;
- a statutory body, statutory authority or local authority in relation to—
i. the collection of payment, fee, charge, statutory levy, summon, compound and penalty in carrying out its functions under any written law; and
ii. a transaction of any goods sold or service performed before 1 July 2025; and
- an international organisation for transaction of any goods sold or service performed before 1 July 2025.
The Rules must be read together with sections 82C, 138(4)(aa) and 138(5)(e) of the Income Tax Act 1967.
Comments
The Rules, in particular the Schedule thereto, will provide guidance on the requirements that are to be complied with when the obligation to issue electronic invoice applies to a person.
In line with the previously announced phased implementation of electronic invoice, larger businesses will lead the transition to electronic invoice, followed by smaller businesses. In addition, the previously announced six-month grace period for consolidated invoice offers further flexibility, granting businesses the time needed to fully implement electronic invoice.
While the transition to electronic invoice may require significant upfront adjustments, the long-term benefits of increased transparency, reduced fraud, and smoother tax compliance will ultimately benefit businesses and the broader economy of Malaysia.
Alert by Victoria Low (Associate) of the Tax Practice of Skrine.