Malaysia to launch national e-invoicing initiative

The recent Malaysia 2023 Budget confirmed that e-invoicing will be implemented in phases from 2023 with the system development, and pilot project involving selected taxpayers.

Peppol model

Malaysia will set up a Peppol Authority in 2023 with the Malaysia Digital Economy Corporation (MDEC – Malaysia’s lead digital economy agency) becoming Malaysia’s Peppol Authority responsible for the e-invoicing framework including registering Peppol Access Points in the country.  

Malaysia will initially implement a 4-Corner Peppol model, following Australia, New Zealand, Japan, and neighbouring Singapore.  At the moment, there is still discussion on whether Malaysia will adopt the Peppol BIS3 Billing specification or move straight to the new Peppol International (PINT), which is seen to be more scalable in terms of meeting local indirect tax / GST requirements outside of Europe. If Malaysia did implement PINT, it would follow Japan, which recently issued its Japanese invoice specification.

Continuous Transaction Controls in collaboration with tax authority

MDEC recently signed a memorandum of understanding (MoU) with the Inland Revenue Board of Malaysia (HASiL aka LHDN – the Malaysian tax authority). MDEC and HASiL will work together to coordinate the implementation of the National E-Invoice Initiative with the nationwide tax compliance model. Malaysia therefore intends to eventually move from the 4-Corner Peppol model to a decentralised “Continuous Transaction Controls” (CTC) model in future, possibly simply adding a fifth corner to Peppol in the form of the tax authority to receive and validate e-invoices under a pre-clearance model.

"MDEC will work with HASiL in the implementation of the National e-Invoice Initiative taking into account the taxation requirements for the development of the e-invoicing framework to be implemented in Malaysia as well as promoting the importance and advantages of e-invoice to businesses."

Mahadhir bin Aziz, CEO, MDEC

Timeline

It is anticipated that some larger businesses will adopt Peppol e-invoicing in Malaysia in Q4/2023 before scaling up the number of participating businesses in 2024. At this early stage, it is not clear when e-invoicing will be mandated but under the initiative, it will be strongly encouraged and promoted for B2B, and most likely there will be an initial B2G mandate

Service Provider onboarding will likely start in Q3/2023. Malaysia will likely mandate e-invoice service providers to meet the ISO27001 security standard (which will also likely soon become the minimum security standard set by Peppol authorities globally and has also recently been mandated for

Avalara has an e-invoicing solution that can help companies stay compliant in over 60 countries including the Peppol network. Avalara is a Certified Peppol Service Provider across Europe, Australia and New Zealand. Contact an expert at Avalara to discuss how we can assist with e-invoicing in a scalable and strategic way.

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