The Malaysian tax administration has made a big change in 2021-the LHDN E-Invoice system has been made compulsory for all businesses. If you are conducting business and don’t know about this new rule yet, you can face fine in the future. In this guide we will discuss in detail how LHDN E-Invoice works, why it is important, who is obliged to use, how to set the system and how to avoid preparing fine. It will guide your business more transparent and smartly not only for Malaysia but also for the international level.
What is lhdn e-invoice and why is it important?
LHDN E-Invoice is a digital invoice system launched by LHDN (Lembaga Hasil Dalam Neegeri), whose purpose is to keep the business transaction automatically recorded and to determine the tax account more transparent and accurately.
This system is:
- By reducing the tax gap
- By digitizing the business accounting process
- Increases transplantation
- The government’s tax collection process makes the process easier
International Trend & LHDN E-invoice
Many countries around the world have already launched the E-Invoice system, such as Australia, Canada, Germany and the United Kingdom. Malaysia has made the LHDN E-Invoice compulsory from 2021.
Who is forced to use this system?
Businesses must follow the following E -Invoice LHDN:
- SME and Big Company
- Freelancers whose annual income is above certain boundaries
- Any person or agency who did commercial transactions
Where is the risk of fine?
If a business does not launch LHDN E Invoice, LHDN may take fine and legal action.
LHDN E-Invoice Steps to Setup
1. Registration of E-Invoice Portal
In the first step you need to register in the LHDN E-Invoice portal. It may have to give you the following information:
- Business name and registration number
- Tax Registration Number (TIN)
- Bank account and financial information
2. API Integration or Portal Use
If your business is big then it is better to connect your POS or ERP system to the Einvoice portal through API integration. E-Invoice portal of LHDN for small business is enough.
1. Invoice creating and submission
- Must create an e-invoice after each transaction
- It must automatically submit to LHDN
- A Unique Invoice Number will be provided after approval
What information should be in the invoice?
Invoice components of the required
- Invoice number
- Date
- The buyer’s name and tin
- Product
- Quantity
- GST/VAT amount (if any)
Example
Let’s say you’re using a POS system. As soon as the sale is completed, the invoice will be created and sent to LHDN and they will approve it. This approved invoice will be valid.
Lhdn e-invoice: Business Benefits
Transparency
The transaction calculation is more transparent in the use of e Invoice. The tax authority can verify it at any time.
Quick Reporting
Monthly or annual reports can be created with one click. This makes economic analysis easier.
International acceptance
The E-Invoice system is currently mandatory in many countries in Europe, Australia and Asia. Its application in Malaysia will protect the international standards of your business.
Common mistakes and how to avoid them
Provide incorrect information
Invoi can be canceled by giving the wrong TIN or the wrong product name.
Invoice submitted late
Daily transactions should be submitted daily in the form of invoice. The penalty may come delay.
Old POS system
Verify whether your POS or software is ready for E Invoice LHDN. If not, upgrade it.
E-invoice situation in other countries
Singapore
The Einvoice system in Singapore runs through the PEPPol Network. This is exemplary for Malaysia.
Australia and UK
In these countries, E-Invoice has been mandatory in transactions with government institutions.
LHDN E-invoice future plans
Complete Digital Tax Administration
By 20, the Malaysian tax administration has taken a goal of completely digital. This journey has begun through LHDN E-Invoice.
Free Software and Tools
LHDN has also been said to provide free e-invoice software for small businesses.
Conclusion
LHDN E-Invoice is an essential step for business in Malaysia. If you do not prepare now, you can read fine and other complications in the future. So make your business LHDN E Invoice today and participate in digital transformation.
This guide is also relevant to traders from other countries including the United States, Canada, the United Kingdom, Germany, Sweden, Singapore, Japan, not only in Malaysia.
🛡 Extra Important: How to prepare LHDN E-Invoice from today (step-by-step checklist)
LHDN E-Invoice implementation is delayed not only the fine, but your business can fall behind. So follow the steps below today and check each step:
✅ Step 1: Business Types and Taxpayer classes to determine
- Are you sole proprietor, company or freelancers?
- What is the annual income?
- Verify whether your LHDN E Invoice is mandatory.
✅ Step 2: LHDN MYTAX account update
- Make sure the tax registration number (TIN) is correct.
- Update it if you have older information.
✅ Step 3: E-Invoice Portal Pre-Registration
- Go to LHDN E-Invoice Portal and register.
- Follow the portal’s tutorial and video guide.
✅ Step 4: Take the Software Preparation
- If you use POS/ERP, make sure it supports Einvoice API.
- View update options on software such as Xero, QuickBooks, SQL Accounting etc.
✅ Step 5: Train Staff Train
- Teach the Finance or Accounting Team the E-invoice system.
- Create Regular Training and Manual.
✅ Step 6: Create Internal E-Invoicing SOP
- In what step will the invoice issue be?
- Who will approve?
- How many days do you need to submit?
✅ Step 7: Run Pilot Test
- Create a few invoices and submit to the LHDN E Invoice portal.
- Learn from there if wrong.
📌 Bonus TIP:
If you have clients from outside your country, start using the International E-Invoice format (UBL or Pepol) in transactions with them. This will make your business global-rate.
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