Good e-invoicing methods crucial for economic and financial growth, says US-Malaysia business group

KUALA LUMPUR, March 11 — The American Malaysian Chamber of Commerce (AmCham) hopes Malaysia will have a strong foundation to build its e-invoicing platform, citing its potential to grow the economy and local businesses exponentially.

At the launch of the bi-annual Economic Impact Survey (EIS), the chamber said e-invoicing was one of the hardest parts of digitising businesses, which is why many nations are struggling to adopt it.

One of the main issues with e-invoicing, the group said, is making sure sufficient input is provided to authorities to understand the different business models in Malaysia.

AmCham chief executive officer Siobhan Das said each business model is different and highly complex which requires detailed information in order to be accurate and transparent in reporting.

“With good e-invoicing, we can remove things such as supply chain disruptions and delays while being plugged into global systems. For now, what we are doing is helping the government understand its nuances so that whatever we push out will be smooth and avoid disruptions to the process of business,” said Siobhan.

Siobhan said its implementation would be a top-down approach which will end up going down to the SMEs. She said it would be difficult for the smaller businesses to adopt this as it will incur a cost.

“In order to trade overseas, and the target now is 2027 for full implementation, we hope we can work closely with authorities and figure out how to integrate with the SMEs as it is costly for them,” she added.

E-invoicing is about control, said Anthony Lee the chairman of AmCham. He said it is a massive undertaking which requires plenty of stakeholder engagement.

“The key is to encourage transparency and accuracy,” said Anthony.

E-invoicing is the direct transmission of invoice data from your financial systems to those of your business partners and or a government body.

To produce an e-invoice, a business cannot simply create a PDF version of a traditional paper invoice, rather, a business must have the ability to convert invoice data into a prescribed data format.

The most widespread regulator and document exchange format of this model is called PEPPOL. Countries which have adopted PEPPOL e-invoicing in APAC include Australia, Singapore and Japan.

The reason for the difficulty in regulating e-invoices is because of missing data, poor software, lack of business awareness, inaccurate tax calculations, data sitting in multiple systems and difficulty in mobilising resources in a timely manner.

“Hence, the need for a transparent and automated system, but before we get there, there are a lot of checks and balances. It is like learning to ride a bike,” said Siobhan.

“We are at the stage of understanding the businesses, what items within the companies tracking system can be linked to global business functions. Many countries haven’t adopted e-invoicing as yet, so we’d like to be ahead of this,” she added.

As businesses digitise the question of handling technical problems arising from poor e-invoicing practices arose.

Last year, in Parliament, Senator Tan Sri Low Kian Chuan, asked the Ministry of Finance if the Inland Revenue Board (IRB) would establish a one-stop centre to deal with potential technical problems during the transition to the e-invoicing system and if the government would provide incentives to facilitate the transition.

At the time, Deputy Finance Minister II Steven Sim said the IRB was preparing general and specific guidelines for businesses to consult in order to make changes or upgrades involving human resources, business processes and systems as a whole.

Regarding incentives to facilitate the e-invoicing transition, he said that based on the Budget 2024 announcement, the government would provide several incentives for digitalisation and e-invoicing implementation to the taxpayers.

He said the government had allocated RM100 million to provide digitalisation grants of up to RM5,000 for micro, small and medium enterprises (MSME) to upgrade sales, inventory and digital accounting systems.

The survey also revealed that in total, US companies invested in Malaysia paid RM5.7 billion in taxes for the year 2022/2023. RM1.3 billion went to EPF and Socso contributions, RM11.7 billion in salaries and RM172.6 billion in Fixed Direct Investments (FDI).

Exports in goods and services hit RM121.5 billion while imports came in at RM83.6 billion.

There were 10,085 local companies who got contracts worth more than RM100,000 and overall 148,778 livelihoods were supported.

The survey includes multiple economic sectors represented within the AmCham membership with a focus on the electrical and electronics (E&E) industry, financial services, agribusiness, extraction and energy. A total of 81 companies participated in the survey, 65 of which are American multinational companies. Half of the respondents are manufacturing companies with the E&E manufacturers among the largest group of respondents.