A Comprehensive Guide on Malaysia e-Invoice Regulations - (2) (PrePayments/ Advance Payments, Retailer/POS, E-commerce and Mobile APPs)

Introduction

IntrudctioIn the digital age, the shift towards electronic invoicing (e-Invoicing) is not just a trend but a strategic move for businesses to streamline operations, enhance efficiency, and comply with regulatory standards. In the previous article we discussed the Inland Revenue Board of Malaysia (IRBM) comprehensive framework through the e-Invoice Specific, which mandates the adoption of e-Invoicing practices across various sectors. This article delves into the intricacies of achieving compliance for different transaction issuers, including e-commerce platforms, mobile applications, Point-of-Sale (POS) systems, and retailers.

How to be compliant with IRBM E-invoicing regulations for PrePayments/ Advance Payments Scenario?

To ensure compliance with the e-Invoice standard for prepayments, the issuer must follow a structured process that aligns with the guidelines provided by the Inland Revenue Board of Malaysia (IRBM). The design architecture for this process should integrate with the MyInvois system, either through a web portal or an API (we will be discussing integration technicalities in Article 3).

Steps for Compliance:

• Agreement and Prepayment Transaction:The issuer (Supplier 2) enters into an agreement with the Buyer for the supply of goods or services, which includes making prepayments on behalf of the Buyer to settle expenses during the contract period.
• Issuance of Initial e-Invoice:Upon concluding a sale or transaction, the initial supplier (Supplier 1) issues an e-Invoice to the issuer (Supplier 2) for the prepayment made. This e-Invoice must include all required fields as outlined in (Article 1) of the e-Invoice Guideline and be submitted to IRBM for validation.
• Payment Proof:Supplier 1 provides payment proof to Supplier 2 for the prepayment settlement.
• Issuance of e-Invoice to Buyer:Supplier 2 then issues an e-Invoice to the Buyer, recording the prepayment (as disbursement/reimbursement) along with any goods sold or services rendered by Supplier 2. These are presented as separate line items in the e-Invoice.
• Validation and Submission:The e-Invoice is validated by the IRBM through the MyInvois system, either via the web portal or API, as per the e-Invoice workflow discussed in (Article 1)

• Use as Proof of Expense or Income:The validated e-Invoice can be used by the Buyer as proof of expense and by Supplier 2 as proof of income for tax purposes.

Design Architecture Considerations:

• Integration with MyInvois System:The issuer's system must be capable of integrating with the MyInvois system to ensure real-time validation of e-Invoices. This can be achieved through a web portal or by using an API for direct system-to-system communication (Will be discussed in detail in article 3).
• Data Fields Compliance:The design must accommodate all required data fields for e-Invoice issuance as specified in (View Article 1 for the list). This includes buyer and supplier details, transaction details, and any unique identifiers.
• User Interface for Data Entry:A user-friendly interface should be provided for the entry of buyer details and transaction information, ensuring accuracy and compliance with the required fields.
• Security and Authentication:The architecture must include secure authentication mechanisms to protect sensitive data and ensure that e-Invoices are only issued by authorized personnel.
• Digital Signature and Timestamp:The system should support digital signatures and timestamping to authenticate the e-Invoice and ensure non-repudiation.
• Record Keeping and Retrieval:The design should include a robust record-keeping system for storing validated e-Invoices and providing easy retrieval for audit and compliance purposes.
• Notification and Communication:The system should have the capability to notify buyers and suppliers of the e-Invoice status and provide a means for electronic communication between parties.

How to be compliant with IRBM E-invoicing regulations for E-commerce?

To ensure compliance with the e-Invoice standard for e-commerce issuers, the following steps should be taken, supported by a robust design architecture:

Steps for E-commerce Issuers to Comply with e-Invoice Standards:

1. Understand Roles and Responsibilities:Recognize that the e-commerce platform provider is the supplier responsible for issuing e-Invoices to merchants and service providers using the platform.
2. Implement e-Invoice Issuance Process:Follow the detailed e-Invoice workflow as mentioned above in the e-Invoice model via MyInvois Portal process
3. Transition from Traditional to Electronic Invoicing:Shift from issuing traditional invoices/bills/receipts to issuing e-Invoices upon request by the purchaser or as part of the platform's service to merchants and service providers.
4. Input Required Details:Complete the required fields as outlined in Appendices 1 and 2 of the e-Invoice Guideline and input additional details as per (Article 1).
5. Issue Self-Billed e-Invoices:Create and submit self-billed e-Invoices for IRBM’s validation according to the current issuance frequency.
6. Ensure Data Security and Compliance:Verify that the MyInvois System complies with ISO/IEC 27001 and ISO 22301 certifications for information security and business continuity.

Design Architecture for e-Invoice Compliance:

• Integration with MyInvois System:The e-commerce platform's architecture must include integration with the MyInvois System for real-time e-Invoice generation and validation (more technical discussion would be in Article 3).
• Data Field Mapping:The system should have a mechanism to map transaction details to the required data fields specified by the IRBM, ensuring accurate e-Invoice creation (mentioned in Article 1).
• User Interface for Data Entry:Design a user interface that allows for the easy entry of purchaser and transaction details, which are necessary for e-Invoice issuance.
• API Connectivity:Develop API endpoints that align with the IRBM's specifications for e-Invoice submission and validation.
• Security Measures:Implement robust security measures to protect sensitive data, including encryption, access controls, and secure authentication methods.
• Compliance Monitoring:Incorporate features to monitor and ensure ongoing compliance with e-Invoice standards and regulations.
• Record Keeping:Design a system for storing e-Invoices securely, with the ability to retrieve them for audits or compliance checks.

How to be compliant with IRBM E-invoicing regulations for Mobile application transactions?

To ensure compliance with the e-Invoice standard for transactions conducted through mobile applications, issuers must follow a series of steps and incorporate a design architecture that aligns with the e-Invoice Specific above provided by the Inland Revenue Board of Malaysia (IRBM). Here are the steps and design architecture considerations:

Steps for Mobile Application Transactions to Comply with e-Invoice Standards:

1. Integration with MyInvois System:Mobile applications must be integrated with the IRBM MyInvois System to generate and validate e-Invoices upon request.
2. User Profile Configuration:The mobile app should allow users to create Personal or Corporate profiles containing the required details for e-Invoice purposes, Where applicable, individual Buyer to provide SST registration number if the individual Buyer is not registered for SST, Supplier to input “NA”.
3. Transaction and e-Invoice Request:When a transaction occurs, the buyer can request an e-Invoice through the mobile app. The app should facilitate the entry of transaction details and buyer information as above images.
4. e-Invoice Generation and Validation:Upon confirmation of details, the mobile app sends a request to the MyInvois System to generate the e-Invoice. The API validates the e-Invoice and responds to the app with a validated e-Invoice in less than two seconds.
5. Notification and Delivery:The buyer receives a push notification from the mobile app and a notification from IRBM once the e-Invoice is validated. The validated e-Invoice is then shared with the buyer via email or within the app.
6. Proof of Transaction:The validated e-Invoice serves as proof of income or expense for tax purposes for both the supplier and the buyer.

Design Architecture for Mobile Application e-Invoice Compliance:

• API Integration:Implement API endpoints for communication with the MyInvois System for e-Invoice generation and validation.
• User Profile Management:Design a user profile management system within the app to store and manage buyer details as per e-Invoice requirements.
• Transaction Data Capture:Create a transaction module to capture and map transaction details to the required e-Invoice data fields.
• Real-Time Validation:Ensure the system architecture supports real-time validation of e-Invoices with the MyInvois System.
• Security and Data Protection:Incorporate security features such as encryption, secure data transmission, and user authentication to protect sensitive information.
• Notification System:Develop a notification system to alert buyers of the e-Invoice status and delivery.
• Record Retention:Include a mechanism for storing and retrieving validated e-Invoices for compliance and audit purposes.

How to be compliant with IRBM E-invoicing regulations for POS Transactions/Retailer transactions?

To ensure compliance with the e-Invoice standard for retailers, the following steps should be taken, supported by a design architecture that aligns with the e-Invoice Specific provided by the Inland Revenue Board of Malaysia (IRBM):

Steps for Retailers to Comply with e-Invoice Standards:

1. Integration with MyInvois System: Retailers must integrate their online platforms, mobile apps, or POS systems with the IRBM MyInvois System to generate and validate e-Invoices upon request.
2. Transaction Initiation: At the point of sale, the retailer (supplier) must be prepared to issue an e-Invoice when a buyer makes a purchase and requests it. The retailer collects the buyer's details as required above.
3. Data Entry and Validation: The retailer inputs the necessary details into the system, which then sends a request to the MyInvois System for e-Invoice generation and validation.
4. Issuance and Sharing: Once the e-Invoice is validated, it is shared with the buyer, either in print form from the POS system or electronically via the online platform or mobile app (example below).
5. Post-Transaction Requests: Retailers must also accommodate buyers who request an e-Invoice after the transaction by providing an online platform or mobile app for this purpose.
6. Self-Billed e-Invoices: For e-commerce platform providers, are responsible for issuing self-billed e-Invoices to merchants and service providers using the platform, following the e-Invoice workflow.
7. Record Keeping: Retailers must store all validated e-Invoices for compliance and audit purposes.

Design Architecture for Retailer e-Invoice Compliance:

• API Integration:Develop API endpoints for communication with the MyInvois System for e-Invoice generation and validation.
• User Interface for Data Entry:Design user interfaces for online platforms, mobile apps, and POS systems that allow for the easy input of buyer details and transaction information.
• Real-Time Processing:Ensure the system architecture supports real-time processing and validation of e-Invoices with the MyInvois System.
• Security and Data Protection:Incorporate security features such as encryption, secure data transmission, and user authentication to protect sensitive information.
• Notification and Delivery Systems:Develop notification systems within the POS, online platforms, and mobile apps to alert buyers of the e-Invoice status and enable electronic delivery.
• Record Retention and Retrieval:Include a mechanism for storing and retrieving validated e-Invoices for compliance and audit purposes.

Summary:

The transition to e-Invoicing requires a meticulous approach, integrating with the MyInvois System for real-time validation and adhering to the data fields outlined in the guideline's appendices. From capturing buyer details to ensuring the security of sensitive information, each issuer must navigate a unique set of challenges. This article provides a graduate-level depth of understanding, offering a decisive and informative exploration of the steps and design architecture necessary for compliance.

Whether you are an e-commerce giant, a developer of mobile commerce applications, a retailer with a sophisticated POS system, or a business issuing periodic statements, this guide will lead you through the e-Invoice compliance journey. We will dissect the requirements, discuss the design architecture, and offer practical insights into the implementation process. In the coming Article 3 we will be discussing the technical integrations, feel free to reach out to me for any questions, and to preregister for my upcoming webinar on Malaysia E-invoicing.