1.0 Introduction
Micro, small and medium enterprises (MSME) with annual turnover ≤ RM 25 million is mandatory to execute and implement the nationwide e-Invoice system latest by 1.7.2025, which is on Tuesday. An analysis of the business transactions in terms of volume, nature and its diversity are required to map out the implementation process needs and requirements.
The ICT equipment and software has to concurrently able to accommodate the forthcoming GST implementation and e-Invoice working mechanism.
2.0 Annual threshold assessment
The annual threshold assessment for the timeline implementation is reference to the turnover of companies for the financial year ended 2022.
Year | Implementation date | Turnover (RM million) | Phase |
2024 | 1.8.2024 | > 100 | I |
2025 | 1.1.2025 | 25 < x ≤ 100 | II |
2025 | 1.7.2025 | ≤ 25 | III |
2025 | 1.7.2025 | Company or business entities commence business in 2023 or thereafter | III |
MSME are the last group of companies to implement and to execute the e-Invoicing system must proactively explore in dealing with the suppliers that are currently operating on the e-Invoice system which is company with annual turnover > RM100 million on 1.8.2024; and company with turnover > RM25 million on 1.1.2025.
Transition issues and the common hiccup encountered by these businesses and their companies are essential in refine, new formulate the current business strategies and finalise the most appropriate business model to carrying on the business of MSME.
2.1 Supermarket or hypermarket
Supermarket or hypermarket can continue using the point of sales system to issue receipts to its individual consumers on the products sold daily. At the end of every month, the aggregated sum of the receipts issued would be processed in one aggregated sum on consolidated e-Invoice to be sent to IRB within 7-day upon expiration of that particular month.
2.2 Voluntary compliance
E-Invoicing is tax revolution in action. It is always best and pragmatic to implement e-Invoicing on an earlier date voluntarily regardless of their annual turnover or revenue. The mandatory timeline imposed by IRB is the latest date of compliance.
The IRB has expressed its welcome to Phase II and Phase III suppliers to commence e-Invoicing implementation on a much earlier date based on its IT capacity and readiness.
This is more acute on new business commencing from 2023 with annual turnover of > RM100 million. The transition period during 1.8.2024–30.6.2025 would be an essential learning period on e-Invoicing implementation without having implicated with its penalty.
3.0 MyInvois portal or API
The IRB is committed in its R&D activities, progressively improve and enhance the ability and user friendliness in the MyInvois portal. It may be a good option to currently engage on MyInvois portal to issue e-Invoice and receive its validation on near real time basis prior to sending to its trade customers. The existing accounting system with the software would be supplemented to consolidate and aggregate the e-Invoice in batches on revenue recognition.
The use of API as the mode to integrate with MyInvois portal are essential on ERP, SAP system involving on high volume, substantial value in revenue transactions that occurred daily, weekly or monthly, depending on the industry. The reliability of the system vendor and software developer, the initial cost of purchase, the subsequent updated version cost, its support services have to be carefully accounted on its cost and contemplated before finalised the acquisition of the revised system and software. The e-Invoice system changes regularly requires similar revision and updates of the software.
In the interim period or initial e-implementation stage, it may be pragmatic to explore using the MyInvois portal prior to finalisation of e-Invoice system to experience the outcome of e-Invoice issuance, the validation process and the integration with existing software system for an actual experience prior in deciding to choose the ultimate system having API integration with MyInvois portal as a final solution.
4.0 Business model
Trading business involving sale of goods is best using Sdn Bhd or Limited Liability Partnership (LLP) (business entities) for services industries. These two models have the legal protection of separate legal entities, allows the business entity to sue, to own property and to be sued.
Individual be it director, shareholder, LLP partner would not be implicated on its personal properties or injured on business liabilities with the exception of personal guarantee provided to the bank or supplier.
However, director with shareholding ≥ 20%, compliance officer of LLP or LLP partner would be jointly and severally liable on outstanding taxes of the Sdn Bhd or LLP. Tax remains due and payable and would never be shield by the separate legal entities.
5.0 Segregate of businesses
MSIC code is designed to identify, segregate and segmentalise the industry, highlighting the nature of business to aid data analysis. These data are consolidated, processed and stored in designated multi-layers to facilitate tax compliance, improving efficiency on tax administration.
The forthcoming e-Invoice system has 55 data fields with additional particulars or detailed classification on the business activities, tax identification number (TIN), contact number, email address, business registration, SST number and business address.
The swift and smooth on e-Invoicing implementation requires the serious contemplation on the existing multi source of business or diversifies of businesses within a company to break down into several companies or LLP with single business source for tax efficiency, effective management and efficiency in operation. It allows the flexibility on sale of business, listing purposes or split of business activities for inheritance advantages.
Manufacturing and trading business are business effective with two companies on its own. Trading business such as retail, supermarket are best operate using separate distinct Sdn Bhd, segregated by geographical locations. The provision of services, in particularly management services and placement of talent individuals are to be consolidated in one entity, be it LLP or with Sdn Bhd.
These business structures mitigate business risk, promote effective business operation, allow expansion or diversification with mobility and meeting up with division of family business for inheritance purposes.
6.0 Cost or expense
The setting up of several Sdn Bhd presumably involves higher compliance cost in incorporation, annual audit fees, company secretarial charges, accounting fee and tax submission charges. These costs are essential and must be viewed as investment cost rather than as an expense.
If one take into wider perspective to accounts of the qualitative benediction, future expansion possibility, diversification or split up opportunity, mitigation of business risk, minimised of tax audit frequency coupled with the tax savings riding on MSME incentives, then this action of separate groups of companies, companies in common control is a must. It assures better qualitative business advantages, intangible in nature far exceed the initial cost on segregation of businesses.
7.0 Conclusion
MSME acts as suppliers or trade customers having business transactions with mega companies that are placed on the first phase of e-Invoicing system on 1.8.2024 must duly comply with the tax administrative duties with the refine and revise contents on its existing invoices; providing the needed particulars for the supplier on the issuance of e-Invoice and acted promptly in rejecting the validated e-Invoice issued. This is the first task experiencing the evolution of e-Invoice system.