1.0 Introduction
The Government moving into e-tax regime in digitalisation economy had introduced tax identification number (TIN) to every taxpayer or Malaysian individual reaches age 18 years old on 1.1.2022. It aims to integrate and consolidate the wide arrays of financial data and tax information of individual into a big data pool for a better tax administration and efficient in operation.
2.0 Revenue – sale of goods / provision of services
Supplier in business of sale of goods or provision of services is now required to include its TIN, contact details in the e-Invoice. The customers when purchase goods or payments of services, is now equally required to provide its TIN number to the supplier and contact details to be included in the e-Invoice issued. TIN is a mandatory field in every e-Invoice issued to customers in relation to business purposes.
Where no TIN number available, revenue needs to be categorised with the IRB pre-assignment of General TIN.
EI | 00000000010 | Malaysian individual provides MyKad identification with no TIN number |
EI | 00000000020 | Foreign buyer in export sales situation |
The e-Invoice system is mandatory to have either the TIN number or pre-assigned TIN number to be stated in every e-Invoice issued.
This is an internal control measurement to ensure complete data and essential information on the supplier carrying on business in Malaysia on sale of goods or provision of services together with its customers are now mandatory to have the TIN number in the e-Invoice for issuance.
3.0 Purchases of goods / expenses
The deduction of cost of sales or expenses being incurred ‘wholly and exclusively’ in the production of income requires the support of e-Invoice with the supplier TIN number being primary documentation as evidential proof of payment. Every supplier carrying on business in Malaysia mandatory to include its own TIN number in the e-Invoice generated.
This is the counter measurement to cross check the supplier has indeed accounted all its revenue to the Government for income tax purposes.
4.0 Incorporation of Sdn Bhd / LLP
Sole proprietor, small trader would have to provide its tax reference number being the TIN number to the supplier on purchasing goods or payment for services. Only then, the deduction would be treated as business expense with the support of a validated e-Invoice.
The provision of MyKad in the e-Invoice of the supplier may at times be viewed by IRB as private and domestic expenses, prohibited for deduction [s 39(1)(a)].
Moving forward, the incorporation of new Sdn Bhd or LLP in e-Invoicing era to transform the existing sole proprietor business with separate legal entity would have its tax advantages, personal data protection and complete disintegrate individual having mixture identity on business. The tax reference number of the company or LLP would be deemed as TIN to be used in the trading goods purchase or payments of services.
5.0 Conclusion
The nationwide e-Invoice system promotes business efficiency, transforming accounting process timely and accurately, complete transparency between trading parties and contributes to tax efficiency on the tax collection for the country.
The use of TIN number mandatory for the supplier and the trade customers that wish to claim business deduction would ensure both revenue and expenses be accounted legitimately.