E-Invoicing in Malaysia: How It Impacts Landlords and Property Owners

Malaysia is rapidly digitizing its business landscape with the mandatory implementation of electronic invoicing (e-invoicing). This article explores how this shift affects landlords, property managers, and the broader property sector.

Key Dates and Implementation Phases:

Last year August 2024, businesses in Malaysia with an annual turnover exceeding MYR 100 million are required to adopt e-invoicing. This is the first phase of a broader rollout, with further phases in 2025 targeting businesses with different revenue brackets. Landlords and property managers must stay informed about these changes and understand their implications for rental operations.

What is E-Invoicing?

An e-invoice is a digital version of a traditional invoice, credit note, or debit note. It contains the same essential information:

• Supplier and Buyer Details

• Item Description, Quantity, and Price (excluding tax)

• Total Amount

E-invoicing streamlines transactions, replacing paper-based documents and improving data accuracy.

The Inland Revenue Board of Malaysia (IRBM) manages the MyInvois portal, a free platform for receiving and validating e-invoices. This digital transformation aims to boost efficiency, improve compliance, and provide greater transparency in financial transactions.

How Does E-Invoicing Affect Landlords and Property Owners?

Property ownership, particularly in the context of rental income, often functions as a business. Therefore, e-invoicing has significant implications for landlords and property managers. They must adapt their invoicing and record-keeping processes to meet the new requirements.

Who Needs to Implement E-Invoicing?

Currently, landlords with annual rental income exceeding RM100 million must adopt e-invoicing. This also applies to landlords operating through business entities or property management companies that meet the revenue threshold.

Landlords involved in non-commercial rental activities, or those with personal rental income below the threshold (currently, an annual income below RM150,000), are generally not required to issue e-invoices. However, if a tenant operates a business within the property, they are responsible for issuing a self-billed e-invoice for the rental.

Impact on Rental Transactions:

E-invoicing transforms rental transactions in several key ways:

• Efficiency: Automates invoice creation, reducing manual errors and accelerating processing times.

• Compliance: Ensures adherence to government regulations, mitigating potential legal and financial penalties.

• Transparency: Provides a clear, verifiable record of transactions, benefiting both landlords and tenants.

Benefits of E-Invoicing for Landlords:

E-invoicing offers several advantages:

• Simplified Processes: Reduces administrative workload by automating invoicing.

• Improved Accuracy: Minimizes errors and ensures precise financial reporting.

• Enhanced Record Keeping: Facilitates efficient tracking and management of rental income.

• Efficient Tax Filing: Enables seamless system integration for efficient tax reporting.

• Digitalization: Aligns financial processes with modern industry standards.

E-Invoice Process Flow:

There are two main methods for transmitting e-invoices to the IRBM:

1. MyInvois Portal:

   • Free, government-hosted platform.

   • Accessible to all taxpayers, even without API integration.

   • Supports both individual and batch e-invoice generation (via spreadsheet upload).

2. Application Programming Interface (API):

   • Enables direct data transmission between the taxpayer's system and the MyInvois system.

   • Requires investment in technology and system adjustments.

   • Ideal for high-volume businesses.

The general e-invoice workflow is as follows:

1. Issuance: Supplier creates an e-invoice and submits it to IRBM.

2. Validation: IRBM validates the invoice in near real-time.

3. Notification: Supplier receives a unique identifier number upon validation.

4. Sharing: Supplier shares the validated e-invoice with the buyer.

5. Rejection/Cancellation: Justification required for rejections or cancellations.

6. MyInvois Portal: Access to a summary of e-invoice transactions.

Utility Bills and Self-Billing:

If the utility bill is in the landlord's name:

• Include the utility payment amount in the e-invoice.

• If the landlord is not conducting a business, the tenant will issue a self-billed e-invoice.

Consequences of Non-Compliance:

Failure to issue e-invoices, once the law is fully implemented, is an offense under Section 120(1)(d) of the Income Tax Act 1967. Penalties include fines of RM200 to RM20,000, imprisonment not exceeding 6 months, or both.

Incentives:

Micro, Small, and Medium Enterprises (MSMEs) can claim a tax deduction of up to RM50,000 annually for environmental, social, and governance (ESG)-related expenditures. These include consultation fees related to e-invoicing implementation, effective for the years of assessment 2024-2027.

Resources and Support:

• Government Resources: Refer to official guidelines from the Malaysian government and tax authorities.

• Professional Advice: Consult accountants, tax advisors, or compliance specialists.

• Training Programs: Explore training opportunities offered by e-invoicing solution providers or industry associations.

As Malaysia embraces e-invoicing, landlords and property managers must proactively understand and prepare for the changes. By adapting to this digital transformation, they can streamline operations, enhance compliance, and maintain a competitive advantage in the evolving property market.