Understanding Self-Billed e-invoice in Malaysia
A self-billed e-invoice is an electronic invoice issued by the buyer, rather than the seller, to comply with Malaysia’s tax regulations. This method is required in various scenarios where the seller is either exempt or unable to issue an e-invoice. By issuing a self-billed e-invoice, buyers ensure that the transaction is recorded accurately and meets the compliance requirements set by the Malaysian Inland Revenue Board (LHDNM).
When is a Self-Billed e-invoice Required?
Self-billed e-invoices are required in Malaysia under the following scenarios:
- Payments to Agents, Dealers, and Distributors (ADDs):
- When a buyer pays commissions or other forms of compensation to agents, dealers, or distributors, a self-billed e-invoice must be issued to record the transaction.
- Purchases from Foreign Sellers:
- If a Malaysian buyer purchases goods or services from a foreign seller who does not issue an e-invoice, the buyer must generate a self-billed e-invoice to document the expense.
- Profit Distribution:
- When profits (e.g., from non-listed unit trusts) are distributed, a self-billed e-invoice must be issued if the distributing entity is not a publicly listed company or a single-tier company.
- E-Commerce Transactions:
- E-commerce platforms like Shopee, Lazada, and others are required to issue self-billed e-invoices for sellers using their platforms when the seller does not provide an e-invoice.
- Payouts to Betting and Gaming Winners:
- Self-billed e-invoices must be issued when payouts are made to winners in betting and gaming activities.
- Acquisition of Goods or Services from Individual Taxpayers:
- If goods or services are acquired from individuals who are not conducting a business, the buyer must issue a self-billed e-invoice since these individuals are not obligated to issue their own.
- Interest Payments:
- A self-billed e-invoice is generally required for interest payments, except in these cases:
- When interest is charged by financial institutions to the public.
- When an employee pays interest to their employer.
- When a foreign entity pays interest to a Malaysian taxpayer.
- A self-billed e-invoice is generally required for interest payments, except in these cases:
- Claims, Compensation, or Benefit Payments from Insurers:
- In cases where an insurance claim or benefit payment is made by an insurer, and the insurer does not issue an e-invoice, the buyer must issue a self-billed e-invoice.
10 Examples of Self-Billed e-invoice Scenarios
To better understand how self-billed e-invoices work, here are detailed examples of different scenarios where they are required:
1. Purchasing Products from an Individual Not Engaged in Business
Example: Tina sells a teddy bear to Kedai Permainan Cuddle Bears, a store dealing in used toys. Since Tina is an individual and not running a business, she is exempt from issuing an e-invoice. As a result, Kedai Permainan Cuddle Bears must create and submit a self-billed e-invoice for the transaction to record the expense.
2. Self-Billed e-invoice for E-Commerce Platform Providers
In Malaysia, e-commerce platforms like Shopee, Lazada, Zalora, and TikTok Shop are required by LHDNM (Lembaga Hasil Dalam Negeri Malaysia) to issue self-billed e-invoices to the sellers using their platforms.
A local seller named Ali sells beauty products on Shopee.
- Ali lists his products on Shopee and receives an order from a customer.
- Shopee processes the payment and facilitates the transaction between Ali and the customer.
- Since Ali uses Shopee’s platform and does not issue an e-invoice, Shopee, acting as the buyer in this context, must generate and submit a self-billed e-invoice to record the payment it makes to Ali for the product sold.
- This self-billed e-invoice is then validated through the LHDNM system, ensuring compliance with the Malaysian tax regulations.
This example demonstrates how e-commerce platforms are responsible for issuing self-billed e-invoices for transactions conducted through their networks, ensuring that even when sellers do not issue their own e-invoices, the platform fulfills the regulatory requirements.
3. Rental and Utility Bills from a Non-Business Landlord
Example: Tina rents her commercial shoplot to Kedai Elektronik Smart Gadget. As Tina is an individual who does not conduct business, she is not required to issue an e-invoice for rental and utility bills. Therefore, Kedai Elektronik Smart Gadget must issue a self-billed e-invoice to record these expenses.
4. Renting from Multiple Non-Business Landlords
Example: Best Mesra Sdn Bhd rents office space owned by three brothers—Haikal, Alif, and Arif—who are not conducting a business. Since these individuals are not obligated to issue e-invoices, Best Mesra Sdn Bhd must create and submit separate self-billed e-invoices according to their rental agreement proportions.
5. Interest Payment to Financial Institutions
Example: Tina takes a car loan from Bank Duit, a financial institution. She pays monthly installments, which include principal and interest. In this case, Tina does not need to issue a self-billed e-invoice because financial institutions are responsible for providing e-invoices for interest payments.
6. Interest Payments and Self-Billed e-invoice Exemptions
In Malaysia, there are specific cases where the payer is not required to issue a self-billed e-invoice for interest payments. Instead, the recipient (the party collecting the interest) is responsible for issuing a regular e-invoice. The exceptions are as follows:
- Interest Collected by Financial Institutions:
- If a bank or a financial institution collects loan interest from individuals or businesses, the bank issues the standard e-invoice. The payer does not need to issue a self-billed e-invoice.
- Interest Payment from Employee to Employer:
- When an employee pays interest (e.g., for a loan or any other arrangement) to their employer, the employer must issue a regular e-invoice. The employee, as the payer, is not required to create a self-billed e-invoice.
- Interest Payment Made by Foreign Entities to Malaysian Taxpayers:
- If a foreign person or company makes an interest payment to a Malaysian taxpayer, the Malaysian taxpayer (the recipient) must issue the regular e-invoice. The foreign payer is not obligated to create a self-billed e-invoice.
These scenarios outline when the responsibility for issuing the e-invoice lies with the receiving party rather than the paying party. This ensures clarity in transactions involving interest payments and aligns with the guidelines set by the LHDNM.
7. Profit Distribution and Self-Billed e-invoice in Non-Listed Entities
In Malaysia, when a taxpayer distributes profits (such as from a non-listed unit trust), they are required to issue a self-billed e-invoice for the transaction. This is necessary to ensure that the distribution of profits is recorded properly for tax purposes, even if the entity distributing the profits is not a public listed company or a single-tier company.
Scenario:
Example: A local unit trust that is not listed on Bursa Malaysia distributes profits to its beneficiaries.
- The unit trust allocates a profit payout to its beneficiaries.
- Since this entity is not a public listed company, it is required to issue a self-billed e-invoice for the distributed profits.
- The self-billed e-invoice records the profit distribution, ensuring compliance with the LHDNM regulations.
Exemptions:
- Profit distributions by public listed companies on Bursa Malaysia are exempt from issuing self-billed e-invoices.
- Local companies distributing profits under the single-tier system also do not require self-billed e-invoices.
This example illustrates how self-billed e-invoices function in profit distribution scenarios, ensuring that non-listed entities comply with tax regulations when distributing earnings.
8. Payments to Agents, Dealers, and Distributors
Example: Alif, a car salesman at Bond Automotive Sdn Bhd, earns a 20% commission on a car sale. Bond Automotive is responsible for issuing a self-billed e-invoice to document the commission paid to Alif.
9. Cross-Border Transactions
Example: Food Eate Sdn Bhd hires ABC Advisory Ltd, a UK-based legal firm, for services. Since ABC Advisory is a foreign entity and not required to issue an e-invoice in Malaysia, Food Eate Sdn Bhd must issue a self-billed e-invoice to record the expense.
10. Importation of Goods from Foreign Sellers
Example: Bobby, who runs Kedai Elektronik Smart Gadget, imports products from a supplier in China. As the Chinese supplier is not obligated to issue an e-invoice, Bobby must create and submit a self-billed e-invoice by the end of the following month after customs clearance.
How Does the Self-Billed e-invoice Process Work?
The process of issuing a self-billed e-invoice typically involves these steps:
- Identify the Transaction: Determine whether the transaction falls into a category that requires a self-billed e-invoice.
- Gather Transaction Details: Collect the necessary details such as the seller’s information, the nature of the transaction, and payment specifics.
- Create and Submit the e-invoice: Using an invoicing system or the MyInvois Portal, create the self-billed e-invoice. Ensure all information is accurate and in line with LHDNM’s requirements.
- Validation: Submit the self-billed e-invoice to LHDNM for validation. Upon validation, the e-invoice is recorded in the system.
- Record-Keeping: Retain the self-billed e-invoice for auditing and compliance purposes as per Malaysian tax regulations.
Wrapping Up Self-Billed e-invoice Malaysia
Self-billed e-invoices play a crucial role in Malaysia’s tax compliance framework, particularly in scenarios where sellers are exempt or unable to issue their own e-invoices. By understanding when and how to issue self-billed e-invoices, businesses can maintain accurate financial records, comply with tax regulations, and ensure smooth transactions across various contexts, from e-commerce platforms to cross-border dealings.
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