Mandatory CTC Electronic Invoicing model in Malaysia

Mandatory Electronic Invoicing in Malaysia: Regulations, Rollout Timeline, and Scope

Electronic invoicing is mandatory in Malaysia as part of the government's strategy to modernize the tax system and strengthen tax compliance through a Continuous Transaction Controls (CTC) model based on pre-clearance. The rollout is led by the Inland Revenue Board of Malaysia (IRBM/LHDN), with support from the Malaysia Digital Economy Corporation (MDEC), the organizations responsible for implementing the National e-Invoicing Initiative.

Which Businesses Are Required to Use E-Invoicing in Malaysia?

The e-invoicing mandate applies to most commercial transactions carried out in Malaysia, including:

1. B2B (Business-to-Business): transactions between businesses.
2. B2C (Business-to-Consumer): sales to end consumers.
3. B2G (Business-to-Government): transactions with public sector entities.

The mandate came into effect on 1 August 2024 for businesses with an annual turnover of MYR 100 million or more. It is being implemented in phases and will gradually expand to cover all taxpayers by 2026.

As part of the National e-Invoicing Initiative, Malaysia has introduced an interoperable framework that enables the standardized issuance, validation, and receipt of electronic invoices. The framework is designed to automate tax processes, improve transparency, and facilitate the secure exchange of invoicing data between businesses and the tax authority.

Key dates for electronic invoicing in Malaysia

The implementation schedule for the adoption of the national electronic invoicing system in Malaysia is as follows:

How Does the CTC Model Work in Malaysia?

Malaysia has adopted a Continuous Transaction Controls (CTC) model, a pre-clearance approach that is increasingly being implemented by tax authorities around the world. To comply with this requirement, the IRBM has established a platform where all electronic invoices must be sent for validation and registration. The documents covered by the law include invoices, debit notes, and credit notes.

Scenarios that will require the issuance of electronic invoices

• Proof of Income: Document issued upon making a sale or other transaction to record taxpayers' income.
• Proof of Expense: These documents pertain to purchases made or other expenses incurred by taxpayers. They can also be used to correct or modify a proof of income based on documented amounts. Additionally, there are specific circumstances in which taxpayers would need to issue their own electronic invoice to document an expense, such as transactions conducted abroad.

There are two methods available for transmitting invoices to the IRBM portal

1. Manually via the MyInvois portal hosted by IRBM.
2. Automatically via API in either XML or JSON format.

The e-invoicing process can be summarized in six steps:

• The business generates the invoice using its ERP or accounting system.
• The invoice is converted into the required XML or JSON format.
• The electronic invoice is automatically submitted to the IRBM via API through the MyInvois platform.
• The tax authority validates the invoice, assigns a Unique Identifier (UID) and a QR code, and notifies both the issuer and the recipient once validation is complete.
• The IRBM provides a 72-hour window during which an electronic invoice may be cancelled by the issuer or rejected by the recipient, where applicable.
• Once the invoice has been validated by the IRBM, the issuer can share it with the recipient. If the invoice is provided in a human-readable format, such as PDF or paper, it must include the QR code so the recipient can verify its validity with the IRBM.

This pre-clearance process ensures that every electronic invoice complies with the applicable legal and technical requirements before it is exchanged between the parties.

e-Invoicing Software Development Kit (SDK) Released for Malaysia e-Invoicing

The IRB has released a beta version of the Electronic Invoicing Software Development Kit (SDK) and an update to the guidelines.

The e-Invoice Software Development Kit (SDK) is a collection of tools, libraries, and resources providing a set of functionalities, Application Programming Interfaces (APIs), and development guidelines to assist businesses in integrating their existing system into the MyInvois System via API.

Access here: Software Development Kit + Guideline 2.2.

Testing Environment Available in Malaysia: MyInvois Sandbox

Malaysia has launched the Electronic Invoicing Sandbox, a dedicated testing environment aimed at facilitating integration tests for businesses and service providers in Malaysia.

The IRBM has initially released the MyInvois Sandbox test environment for pilot companies, expanding to all others starting from April 22.

This platform enables taxpayers and service providers to test integration with MyInvois through API.

How does self-billing electronic invoicing work in Malaysia?

One notable aspect of electronic invoicing in Malaysia is that the law requires declaring all transactions with domestic companies. Therefore, in certain situations, the taxpayer must issue what is called a self-billing electronic invoice.

For example, if the taxpayer acquires goods and/or services from a foreign supplier and receives an invoice from the foreign supplier that does not use Malaysia's MyInvois system, the taxpayer must issue a self-billing electronic invoice to document the expense.

For electronic invoicing purposes, the buyer will issue self-billing electronic invoices for the following transactions:

• Payment to agents, dealers, distributors, etc.,
• Goods sold or services provided by foreign suppliers,
• Distribution of profits (e.g., dividend distribution),
• E-commerce transactions,
• Payment to all betting and gaming winners,
• Acquisition of goods or services from individual taxpayers (not engaged in business activities) (applicable only if other self-billing circumstances do not apply),
• Interest payments, with several exceptions.

MDEC: Use of Peppol for electronic invoicing in Malaysia

The MDEC agency is committed to complete digitalization of electronic invoicing processes, facilitating the creation and sending of invoices between companies through the Peppol network. 

As the Peppol Authority, MDEC accredits Peppol service providers in Malaysia, specifying local requirements and technical standards. EDICOM is an accredited Peppol Service Provider in Malaysia certified by MDEC.

Peppol Service Providers are responsible for creating and maintaining the connectivity gateways that function as access nodes on the e-Invoicing network, compliant with the Peppol standards, routing of e-Invoices to the correct destination APs, as well as for registering and updating participant details in the Malaysia SMP.

The use of Peppol is not mandatory in Malaysia's electronic invoicing model. It is an initiative to facilitate and help companies digitize electronic invoicing processes before the legal obligation to send them to the IRBM. 

The main objectives are:

• Increased efficiency: Manual data entry and physical paper handling processes can be eliminated with the implementation of electronic invoicing, thus helping companies process invoices more efficiently and seamlessly, with precise traceability.
• Improved cash flow: Thanks to Electronic Invoicing, billing and calculation errors can be significantly reduced, thus accelerating payments and minimizing disputes over irregularities.
• Tax compliance: The implementation of an interoperable electronic invoicing framework in accordance with standards will ensure an organized work process and facilitate effective tax reporting.

Through the EDICOM Peppol Access Point, it is possible to generate the complete invoice in electronic format and send it to the final recipient. Peppol Access Points facilitate generating invoices in electronic format for companies to send them to both the final recipient and to comply with the obligation to send them to the IRBM platform. Once the IRBM validates that invoice, it will return it to the EDICOM Access Point, and EDICOM will transmit it to the recipient's Access Point. 

For the exchange of electronic invoices through the Peppol network, the government has published technical specifications for the use of the PINT format. Peppol International Invoice (PINT) is the specification that facilitates interoperable invoice exchange through the Peppol network worldwide. In Malaysia, it has been named MY PINT and the documents can be consulted here: Malaysia Electronic Document Specifications.

How EDICOM Supports E-Invoicing Compliance in Malaysia

Malaysia's e-Invoicing mandate introduces new technical and regulatory requirements for both local businesses and multinational companies operating in the country. Beyond complying with the Inland Revenue Board of Malaysia (IRBM/LHDN) requirements, organizations need to ensure their invoicing processes remain efficient, secure, and scalable.

EDICOM's global e-Invoicing and tax compliance platform enables businesses to automate the complete electronic invoicing lifecycle-from invoice generation and submission to validation, receipt, and long-term archiving. The solution integrates seamlessly with leading ERP systems, including SAP, Oracle, Microsoft Dynamics, Sage, and Infor, allowing companies to preserve their existing business processes while meeting Malaysia's regulatory requirements.

For organizations operating solely in Malaysia, EDICOM simplifies compliance by providing direct API connectivity with the IRBM, automatically converting invoices into the required XML or JSON formats, and managing the mandatory pre-clearance validation process through the MyInvois platform.

For multinational enterprises, EDICOM offers a single global platform to manage e-Invoicing and tax compliance across multiple countries. By centralizing compliance, businesses can standardize processes, reduce the need for country-specific developments, and adapt more quickly to evolving regulations in jurisdictions that have adopted Continuous Transaction Controls (CTC) or other electronic reporting models.

Backed by decades of international experience in e-Invoicing and VAT compliance, EDICOM helps organizations transform regulatory compliance into a strategic advantage—streamlining operations, accelerating digital transformation, and reducing compliance risk across global markets.

Context of electronic invoicing in Malaysia

In the pre-budget report for 2023 from the Ministry of Finance, the intention to develop an electronic invoicing model in the country was already mentioned. This statement aimed to reinforce recovery and facilitate reforms towards sustainable socioeconomic resilience. 

As the momentum of the recovery gained traction in the post-COVID-19 period, the government decided to focus on reforms to improve the welfare of the rakyat, particularly income and social protection, the competitiveness of Malaysia, and strengthen the nation's resilience against future setbacks, while also consolidating the government's fiscal position. 

The government is committed to prioritizing its digital transformation in order to have a positive impact on society and the economy. Efforts will be intensified to increase the use of digital technology to improve the quality of service and productivity of government services. 

To support the growth of the digital economy and improve efficiency in the management of the country's tax administration, electronic invoicing will be a relevant part of its digital transformation. As part of its strategies to increase tax revenues, the government has announced a phased plan to implement electronic invoicing in the country. 

The implementation of electronic invoicing will improve the quality of services and increase taxpayer compliance, as well as increase the efficiency of business operations.