Self-Billed eInovice - the Why, the How and the Who

 Self-billed e-invoices, particularly under Malaysian tax regulations, can be tricky if not handled carefully. 

Here's a clear, detailed breakdown for your bookkeeper and accounting technician to understand the concept, the relevant rules, and practical actions to avoid any potential penalties:

What is a Self-Billed E-Invoice?

A self-billed e-invoice is issued by the buyer, instead of the supplier. In a normal transaction, typically, suppliers issue the invoice. But in a self-billing arrangement, it is the customer (recipient or buyer) who prepares and sends the invoice on behalf of the supplier. In Malaysia, self-bill documents are allowed under certain conditions and especially important for SST (Sales and Service Tax) registrants. With the mandatory implementation of e-invoicing (via MyInvois by LHDN) progressively effective from 2024 onwards, it's vital to ensure correct practice and adherence.

Why Self-Billing?

Usually chosen when:
    • The buyer is more capable and efficient in handling invoicing, possibly due to advanced accounting systems or ERP.
    • Common in industries like logistics, transport, agriculture, or insurance, where payment terms or rates are standardised.

Malaysian Legal Requirements (Important to Remember)

Under the Malaysian Inland Revenue Board (LHDN)’s guidelines for Self-Billed e-Invoices:
    • Mutual Agreement:
    • Must have a written understanding/agreement between supplier and customer clearly authorising self-billing.
    • Approval & Control:
    • Use a standardised and government-approved system platform (e.g., LHDN's MyInvois).
    • Every self-bill invoice needs to clearly state "Self-Billed Invoice."
    • Mandatory Details on the Self-Billed Invoice:
    • Document clearly marked (e.g. “Self-Billed Invoice”).
    • Supplier's name, business registration and SST number.
    • Customer’s name, business registration and SST number.
    • Invoice number and date, item description, quantity, unit price, amount payable (inclusive/exclusive of tax clearly specified).
    • SST rate and amounts separately noted if applicable.
    • Accuracy and Timeliness:
    • Invoices must accurately reflect all relevant transaction details.
    • Issued promptly within the stipulated time frame upon receipt of goods/services, or following pre-agreed schedule.

What Must Bookkeepers & Accountants Do to Avoid Penalties?

Your accounting team must ensure the following to avoid penalties:
Action Steps Detail & Purpose
Ensure Proper Documentation and approval: - Keep a written and signed agreement clearly authorising self-billing. - Store agreements properly for audit trails.
Check & Validate SST Information (if applicable): - Supplier’s SST information must be accurate. Incorrect SST numbers can cause penalties. - Document clearly the SST rate (6%, exempt, or zero-rated).
Issue Promptly: - Ensure invoices are generated and electronically submitted within the period stipulated by law. Late issuance can trigger penalties from tax authorities.
Maintain Accurate Invoice Sequences: - Self-billed invoices must follow logic & consistent numbering sequences to avoid suspicion of backdating or falsification.
Proper Bookkeeping and Record retention: - Maintain accessible, comprehensive digital records. Ensure these invoices (and their supporting documents) are securely stored and retrievable for at least seven (7) years.
Regular Training & Updates: - Regular updates or training for staff responsible for invoice processing, since rules around SST and their electronic submissions can change periodically.

Penalties & Enforcement Risks if Non-compliant (Malaysia):

Non-compliance could result in:
    • Tax audits/investigations.
    • Financial penalties for late or inaccurate invoicing.
    • Interest & fines relating to SST discrepancies.
    • Potential legal action or added scrutiny by the LHDN.

Quick Summary of "Must Do" Checklist:

✅ Written self-billing agreements in place. ✅ Clearly marked documents ("Self-Billed Invoice"). ✅ Accurate SST information verified and clearly displayed. ✅ Issue invoices timely. ✅ Retain electronic documents & proof for seven years minimum. ✅ Regular review/check on compliance.
Following this detailed process ensures compliance with Malaysia’s e-Invoicing requirements, safeguards the business from unnecessary penalties, and enhances overall efficiency.
Location: Malaysia

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