B2C E-Invoicing in Malaysia – The Full Business Guide

B2C E-Invoicing in Malaysia – The Full Business Guide

Introduction of e-invoicing in Malaysia is a tax compliance milestone encompassing all types of transactions, including Business-to-Consumer (B2C) sales. For businesses selling to final individual consumers directly, understanding the clear rules and eased requirements for B2C e-invoicing is required for smooth integration. Unlike Business-to-Business (B2B) transactions, B2C e-invoicing does not require more complicated customer data requirements and specific operation factors to be taken into account for high-volume, value transactions. This guide provides a detailed explanation of the Malaysian B2C e-invoicing model, such as the compliance requirements, technical specifications, and practical implementation steps that consumer-facing retailers, service businesses, and other companies must comply with the Inland Revenue Board of Malaysia's (LHDN) requirements.

Recent Amendments

LHDN has provided specific clarifications for B2C transactions within the e-invoicing framework. Key updates include:  

1. Easier Buyer Information: For B2C sales, you only need the name of the consumer. If a customer doesn’t hold a valid TIN, their NRIC number(Malaysian citizens), Passport number(foreigners), or Army ID number(where applicable) should be provided.  
2. QR Code Requirement: All validated e-invoices (B2C or otherwise) must have a QR code developed by LHDN. The QR code is a method for consumers to verify the integrity of the invoice  
3. Clarification on Batch Transactions: For issuing a consolidated receipt for multiple transactions (e.g., a total daily receipt), each e-invoice shall be expressly allocated to an individual supply or a consolidated supply that is issued to the consumer for transactions with the same consumer that all occur within seven calendar days after month-end

Compliance with the latest FAQ and guidelines documents can be accessed through LHDN's official e-invoicing website by companies.

What is B2C E-Invoicing?

B2C e-invoicing refers to the process of generating, validating, and issuing electronic invoices for sales made to individual consumers who are not registered for tax purposes. It is a subset of the broader Malaysian e-invoicing mandate. The core principle remains the same: transaction data must be submitted to LHDN's MyInvois system for validation before it is considered a valid document for tax purposes. The key difference lies in the simplified data requirements for the buyer (consumer) compared to a B2B transaction.

Scope and Applicability

The e-invoicing mandate applies to any business that makes sales to end consumers. This includes, but is not limited to:  

• Retail Outlets: Fashion stores, electronics stores, supermarkets.  
• Food and Beverage Outlets: Restaurants, cafes, food stalls.  
• Service Outlets: Entertainment places, repair shops, beauty parlors.  
• E-commerce Websites: Sales online to consumer customers.  
• Utilities and Telecommunication Providers: Bills sent to individual consumers.

In short, if your business is providing goods or services to consumers, your invoices are B2C e-invoices.  

Exemptions:  

The following are exempted from using e-invoicing, as provided under the Act and regulations of the Royal Malaysian Customs Department (RMC):  

1. Individuals not deriving Business Income: Individuals who are taxed on employment income, dividends, interest, or rentals but do not carry on business are exempt from issuing e-invoices for their non-business transactions.  
2. Specific Exempted Entities (according to the Act and RMC):

• The Government of Malaysia and State Governments (since they are not "person(s)" to be taxed under the Act in this instance).  
• Local Councils (i.e., municipal council, city council).  
• Statutory Bodies as established under the Income Tax Act in Schedule 1 (i.e., limited number of government-connected companies).  
• Approved Institutions, Trusts or Funds exempted under Section 44(6) of the Act (i.e., chosen sporting, charity, or recreational institutions).  
• Diplomatic Missions and International Organizations that enjoy tax exemption, arising from succession treaties or orders of the applicable Malaysian law.  
• Organizations under the Minister of Finance Incorporated that are expressly exempted by the RMC.

Implementation Schedule in Phased Method:

1. August 1, 2024: All taxpayers with sales revenue/turnover of RM100 million and above every year. 
2. January 1, 2025: Taxpayers with sales revenue/turnover greater than RM25 million but less than RM100 million. 
3. July 1, 2025: Taxpayers with sales revenue/turnover of more than RM5 million but less than RM25 million.
4. January 1, 2026: Taxpayers with sales revenue/turnover of more than RM1 million but less than RM5 million.
5. July 1, 2026: Sole proprietors with a sales revenue/turnover of RM1 million or less.

Exemptions:

• This does not include people selling on a non-commercial basis. For example, a person who sells something they own and uses it second-hand (a personal item as part of a sale).  
• This also applies to everything associated with government, including federal, state, and local governments, government departments and agencies, and non-profit organizations that are tax-exempt and were incorporated under the Income Tax Act.

What are the Differences between E-Invoicing B2B and B2C?

The difference is especially important to consider in order to configure correctly.

Feature	B2B E-Invoicing	B2C E-Invoicing
Buyer's TIN	Mandatory	Mandatory (TIN or other official ID)
Buyer's Name	Mandatory (Legal Entity Name)	Mandatory (Consumer's Name)
Buyer's Address	Mandatory	Optional
Invoice Detail Level	Typically, itemized	Can be summarized (e.g., "Goods" or "Services")

B2C E-Invoicing Workflow

The process for B2C transactions can be adapted to suit high-volume environments.

Step 1: Data Preparation at Point of Sale

The point-of-sale (POS) or billing system collects all the required information at the transaction point when a sale occurs. (For B2C invoices, this would be:) 

• Seller information (name, address, TIN)  
• Invoice number and date  
• List of goods/services sold (can be aggregated as "Retail Goods")  
• Total amount payable, including tax breakdown (if applicable)  
• Buyer's information: Consumer's Name and official identification number.

Step 2: Submission to LHDN

The structured data (in JSON/XML format) is transmitted to LHDN. For high-volume B2C businesses, API integration is essential.

• Real-time API: For immediate validation during checkout.  
• Bulk API: For submitting a batch of transactions at the end of the day.

Step 3: Validation by MyInvois

LHDN's system validates the data. Upon success, it returns a Unique Identifier (UID) and a QR code.

Step 4: Issuance to Consumer

The business then issues the invoice to the consumer. This can be:

• A printed receipt with the UID and QR code.  
• An email or SMS that includes a link to a PDF that features a UID and the QR code. To verify the transaction that occurred and/or to verify the UID, either the printed receipt or the digital receipt must contain the QR code.

Technical Requirements for B2C Transactions

The technical implementation focuses on efficiency due to the high number of transactions.

Data Fields for B2C Buyer:

The buyer section in the data payload is simplified. The required field is:

• name: The name of the consumer.  
• The id (TIN), either NRIC number(Malaysian citizens), Passport number(foreigners), or Army ID number(where applicable), should be provided.

Handling High Volume:

E-commerce sites and large retailers must integrate their POS or order management systems with LHDN's API to automate the submission and validation process. Manual entry via the MyInvois portal is not feasible for high-frequency B2C sales.

Compliance Process and Deadlines

Adherence to the following process is mandatory.  

1. Invoice Issuance Deadline: The consolidated e-invoice must be issued to the consumer within seven calendar days after month-end, where no buyer requests for an e-invoice. For most B2C transactions, this occurs immediately or by the end of the business day, such as at the point of sale.  
2. Record Keeping: Companies are required to retain authenticated e-invoice information (in the original JSON/XML format) for a minimum of 7 years, starting from the end of the relevant assessment year.   
3. Consumer Verification: The receipt has a QR code that permits any consumer or LHDN official to scan and verify the invoice against LHDN's database. This verification can be done almost instantaneously.

Penalties for Non-Compliance

Companies that do not comply with the rules for B2C e-invoicing will face penalties under the Income Tax Act 1967.  

• Failure to Issue a Validated E-Invoice: This may be treated as a failure to maintain proper records, leading to penalties and potential disallowance of related expenses for tax purposes.  
• Distribution of Invoices Without LHDN Verification: Chasing payments for invoices that lack compliance with the rules or lack a UID/QR code may not be considered valid supporting documents.  
• Systemic Non-Compliance: Systemic non-compliance with the rules can merit more serious consequences, including fines and lawsuits.

Conclusion

The implementation of B2C e-invoicing is a central component of Malaysia's digital tax revolution, designed to bring transparency and ease to the high-volume consumer space. The main purpose of this mandate is to help establish a complete and real-time audit trail for each business-to-consumer transaction, thereby bridging the tax gap and reducing mistakes. For businesses, the initial investment in system integration is paid off by future returns in automated compliance and reduced manual tasks, and an opportunity for more credibility. It will be a long process to make POS and e-commerce systems compliant, but ongoing transaction compliance is what has to happen in order to conduct business and avoid huge fines. Compliance should not just be considered legal, but as a practical step towards modernizing business processes and securing your financial future.  

FAQs

1. What are we doing with customers who refuse to leave their names?

For walk-in retail transactions, the buyer's name is still mandatory. However, LHDN has indicated that a generic name like "Walk-in Customer" may be acceptable if the consumer genuinely wishes to remain anonymous. It is preferable to request the name for completeness.  

2. Can we issue one consolidated e-invoice for all sales to a consumer in one day?

The guideline requires an invoice per supply. However, LHDN allows for the aggregation of multiple items sold in a single transaction onto one invoice. For multiple, distinct transactions throughout a day, each should ideally have its own e-invoice. A consolidated receipt for a single continuous supply event (like a hotel stay) is acceptable.  

3. Are low-value transactions exempt from e-invoicing?

No, there is no minimum threshold. The mandate applies to all B2C transactions, regardless of value.  

4. How is this affecting e-commerce sites?

E-commerce websites have an obligation to make sure their sales to customers conducted through their site are compliant. They must integrate their systems with the MyInvois API to generate validated e-invoices for each order fulfilled by their merchants.  

5. What is the consumer's responsibility?

The consumer's main responsibility is to verify the authenticity of the invoice using the QR code if they need it for warranty or return purposes. They are not required to submit anything to LHDN.

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