SAFEGUARDING DATA IN M’SIA’S NEW ERA OF E-INVOICING

Vast potential: Digitalisation boosts growth and efficiency, but adopting strong cybersecurity measures and secure software can protect data, systems and customers. Image: Blake Wisz / Unsplashed

AS THE roll out for Malaysia’s e-invoicing mandate draws near, small businesses around the country are embarking on their digital transformation journeys.

In doing so, they unlock numerous benefits such as increased efficiency and productivity and improved customer engagement, while becoming more competitive and resilient.

This digital shift however, can also introduce significant data and security risks.

Understanding these risks is crucial to protect businesses, their data and their customers.

Data breaches and other online crimes, including hacking and financial fraud, can have disastrous effects on businesses, such as the exposure of sensitive customer information, intellectual property theft and the disruption of business operations.

These breaches in security can result in significant losses for companies, sometimes amounting to millions of ringgit.

Additionally, small businesses, often the targets of cyber-attacks because they are seen as more vulnerable, may lose valuable consumer trust and potential opportunities.

Ahead of the phased mandate launch in August, business owners can ensure they are fully prepared by understanding the key advantages and risks of e-invoicing, and take proactive measures to safeguard their business.

Security first: Cyber threats are increasingly complex and widespread. Small businesses can protect sensitive data by choosing reputable software with strong security.

Security benefits and e-invoicing considerations

Despite the risks, the shift towards e-invoicing is certain to offer businesses numerous immediate and tangible benefits.

Enhanced efficiency, reduced errors and improved transparency in financial transactions make e-invoicing more secure than manual handling and traditional invoicing practices.

With oversight from the Malaysia Digital Economy Corporation (MDEC), e-invoicing is tracked through the Peppol framework and verified in real-time, providing an additional layer of security and accountability.

Verification through Peppol ensures that invoices are authentic, preventing fraud and alterations.

This standardised network facilitates the secure and efficient exchange of electronic documents, protecting them from cyberattacks and potential data breaches.

Choose a reputable software provider

As Malaysian businesses look to adopt solutions that will enable them to comply with the upcoming mandate, prioritising reputable software providers to ensure data, privacy and security protection cannot be overstated.

In today’s digital landscape, cyber threats are pervasive and increasingly sophisticated, targeting vulnerabilities in businesses of all sizes.

By choosing established software providers known for robust security measures, small businesses can protect sensitive customer information and internal data from breaches and theft.

Reliable software providers offer regular updates, advanced encryption and compliance with regulatory standards, ensuring that businesses remain resilient against evolving cyber threats.

Additionally, this proactive approach fosters customer trust, as clients are more likely to engage with businesses that prioritise their privacy and data security.

Xero, for example, adheres to stringent security standards and compliance requirements to effectively safeguard user data.

By incorporating multi-factor authentication (MFA), user accounts and financial data remain secure and protected while Xero’s encryption protocols prevent unauthorised data access, safeguarding it from cyber threats.

With a global presence, including in countries such as the United Kingdom, United States, Singapore, Australia and New Zealand, Xero maintains a high level of cybersecurity features and compliance measures to meet regional and international standards.

The accounting platform currently supports many local businesses in streamlining processes and improving data security.

Additional precautions

In addition to leveraging the security features of cloud accounting software like Xero, Malaysian businesses can take extra precautions to safeguard their accounting data. This includes:

> Paying attention to security notices: staying informed about security alerts and notices from software providers to promptly address emerging threats.

> Reporting unusual activity: encouraging employees to report any suspicious or unusual activity related to accounting data to prevent potential security breaches.

> Deploying antivirus and anti-malware solutions: installing reputable antivirus and anti-malware software on their devices to protect against potentially malicious software.

There is no question that digitalisation presents enormous opportunities for growth and efficiency for small businesses, but with that, come some critical security risks.

By adopting cybersecurity measures and choosing software with robust protection features, small businesses can safeguard their data, systems and customers.

Proactive security management not only protects against financial losses and reputational damage but also builds trust with customers, fostering long-term business success.

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E-invoicing system set to go

PETALING JAYA: With two days to go, most of the 5,000 companies under Phase 1 of the e-invoicing rollout are raring to go and looking at a smooth takeoff, say stakeholders.

Associated Chinese Chambers of Commerce and Industry of Malaysia treasurer-general Datuk Koong Lin Loong said these companies, with an annual turnover of RM100mil and above, should not face any major hiccups when transitioning to e-invoicing on Thursday.

“They will be able to cope with the transition as these companies have the resources to do so,” he said when contacted yesterday about worries some businesses have expressed about beginning the e-invoicing process.

Asked if accounting firms acting for these companies are facing pressure in switching to e-invoicing, Koong, who is a practising auditor and licensed tax agent, said that it is unlikely.

ALSO READ: How e-invoicing affects you

“There is some misunderstanding that e-invoicing is like the Goods and Services Tax (GST), which required some companies to change their entire accounting system.

This is not the case with e-invoicing because companies are already generating invoices through email and their existing computing systems. The only difference is that their invoices will now be digitised and linked to the Inland Revenue Board (LHDN),” he added.

Koong also said that it is quite normal for businesses to express worries whenever a new system is introduced, like mobile phone and QR code payments, for instance.

ALSO READ:‘There’s time for smaller companies to learn the new system’

“There would have been a lot of complaints prior to the Covid-19 pandemic (in 2020) if businesses had been asked if ewallets could be used to make payments. They were practically non-existent.

“But nowadays such payments are widely accepted even among smaller businesses and hawkers,” he said.

Experts say the pandemic greatly sped up digital payments globally, as, for a few years, people were living mostly online.

ALSO READ:LHDN announces six-month grace period for einvoicing implementation

When it comes to e-invoicing, the driving force is efficiency in collecting taxes and stopping leakages to increase the government’s tax revenue. To further ensure a smooth transition, Koong said the LHDN has announced some flexibility and relaxation of e-invoicing regulations.

For instance, there will be no prosecution action under Section 120 of the Income Tax Act 1967 for non-compliance with e-invoicing rules, provided the business complies with consolidated e-invoicing requirements.

This means the supplier can gather all statements or bills issued and then issue a consolidated einvoice as proof of the supplier’s income, according to einvoicemalaysia.my.

ALSO READ:Are you ready for e-invoicing starting Aug 1?

Koong added that the LHDN is planning to roll out an e-invoicing mobile app and e-POS (electronic point-of-sale) system by the end of this year, free of charge for businesses to download.

Phase 2 of the e-invoicing system will be implemented on Jan 1, 2025, for companies with a turnover of below RM100mil and up to RM25mil, while full implementation under Phase 3 will begin on July 1, 2025, for businesses with an annual turnover of above RM150,000.

Malay Chamber of Commerce Malaysia secretary-general Ahmad Yazid Othman said most Phase 1 companies are ready, although some may still be facing some difficulties, especially smaller businesses that serve the larger companies under the Aug 1 rollout.

He added that companies are expecting to run into teething problems just as they did when the GST was first implemented in April 2015.

ALSO READ:The e-invoicing dilemma

“The LHDN has given its assurance of some flexibility and relaxation of regulations during the initial implementation period, and this is most welcome.

“We hope that companies will not delay implementing e-invoicing with these assurances, which will at the same time motivate other companies to speed up the transition process when their turn comes,” he said.

Ahmad Yazid, who is also a senior fellow with the Malay Economic Action Council, said the experience gained from Phase 1 of the e-invoicing process will be helpful for both the LHDN and businesses to better prepare for the coming phases next year.

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Mandatory e-invoice countdown

CYBERJAYA: In just one week, the one-year countdown begins in earnest for all businesses in the country to switch to the mandatory electronic invoicing (e-invoicing) rule.

Ahead of its full rollout on July 1, 2025, the Inland Revenue Board (LHDN) will be officially launching a free software on June 1 to help businesses, both big and small, ease into the system.

LHDN chief executive officer Datuk Abu Tariq Jamaluddin (pic) said businesses could actually already use e-invoicing when the software was made available for free on May 15.

“The free programme will be officially launched on June 1. More than 60 pilot companies and service providers have committed to issuing e-invoices in a production environment by June 30 this year through the MyInvois integration,” Abu Tariq told The Star in a recent interview.

He added that on Aug 1, the first phase of the project will begin with about 5,000 companies, which record annual earnings of RM100mil and above, adopting the use of e-invoices.

The second phase will begin on Jan 1 next year for companies with annual earnings of between RM25mil and RM100mil.

ALSO READ: Give us time to adjust, urge small business

“The final phase is for all businesses or enterprises offering sales or services to come on board with e-invoicing by July 1 next year,” he added.

The gradual move by LHDN, Abu Tariq said, would help in the seamless transition to e-invoicing, while benefiting taxpayers and the board.

“It will also help stem billions in losses due to the shadow economy and is in line with the nation’s digitisation goals by 2030,” he added.

It was previously reported that the nation lost about RM70bil in tax revenue last year due to illegal activities and tax evasion.

Although a recent survey by LHDN showed about 98% of businesses accepting e-invoicing, Abu Tariq acknowledged that there was pushback from certain quarters, particularly small and medium enterprises (SMEs) and hawkers.

Among their concerns was the fine of between RM200 to RM20,000 for each breach of the e-invoicing regulations, he added.

He explained that companies earning less than RM100mil annually need not use e-invoicing this Aug 1 because they do not fall within the category.

“In general, at the initial stage of implementation, there is no need for taxpayers to get an e-invoice as proof of expenditure,” LHDN had said in response to a recent viral post by Datuk Seri Dr Wee Ka Siong.

The MCA president had questioned the manner in which e-invoicing was being “forced upon businesses, particularly petty traders and hawkers”.

Dr Wee, who is the Ayer Hitam MP, also questioned why businesses had to submit 55 data entry points under the system and whether their data was safe from hackers.

LHDN has since clarified that only six out of the 55 data entry points need to be filled up to complete the e-invoice for automatic appraisals.

Abu Tariq explained that e-invoicing can be filed once a month as a “consolidated invoice.”

The consolidated invoice, he said, represents monthly overall sales and services transactions instead of daily individual entries for each sale.

“This will make compliance easier for micro-businesses because they only need to submit their consolidated invoice once a month.”

However, he noted that consumers or buyers have the legal right to demand e-invoicing receipts once the system is fully implemented on July 1 next year.

“Action can be taken against the seller for failing to do so,” he said.

To allay worries, he said LHDN will deal with non-compliance on a case-by-case basis.

Other criticisms cited as impeding the use of the online filing system were the expected rise in operating cost, lack of mobile phone subsidy or aid, and poor signal coverage in rural areas.

Abu Tariq said LHDN is currently in talks with online platform providers providing cashless payment facilities on how best to capture sales transactions through their scanning or QR code systems.

With one year to go before e-invoicing is fully enforced, he said there is ample time for adjustments and improvements.

He also encouraged SMEs, petty traders and hawkers to start using the free e-invoicing software to familiarise themselves with the system and get their books in order by July 1 next year.

A look into the challenges of the new digital system which will be made mandatory in stages from Aug 1.

BY now, most of the business world is aware of the looming deadlines for the implementation of e-invoicing.

The thorny subject tends to elicit groans from company owners and their accountants and administrators.

But as the government is postulating, it is a necessary evil in order to ensure taxes are fully paid.

But then again, is it the only option? Is e-invoicing the best solution to having a more effective tax system?

It does seem that it is going to be a painful, expensive and time-consuming exercise, and hence, does the means justify the end?

In July 2023, the Inland Revenue Board (IRB) issued the first guideline under section 134A of the Income Tax Act 1967 for the implementation of e-invoicing.

Companies with revenues of Rm100mil or more will have to carry out e-invoicing from Aug 1. Those with a turnover of more than Rm25mil will be next, with their deadline being Jan 1, 2025. All companies are to be filing their e-invoices by next July.

Thannees Tax Consulting Services managing director S M Thanneermalai says even though there is about a month left before the first group needs to do the necessary, many of them are unprepared.

“Many companies are waiting to see what will happen to the first batch. The impression that many have is that the e-invoicing deadlines will be postponed, similar to what happened with the low-value goods and high-value goods taxes,” he says.

There are parties who disagree with the idea of e-invoicing, especially in a country which has had a goods and services tax (GST) regime in the past. The GST was introduced in Malaysia in 2015 and abolished in 2018.

Tan Sri Soh Thian Lai of the Federation of Malaysian Manufacturers (FMM) says the GST is the panacea for Malaysia’s debt woes.

“The GST is a timely lifeline for the country’s debt dilemma and a means to shore up adequate fiscal buffers to weather the next economic downturn,” he adds, adding that the problem is that the government lacks the political will to reintroduce the GST.

“The government is focusing on short-term measures rather than doing the right thing for the benefit of the nation in the longer term.

“As the GST is a broad tax base system which would increase indirect taxes, it will also give the government flexibility to reduce direct taxes (personal income and corporate taxes) to make the country a more attractive business destination,” he says.

Soh notes that some companies have voiced their apprehension of e-invoicing, considering the sheer size, volume and complexity of transactions involved.

“These include export and import transactions that require companies to self-bill for overseas purchases. They are also concerned about the readiness of their systems for implementation and compliance with e-invoicing,” Soh says.

So, how complex is e-invoicing going to be? Companies have two ways of digitally filing their invoices to the tax office. One is through the IRB’S own Myinvois Portal. But this means that companies need to manually do it and the understanding is that only companies with a small number of invoices can take this route.

This is why the IRB will be providing all companies with application programming interfaces (APIS), which then will allow companies’ own systems to directly connect with the tax office, thereby automating the submission process.

This will require companies to upgrade their own systems or invest in a new system. “Companies must automate their existing enterprise resource planning (ERP) systems or use a software that can directly speak to the IRB’S Myinvois Portal. Initially, for the first year, it can be a burden to businesses cost-wise, similar to the implementation of the GST back then.

“Companies either have to customise their existing systems (if they are not up to date) or find a suitable middleware. It is going to be expensive,” says Thanneermalai.

He notes that businesses may also need to hire consultants, particularly if they require help to navigate the e-invoicing process and understand the required documentation.

“The IRB can provide assistance, but it is already inundated with many questions, making it challenging for it to address individual concerns comprehensively. Hence, the IRB may offer generic answers which may not hold up during audits, potentially leading to problems in the future,” he says.

However, others do not think that the cost is going to be prohibitive.

Ernst & Young Tax Consultants Sdn Bhd tax managing partner Farah Rosley says the cost for MSMES in gearing up for e-invoicing will not be burdensome, as they can access the Myinvois Portal which is free.

“Larger corporations will typically have the necessary manpower and IT departments to integrate e-invoicing into their existing systems,” she adds. Meanwhile, the government has also announced a tax deduction of up to RM50,000 per year (up to the 2027 year of assess

“The cost for MSMES in gearing up for e-invoicing will not be burdensome, as they can access the Myinvois Portal which is free.” 

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Planned e-invoicing will be troublesome

The e-invoicing dilemma

13 hours ago

Digital way to declare and pay income tax

e-Filing counter facilities are no longer available since last year following the new norm SOP.

 LET’S Click HASiL is a convenient programme for taxpayers to declare their income and pay taxes to the the Inland Revenue Board (IRB).

What is Let’s Click HASiL

Let’s Click HASiL enables taxpayers to submit their income tax return or make payment through the convenience of the easy, accurate and secure MyTax app.

MyTax is the primary access to ezHASiL services such as e-Filing, e-Register, ByrHASiL and other services accessible to all taxpayers with a single sign-on.

Taxpayers can file their return form electronically while ensuring the details are accurate.

Additionally, the programme also provides advice to taxpayers through virtual briefings held in accordance with new norm SOP set by the government.

Submission deadline

The Let’s Click HASiL programme runs from March 1 to June 30,2021.

For individuals without business income, they have until April 30 to submit their BE Form.

People who receive income from business have until June 30 to submit their B Form.

However, e-BE submission via e-Filing allows taxpayers to submit the form by May 15 – an extended period compared to paper submission by April 30, while the deadline for e-B is July 15.

 

Tax refund

For individuals without business income, their employer would have made monthly tax deduction off the monthly salary, reducing the burden of employees as they don’t have to pay a lump sum for their annual income tax.

You are eligible to receive a tax refund if you have paid excess monthly tax deduction than the actual tax levied. The income tax imposed can be reduced through tax reliefs and tax rebates.

The e-Filing service gives taxpayers the advantage of receiving their tax refunds within 30 working days as opposed to 90 days for form submissions by post or hand delivery.

ezHASiL simplified taxation

ezHASiL enables taxpayers to manage their taxation online through e-Filing, e-Register, e-Update, e-Ledger and ByrHASiL without having to visit IRB branches physically.

e-Filing counter facilities are no longer available since last year following the new norm SOP.

The e-Filing system can be accessed via the IRB’s official website at www.hasil.gov.my > MyTax > ezHasil Services > e-Filing.

First-time users are required to obtain the PIN number by filling in the feedback form on the website.

Once you have the PIN number, you can start your e-Filing, make payments using ByrHASiL, access payment review through e-Ledger or update personal details via e-Update.

Declare and pay your income tax at mytax.hasil.gov.my. Let us all do our part to ensure prosperity for the country.

Inquiries can be made through the Customer Feedback Form or call the HASiL Care Line (03-8911 1000). Visit www.hasil.gov.my for further information.

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