Financial Institutions And E-invoicing Compliance In Malaysia

By Author: Ramay.B
Total Articles: 52
Comment this article

The execution of e-Invoicing in Malaysia presents an organized method to issue invoices for financial institutions while making sure e-invoicing compliance with the Financial Services Act 2013 (FSA) and Islamic Financial Services Act 2013 (IFSA).

A few key considerations for financial institutions transitioning to e-Invoicing:

1. Customer’sapproval for e-Invoices
It is important for financial institutions to take customer’s consent or approval in order to align the e-invoicing compliance with FSA and IFSA regulations. This protects confidentiality and aligns with data protection laws.

2. Consolidated e-Invoices – description field
For e-invoicing in financial institutions, it is not mandatory to disclose the statement or bill reference numbers in the “Description of Product or Service” field. As an alternative, institutions should make sure the presence of relevant descriptions that are in line with the regulatory standards.

3. Income from Overseas Branches
Income generated by both Malaysia and overseas branches must be accounted for and e-invoice must be issued by resident ...
... financial institutions that are running a banking business. They must be mindful to ensure complete e-invoicing compliance in all their transactions.

4. Customer-Issued e-Invoices for Income Received
Income received through sources such as interest on fixed deposit, financial institutions must issue e-Invoices as and when it is requested by the customer. An e-invoice containing reports of sums due and received guarantees transparency thus firming up e-invoice compliance.

5. Consolidated e-Invoices for Non-Requested Transactions
In cases, where the consumers do not explicitly require an e-invoice, financial institutions can issue a consolidated e-invoice. E-invoicing compliance guidelines mentioned in in Section 3.7 of the e-Invoice Specific Guideline document should be followed to avoid any errors.

6. Loan Repayments and Interest
There is no requirement for financial institutions to issue an e-invoice on the repayment of principal amount on loan. However, e-invoicing compliance mandates the issue of e-invoices for interest that is charged on loans.

7. Interbank Lending and Borrowing Interest
In cases of interbank transactions, the bank lending must issue the e-invoice for the interest that is charged to the borrowing bank, thisshowcases transparency and enablese-invoicing compliance in the banking industry.

8. Treasury Product Premiums and Upfront Fees
E-invoicing compliance requires financial institutions to issue e-Invoices for non-refundable premiums or upfront fees, ensuring clear documentation of such transactions.

9. Joint and Multi-Party Accounts
For joint, custodial, trust, or escrow accounts, one e-Invoice is generally issued for the principal account holder. However, e-invoicing compliance allows for separate e-Invoices to be generated upon request by other account holders.

10. Charges and Fees for Card Networks and Operators
Foreign Processors: Financial institutions must issue self-billed e-Invoices for charges paid.
Local Processors: Local operators issue e-Invoices for fees received, ensuring e-invoicing compliance by presenting them in XML or JSON format for easy interpretation.
11. Processing Fees for Inward Remittances
Financial institutions must issue:

Self-billed e-Invoices for fees paid to foreign agents.
E-Invoices for fees charged to local recipients to maintain compliance.
12. Upfront Payments for Property Auctions
E-invoicing compliance mandates e-Invoices for non-refundable upfront payments. However, refundable payments do not require an e-Invoice.

13. Cashback and Rewards Programs
Cashbacks can be documented within e-Invoices in XML or JSON format, detailing amounts owed and credits provided.

For reward points:

Free points: No e-Invoice is required.
Redemption: E-Invoices are issued only for additional charges incurred beyond the redeemed value.
14. Adjustments in e-Invoices
To ensure smooth compliance, financial institutions can include adjustments in subsequent e-Invoices rather than issuing separate credit, debit, or refund notes.

15. Treasury Product Income
E-invoicing compliance does not require e-Invoices for certain accounting adjustments, such as:

Realized or unrealized gains and losses.
Amortization or accretion of premiums or fees.
Foreign exchange gains or losses.
Conclusion
E-invoicing compliance is essential for financial institutions to streamline invoicing processes while ensuring adherence to FSA and IFSA regulations. By integrating these guidelines into their operations, institutions can enhance transparency, improve efficiency, and foster trust with both customers and regulatory authorities.