E-Invoicing for Employment Claims and Reimbursement: Guidelines and Implementation
Employment Perquisites and Benefits
An individual under a contract of service (i.e., employment) may receive various benefits from their employer. These benefits can be in cash or in kind and are typically provided to enhance the employee’s job performance and satisfaction. Common examples of such benefits include:
- Pecuniary Liabilities: Coverage of utility bills, parking fees, and car maintenance charges.
- Memberships: Club and gym memberships.
- Professional Subscriptions: Subscriptions to professional organizations or publications.
- Allowances: Travelling, petrol, toll, parking, and meal allowances.
Currently, employees must submit their expense claims to their employers, supported by appropriate documentation such as bills, receipts, invoices, statements, and payment slips. These expenses are recorded as the employer’s expense and reported for tax purposes.
Transition to E-Invoicing
With the implementation of e-Invoicing, employees will be required to request e-Invoices to be issued to their employer when a sale or transaction is concluded. This change aims to streamline the expense reporting process and ensure greater accuracy in expense claims.
However, the Inland Revenue Board of Malaysia (IRBM) recognizes potential challenges in obtaining e-Invoices issued in the employer’s name. To address these challenges, the IRBM offers the following concessions:
1. E-Invoices in the Employee’s Name
Businesses may continue using e-Invoices issued in the employee’s name or existing supporting documents from the supplier to support expense claims for tax purposes.
2. Foreign Suppliers
When payments are made to foreign suppliers, neither the employer nor the employee is required to issue a self-billed e-Invoice. The IRBM will accept foreign supplier’s receipts, bills, or invoices as proof of expense. This exception is applicable if the employer’s policy clearly states the perquisites and benefits.
Steps for E-Invoicing Implementation
1. Confirmation with Supplier
Employees should first confirm with the supplier if an e-Invoice can be issued in the employer’s name.
2. Provision of Employer Details
- If an e-Invoice can be issued to the employer, employees must provide the employer’s details to the supplier.
- If this is not possible, employees should provide their personal details to the supplier for issuance of the e-Invoice in their name.
3. Payment and Validation:
Employees make the payment upon receiving the validated e-Invoice from the supplier.
4. Submission of Expense Claim:
Employees submit the validated e-Invoice (whether issued in the name of the employer or employee) to the employer as supporting documentation for their expense claim.
Certain Expenses Incurred on Behalf of the Employer
Employees may also incur expenses on behalf of their employer, including accommodation, tolls, mileage, parking, telecommunication expenses, and expenses incurred abroad. Similar to personal claims, these expenses require supporting documentation to prove authenticity.
Upon implementing e-Invoicing, employees should request e-Invoices to be issued in the employer’s name where possible. The IRBM provides the same concessions for these types of expenses:
1. E-Invoices in the Employee’s Name:
Businesses may use e-Invoices issued in the employee’s name or existing supporting documents from the supplier.
2. Foreign Bills and Receipts:
For expenses incurred overseas, the IRBM will accept foreign bills, receipts, or invoices, provided the employer can prove the employee was acting on the employer’s behalf.
Steps for Expense Claims on Behalf of the Employer
1. Confirmation with Supplier:
Employees confirm with the supplier if an e-Invoice can be issued in the employer’s name.
2. Provision of Details:
- Employees provide the employer’s details to the supplier if possible.
- If not, employees provide their individual details to the supplier.
3. Payment and Validation:
Employees pay upon receiving the validated e-Invoice.
4. Submission of Expense Claim:
Employees submit the validated e-Invoice to the employer as supporting documentation.
By following these guidelines, businesses can ensure a smooth transition to e-Invoicing for employment claims and reimbursements, while maintaining compliance with tax regulations and enhancing the efficiency of their expense reporting processes.
For more information, please refer to the E-Invoicing Guidelines.
