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How-05: How does e-invoicing work?

• Disbursements and Reimbursements

• Employment Perquisites and Benefits

• Expenses Incurred by Employees on Behalf of Employers

Disbursements and Reimbursements

Reimbursements and disbursements must be included in e-Invoices.

Scenario 1: Supplier 1 issues e-Invoice to Buyer

Step 1:

Supplier 2 entered into an agreement with Buyer for supply of goods or provision of services. As part of the arrangement, Supplier 2 will make payment on behalf of Buyer to settle any expenses incurred during the contract period.

Step 2:

Upon concluding a sale or transaction, Supplier 1 will issue an e-Invoice directly to the Buyer.

Step 3:

Supplier 2 will make payment on behalf of Buyer to Supplier 1 to settle the outstanding amount. Supplier 1 will issue payment proof to Supplier 2 for the settlement.

Step 4:

Supplier 2 will issue an e-Invoice to the Buyer for the goods supplied or services rendered by Supplier 2 to Buyer (the process of issuing e-Invoice is similar to Step 2 above). Supplier 2 should neither include the payment made on behalf of Buyer in Supplier 2’s e-Invoice nor issue an additional e-Invoice for it.

Step 5:

Supplier 2 provides payment proof to the Buyer to recover the payment made to Supplier 1 on behalf of the Buyer.

Scenario 2: Supplier 1 issues e-Invoice to Supplier 2

Step 1:

Supplier 2 entered into an agreement with Buyer for supply of goods or provision of services. As part of the arrangement, Supplier 2 will make payment on behalf of Buyer to settle any expenses incurred during the contract period.

Step 2:

Upon concluding a sale or transaction, Supplier 1 will issue an e-Invoice to Supplier 2.

Step 3:

Supplier 2 will make payment to Supplier 1. Supplier 1 will issue payment proof to Supplier 2 for the settlement.

Step 4:

Supplier 2 will issue an e-Invoice to the Buyer (similar as per Step 2 above) to record the amount incurred on behalf of Buyer (e.g., disbursement / reimbursement) alongside with the goods sold or service rendered by Supplier 2, which will be presented as separate line items in the e-Invoice.

Employment Perquisites and Benefits

  • Employees may receive benefits in cash or kind, such as utility bill payments, club memberships, gym memberships, professional subscriptions, and allowances (e.g., travel, petrol, meal).
  • Employees must submit expense claims with supporting documents (e.g., bills, receipts, invoices) to their employers.
  • With e-Invoice implementation, employees should request e-Invoices issued to their employer as proof of expense. However, IRBM allows concessions where e-Invoices can be issued in the employee’s name or existing documentation can be used for tax purposes.
  • For payments to foreign suppliers, no self-billed e-Invoice is required, and foreign receipts/bills are accepted as proof of expense.

Expenses Incurred by Employees on Behalf of Employers

  • Employees may incur expenses on behalf of their employer, such as accommodation, toll, mileage, parking, and telecommunication expenses.
  • Similar to benefits, employees must provide supporting documents for expense claims.
  • IRBM allows e-Invoices to be issued in the employee’s name or existing documentation for tax purposes, especially for overseas expenses.

Steps for Expense Claims:

  • Employees should confirm with suppliers if e-Invoices can be issued in the employer’s name.
  • If not possible, e-Invoices can be issued in the employee’s name.* 

* Note:  that this exception will only be applicable if the employer is able to prove that the employee is acting on the employer’s behalf in incurring the expenses.

  • Employees pay upon receiving validated e-Invoices and submit them as supporting documents for expense claims.
-Section End-
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