In Malaysia, e-Invoice classification codes are standardized codes used to categorize the nature of transactions in an e-Invoice. These codes help ensure consistency in reporting and facilitate tax analysis by the Inland Revenue Board of Malaysia (IRBM).
There are 45 classification codes, covering various transaction types.
Each transaction in an e-Invoice must be assigned the appropriate classification code. You can find the full list of classification codes here.
In Treezsoft, you can assign Classification Code to:
- Stock items – If invoices are issued based on items.
- Accounts – If invoices are issued using a chart of accounts (e.g. Sales account).
Below are some common business scenarios to consider when assigning a Classification Code:
- Transactions related to sales.
- Transactions for purchases or expenses that require self-billing.
- Transactions involving reimbursements or disbursements.
If your business involves multiple scenarios listed above, it is essential to create separate stock items or accounts to ensure that each transaction is correctly assigned to the appropriate classification code for accurate reporting and compliance.
#1) Steps to Determine and Assign Classification Codes to Sales Transactions
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1. Determine the Nature of Your Sales
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- Find out and understand your own business nature.
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2. Refer to the Official Classification Code List
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3. Match Your Sales Type to the Correct Code
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e.g. 003 (Computer, smartphone or tablet) → If selling computer, smartphone.
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e.g. 030 (Repair and maintenance) → If provide repair or serivce job.
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4. Consult Your Accountant or Tax Advisor
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- If unsure, consult a tax professional to ensure compliance with IRBM regulations.
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5. Assign Your Correct Code in Treezsoft
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Once find out your Classification Code, you may link your stock items or accounts to the classification code accordingly.
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Please refer here for the detail steps.
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If you have stock items or accounts related to different classification code, please link them separately.
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#2) Steps to Determine and Assign Classification Codes to Purchase or Expense Transactions that require Self-Billing
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1. Determine whether You have Transactions that required Self-Billed eInvoice.
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Here are some common scenarios where self-billed e-Invoices are required for purchases or expenses in Malaysia:
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Payments to Agents, Dealers, and Distributors (ADDs) – When a company pays commissions or incentives to ADDs, a self-billed e-Invoice must be issued.
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Purchases from Foreign Sellers – If a Malaysian buyer purchases goods or services from an overseas supplier who does not issue an e-Invoice, the buyer must generate a self-billed e-Invoice.
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Acquisition of Goods or Services from Individual Taxpayers – If goods or services are acquired from individuals who are not conducting a business, the buyer must issue a self-billed e-Invoice.
Here are additional scenarios that are specific to certain businesses or industries, such as banking, e-commerce platforms, insurance companies, and betting firms:
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Profit Distribution – When profits (e.g., from non-listed unit trusts) are distributed, a self-billed e-Invoice is required if the distributing entity is not a publicly listed company.
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E-Commerce Transactions – Platforms like Shopee or Lazada issue self-billed e-Invoices on behalf of sellers who do not provide their own e-Invoices.
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Payouts to Betting and Gaming Winners – When winnings are distributed, a self-billed e-Invoice must be issued.
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Interest Payments – Required for certain interest payments, except when charged by financial institutions to the public.
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Claims, Compensation, or Benefit Payments from Insurers – When insurers make payouts, a self-billed e-Invoice is needed.
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2. Refer to the Official Classification Code List
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3. Match Your Expenses Type to the Correct Code
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e.g. 037 (Self-billed - Monetary payment to agents, dealers or distributors) → If payments made to agents, dealers, or distributors (ADDs) instead of receiving an invoice from them.
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e.g. 045 (Self-billed - Non-monetary payment to agents, dealers or distributors) → If payments (non-cash) made to agents, dealers, or distributors (ADDs) instead of receiving an invoice from them.
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e.g. 034 (Self-billed - Importation of goods) → If purchase goods from foreign seller.
- e.g. 035 (Self-billed - Importation of services) → If purchase services from foreign seller.
- e.g. 036 (Self-billed - Others) → If purchase goods or services from individuals who are not conducting a formal business.
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4. Consult Your Accountant or Tax Advisor
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- If unsure, consult a tax professional to ensure compliance with IRBM regulations.
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5. Assign Your Correct Code in Treezsoft
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Once find out your Classification Code, you may link your stock items or accounts to the classification code accordingly.
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Please refer here for the detail steps.
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If you have stock items or accounts related to different classification code, please link them separately.
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#3) Steps to Determine and Assign Classification Codes to Transactions involving Reimbursement or Disbursement
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1. Determine whether You have Transaction involving Reimbursement or Disbursement.
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- If you make a payment on behalf of your client and later reclaim it by including it in your invoice alongside other sales transactions, you must assign a specific classification code to the claimed item—whether it falls under reimbursement or disbursement.
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2. Refer to the Official Classification Code List
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3. Match Your Reclaim Type to the Correct Code
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e.g. 027 (Reimbursement) → If the invoice was issued to you, paid by you on behalf of client, and later you reclaim the exact paid amount (without markup) by including it in your invoice alongside other sales transactions.
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e.g. 006 (Disbursement) → If the invoice was originally issued directly to your client, and you paid it on their behalf, and later you reclaim the exact paid amount (without markup) by including it in your invoice alongside other sales transactions.
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4. Consult Your Accountant or Tax Advisor
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- If unsure, consult a tax professional to ensure compliance with IRBM regulations.
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5. Assign Your Correct Code in Treezsoft
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Once find out your Classification Code, you may link your stock items or accounts to the classification code accordingly.
-
Please refer here for the detail steps.
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If you have stock items or accounts related to different classification code, please link them separately.
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Transition to TreezSoft Cloud Accounting
Embrace the digital shift with TreezSoft Cloud Accounting, your seamless solution for LHDN E-Invoicing compatibility. As the era of digital taxation dawns, TreezSoft Cloud Accounting stands ready to guide businesses through the E-Invoicing transition, providing robust, user-friendly software solutions. Starting August 1, 2023, purchasers of TreezSoft solutions will gain complimentary access to the E-Invoice module until 2028, underscoring our commitment to affordable, efficient tax compliance.
Join the Future of Accounting Today
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