Credit Notes and Debit Notes in Malaysia E-Invoicing

Learn about credit notes and debit notes in Malaysia's e-Invoicing system, including types of e-Invoices, benefits, and best practices for handling them.

By
Ajith Kumar M
March 11, 2024
6 min

In the world of business transactions, keeping accurate records is crucial. Credit notes and debit notes are essential tools for this, especially with the adoption of e-Invoicing in Malaysia.

Types of E-Invoices:

  1. Invoice:
    • A standard document detailing a transaction between a supplier and a buyer.
    • It can include a self-billed e-Invoice to document an expense, showing item descriptions, quantities, prices, and total amounts.
  2. Credit Note:
    • Issued by suppliers to correct errors, apply discounts, or handle returns in a previously issued e-Invoice.
    • It reduces the value of the original e-Invoice without involving the return of money to the buyer.
  3. Debit Note:
    • Indicates additional charges on a previously issued e-Invoice.
    • It's used for undercharges or when extra costs like shipping are added.
  4. Refund Note:
    • Confirms the refund of the buyer's payment.
    • It's used when there's a return of money to the buyer, such as for returned goods.

What Are Credit Notes and Debit Notes?

  1. Credit Note:A credit note is a document a seller gives to a buyer. It shows that the buyer's account has been credited, usually because of returned goods or an overcharge.
  2. Debit Note:A debit note is the opposite. It's given by the buyer to the seller and indicates that the seller's account has been debited. This might be because of undercharging or other issues.

Using Credit and Debit Notes in E-Invoicing:

In e-Invoicing, credit and debit notes help adjust invoices after they've been issued. This ensures that the financial records are correct.

  1. Issuing a Credit Note:
    • If goods are returned or services aren't satisfactory, a credit note reduces the amount the buyer needs to pay.
    • The credit note should mention the original invoice, the amount credited, and the reason for the credit.
  2. Issuing a Debit Note:
    • If there's been an undercharge or additional costs, a debit note increases the amount the buyer needs to pay.
    • It should also reference the original invoice and state the extra amount charged.

Benefits of Credit and Debit Notes in E-Invoicing:

  1. Accuracy: They help keep financial records correct by adjusting invoices for any mistakes.
  2. Clarity: Both parties have clear documentation of changes made to the original invoice.
  3. Efficiency: E-Invoicing automates the process, reducing errors and saving time.
  4. Compliance: Properly issued credit and debit notes ensure businesses follow tax rules.

Best Practices for Credit and Debit Notes:

  1. Issue Them Quickly: Send out credit and debit notes soon to keep records up to date.
  2. Be Clear: Clearly state why the adjustment is needed and refer to the original invoice.
  3. Keep Records: Save all credit and debit notes for audits and to follow tax regulations.

Conclusion

Credit and debit notes are key parts of e-Invoicing, helping businesses quickly and accurately adjust their financial transactions. By understanding and managing these documents well, companies can keep clear and compliant financial records.

Subscribe to Our Newsletter

Keep yourself informed about the newest e-invoicing trends and other tax-related updates by subscribing to our newsletter.