Simplified Guide to E-Invoicing for Insurance Companies

The Inland Revenue Board of Malaysia (LHDN) has released an inclusive document made for the e-invoicing in insurance sector. This document, in the form of an FAQ answers common concerns regarding general topics such as consolidated e-invoices, annual premium statements, handling policyholder requests. It also includes underwriting and subscriptions, claims and benefits payment, payments to agents, dealers, distributors and inter-fund charges.

A. General

Issuing of Consolidated E-Invoices for Certain Transactions:

Insurance companies can grant consolidated e-invoices for revenue from policyholders who do not require individual e-invoices. This method simplifies reporting and ensures compliance

The consolidated e-invoices must be in compliance with the rules mentioned in section 3.6 of the e-invoice specific guideline released by IRBM.

Role of Annual Premium Statements for Consolidated E-Invoices:

Annual premium statements can be used for consolidated e-invoices if the policy holder does not request e-invoices, In such a case, they must continue to issue regular statements or bills as per current practices.

Accumulated submission:

Aggregate data from these statements or bills to create a consolidated e-invoice. Submit the consolidated e-invoice to the IRBM within seven calendar days after the month-end. Detailed guidance is provided in Section 4.3 of the e-Invoice Specific Guideline.

Full-Year Premium Data Transmission If the first annual premium statement (for January to December 2024) is only available in February or March 2025, companies can:

Include the entire year’s data (January to December 2024) in the February/March 2025 submission.

There is no requirement to separate data for the period from January to July 2024, although mandatory e-invoicing begins on August 1, 2024.

Dealing with ad-hoc requests for valid e-invoices:

When e-invoices usually follow the consistent issuance cycle, the insurance company must consider policyholder requests outside this cycle:

Simple procedure: Establish a direct process to deal with such requests.

Effective communication: Notify customers on how to request consolidated e-invoices during regular invoice cycles to evade postponements or misunderstanding.

Issuing E-Invoices for Products that do not have a tax-respite:

Policyholders may ask for consolidated e-invoices for products are not in tax relief category. In such a scenario:

For e-invoicing purposes, the policyholder is assumed to be the buyer.

Insurance companies are obliged to grant a consolidated e-invoice on request, despite the product’s tax relief status.

Understanding insurance premiums in e-Invoices

For clearness and compliance, companies must contain a strong analysis of premiums in their e-invoices. This aids policyholders in understanding what they are paying for. Premiums must be classified using certain specific codes, such as:

014:– Education and medical insurance

015:– Takaful or life insurance

022:– Other types of insurance

024:– Private retirement or deferred annuity schemes

Joint Insurance Policies: Who Gets the Invoice?

If many people have a share in a joint insurance policy:

The person who receives the invoice, aka, the main policyholder must be registered as the Buyer in the consolidated e-Invoice.

In a case where another policyholder wants their own e-Invoice, the insurance company should issue it accordingly.

Handling Stamp Duty and Third-Party Fees

In some situations, insurance companies collect the payments on behalf of third parties, such as stamp duty or processing fee.

In situations where a consolidated e-invoice is granted to the insurer, it must be included in their own e-invoice.

In cased where the policyholder is invoiced directly, the company

If the third party invoices the policyholder directly, then the insurance company doesn’t need to include these amounts in their e-Invoice.

Since these fees don’t count as the insurer’s revenue, they must be clearly separated from the insurance premiums.

e-Invoicing for Policies Sold Through Intermediaries

Master Policies (Sold to an Intermediary)

If the insurance company sells a master policy to an intermediary, the e-Invoice should go to the intermediary.

The intermediary must then issue a separate e-Invoice to the end customer for the amount collected.

If the intermediary doesn’t issue an e-Invoice, the insurance company must do it instead.

Individual Policies (Sold Directly to Customers)

If the policy is between the insurance company and the customer, the e-Invoice must go directly to the policyholder, even if an intermediary was involved.

Whenever a payment is made for claims, by an insurance company, compensation, or benefits, it must issue a self-billed e-Invoice, whether the recipient is a person or a business.

Important points:

Supplier on the invoice will be the policyholder or beneficiary.

The policyholder remains the supplier in the invoice when the insurer pays third parties such as repair shops, lawyers or hospitals.

The insurance company can issue a single self-billed e-invoice to claim multiple claim benefits, the invoice can cover all the benefits as mentioned

Interfund charges, such as wakalah fees, qard, and actuarial surplus transfers are also handled by insurance companies. As these are internal transactions happening within the same company, and that external parties are not involved in these transactions, there is no requirement for an e-invoice.

However,– Companies can still issue internal invoices for their own tracking if they want to, but it’s not necessary to do so.

Why This Matters

Exempting these internal transactions from e-Invoicing reduces unnecessary paperwork and allows insurers to focus on compliance for external transactions.