How is a company's annual turnover pro-rated when changing its financial year-end for e-invoice implementation purposes?

When a company changes its financial year-end, the annual turnover or revenue is pro-rated to a 12-month period for the purposes of determining the e-Invoice implementation date.

This means that if the company's financial year does not align with a standard 12-month period due to the change, the turnover or revenue will be adjusted to reflect a 12-month equivalent to ensure consistency in determining when the company must start implementing e-Invoicing.

For example, if a company changes its accounting period and the new period covers 18 months, the annual turnover for that extended period will be divided by 18 and then multiplied by 12 to find the average turnover for a standard 12-month period.

This average will then be used to confirm the mandatory e-Invoice implementation date for the company. Let's use an example to illustrate how a company would pro-rate its annual turnover or revenue when there's a change in the financial year-end, particularly when the company has an 18-month financial period.

Example Scenario:

Company XYZ has the following financial periods:

1. Standard Financial Year: 1 January 2021 - 31 December 2021 (12 months)

2. Extended Financial Year: 1 January 2022 - 30 June 2023 (18 months)

Let's assume that Company XYZ had the following turnovers:

• For the standard financial year (2021): MYR 1,200,000

• For the extended financial year (2022-2023): MYR 2,700,000

Pro-Rating the Turnover:

To determine the annualised turnover for the extended financial year, we need to calculate the average monthly turnover and then project it over a standard 12-month period.

Calculation for the Extended Financial Year:

• Total Turnover for 18 months: MYR 2,700,000

• Average Monthly Turnover: MYR 2,700,000 / 18 months = MYR 150,000 per month

• Annualised Turnover for 12 months: MYR 150,000 * 12 = MYR 1,800,000

Conclusion:

After pro-rating, Company XYZ's annualised turnover for the extended financial year (2022-2023) is MYR 1,800,000.

This figure is what the company would use to determine if it meets the annual turnover or revenue thresholds for e-Invoice implementation as per the guidelines provided by the Inland Revenue Board of Malaysia.

Illustration:

Here's a simple illustration to visualize the pro-rating process:

Standard Financial Year (2021):
+------------------+----------------+
| Total Turnover   | MYR 1,200,000  |
+------------------+----------------+
| Duration         | 12 months      |
+------------------+----------------+
| Monthly Turnover | MYR 100,000    |
+------------------+----------------+

Extended Financial Year (2022-2023):
+------------------+----------------+
| Total Turnover   | MYR 2,700,000  |
+------------------+----------------+
| Duration         | 18 months      |
+------------------+----------------+
| Monthly Turnover | MYR 150,000

Based on the annualised turnover of MYR 1,800,000 for the 12-month period, we can determine the e-Invoice implementation date by referring to the thresholds provided in the guidelines:

1. Taxpayers with an annual turnover or revenue of more than MYR 100 million: 1 August 2024.

2. Taxpayers with an annual turnover or revenue of more than MYR 25 million and up to MYR 100 million: 1 January 2025.

3. All other taxpayers: 1 July 2025
   

Since Company XYZ's annualized turnover is MYR 1,800,000, which is less than MYR 25 million, the e-Invoice implementation date for Company XYZ would be 1 July 2025.