E-Invoice Classification Codes: A Key Component in Tax Reporting and Compliance

The Classification Code is a mandatory field in Malaysia’s e-Invoice system, used to identify the nature of a transaction or the type of goods or services involved. This requirement is imposed by the Inland Revenue Board of Malaysia (IRBM) to enhance visibility and traceability of business activities for tax administration purposes.

These codes enable IRBM to systematically analyse transaction patterns, detect potential tax leakages, and strengthen overall tax compliance. They cover a wide range of scenarios—from common expenses like education fees and medical treatments to specific cases such as consignment sales, self-billed imports, and even niche categories like sports facilities or breastfeeding equipment.

1. Why Classification Codes Matter

Using the correct classification code ensures that your transactions are accurately reported, reducing the risk of errors or rejections during submission to IRBM.

2. Overview: 45 Official Classification Codes

Every e-Invoice transaction must be assigned an appropriate classification code. Below are examples from the official list:

Full list of 45 classification codes is available at: sdk.myinvois.hasil.gov.my/codes/classification-codes/

3. How It Works in Biztrak

In Biztrak system, classification codes can be assigned to:

(a) Stock Items – Used when invoices are issued based on item lines.

(b) Accounts – Used when invoices are generated based on Chart of Accounts (e.g. for general sales, disbursements, or expenses).

Common Scenarios for Applying Classification Codes

To maintain accuracy and compliance, businesses that deal with multiple transaction types should consider creating separate stock items or accounts—each tagged with the relevant classification code. This helps ensure all transactions are reported correctly to IRBM.

4. How to Determine and Assign Classification Codes for Sales Transactions

(a) Understand the Nature of Your Business Transactions

Start by identifying the type of products or services your business offers. Clearly defining your sales activities helps in choosing the correct classification code.

(b) Refer to the Official Classification Code List

Review the full list of classification codes issued by IRBM to understand the categories applicable to various transaction types.

(c) Match Your Sales Activity with the Appropriate Code

Find the code that best describes your sales. For example:

(d) Seek Professional Advice if Needed

If you are uncertain which code to use, consult your accountant or a qualified tax advisor to ensure compliance with e-Invoice regulations.

(e) Assign the Code in Biztrak

Once the correct classification code is identified, link it to the relevant stock / service item or account in the system to ensure it's reflected accurately in your e-Invoice submissions.

5. How to Determine and Assign Classification Codes for Purchase or Expense Transactions that require Self-Billing Transactions

(a) Identify Whether Self-Billed e-Invoices Are Required

Determine if your business is involved in transactions where you, as the buyer, are responsible for issuing a self-billed e-Invoice. Common scenarios include:

• (i) Payments to Agents, Dealers, and Distributors (ADDs):
  • If your company pays commissions, incentives, or bonuses to ADDs without receiving an invoice from them, a self-billed e-Invoice must be issued.

• (ii) Purchases from Foreign Suppliers:
  • When purchasing goods or services from overseas vendors who are not registered for Malaysia’s e-Invoice system, the local buyer must generate a self-billed e-Invoice.

• (iii) Acquisition from Individuals (Non-Business):
  • If goods or services are obtained from individuals not engaged in formal business (e.g., freelancers, private sellers), a self-billed e-Invoice is required.

Additional industry-specific cases:

• (i) Profit Distributions (e.g., Unit Trusts):
  • If distributions are made by non-listed entities, the payer must issue a self-billed e-Invoice.

• (ii) E-Commerce Platforms:
  • Marketplaces like Shopee or Lazada may issue self-billed e-Invoices on behalf of sellers who are not issuing their own e-Invoices.

• (iii) Betting & Gaming Winnings:
  • Winnings paid to individuals must be accompanied by a self-billed e-Invoice.
  • (iv) Interest Payments:
    • Certain interest payments (excluding those by financial institutions to the public) require a self-billed e-Invoice.
    • (v) Insurance Claims or Compensation Payouts:
      • Insurers must issue self-billed e-Invoices for benefit payments or claims settlements.

    (b) Refer to the Official Classification Code List

    Review the latest classification codes issued by IRBM to determine the correct code that corresponds to each self-billed transaction type.

    (c) Match Your Expense Type with the Appropriate Code

    Find the code that best describes your expenses. For example:

    Code	Description
    034 – Self-billed: Importation of goods	For goods purchased from foreign suppliers
    035 – Self-billed: Importation of services	For services procured from overseas vendors
    036 – Self-billed: Others	For miscellaneous transactions with individuals not formally in business
    037 – Self-billed: Monetary payment to agents, dealers, or distributors.	For commission or cash-based incentives paid to ADDs
    045 – Self-billed: Non-monetary payment to agents, dealers, or distributors.	For incentives paid in kind (e.g., vouchers, gifts)

    (d) Seek Professional Advice if Needed

    If you are uncertain which code to use, consult your accountant or a qualified tax advisor to ensure compliance with e-Invoice regulations.

    (e) Assign the Code in Biztrak

    Once the correct classification code (self-billed) is identified, link it to the relevant stock / service item or account in the system to ensure it's reflected accurately in your e-Invoice submissions.

    6. How to Determine and Assign Classification Codes for Reimbursement or Disbursement Transactions

    (a) Identify Whether Your Transaction Involves a Reimbursement or Disbursement

    If you make a payment on behalf of a client and later recover the amount by including it in your invoice (together with other sales or service items), you must determine whether the transaction qualifies as a reimbursement or a disbursement, and assign the correct classification code accordingly.

    (b) Refer to the Official Classification Code List

    Review the latest classification codes issued by IRBM to determine the correct code that corresponds to each e-invoice transaction type.

    (c) Match the Reclaim Type to the Appropriate Classification Code

    Find the code that best describes your expenses. For example:

    Code	Description
    006 – Disbursement	Use this code when the original invoice is addressed to your client, but you made the payment on their behalf. You are merely passing the cost through, without markup, and reclaiming the exact amount from the client. This is treated as the client’s expense, not yours. You're acting as a paying agent.
    027 – Reimbursement	Use this code when the invoice is addressed to your company, and you bear the cost initially You then reclaim the cost from your client, again without markup. In this case, the expense is considered to have originated from your business, and you're recovering it as a reimbursement.

    In both cases, the recovery amount must match the original amount paid and should not include any profit element.

    (d) Seek Professional Advice if Needed

    If you are uncertain which code to use, consult your accountant or a qualified tax advisor to ensure compliance with e-Invoice regulations.

    (e) Assign the Code in Biztrak

    Once the correct classification code (self-billed) is identified, link it to the relevant stock / service item or account in the system to ensure it's reflected accurately in your e-Invoice submissions.

    Summary

    Correct use of Classification Codes in your e-Invoice submissions is not only mandatory—it also plays a critical role in supporting Malaysia’s move toward a more automated and transparent tax system. Businesses must familiarize themselves with these codes and apply them appropriately to avoid disruptions and ensure smooth compliance.

    📞 Talk to us today to find out how Biztrak can make your transition to LHDN e-Invoice compliance easier than ever.