The recent implementation of e-invoicing requirements has sparked concerns among various organizations, including non-profit entities like Joint Management Bodies (JMBs), Management Corporations (MCs), and Residents Associations (RAs). While the objective of e-invoicing is to enhance tax compliance and operational efficiency, its application to these entities - despite their non-profit status—raises critical questions about its necessity and impact.
Why E-Invoicing is Unnecessary for JMBs, MCs, and RAs
According to the Inland Revenue Board of Malaysia (IRBM), the e-invoicing mandate applies to all individuals and legal entities, including associations and bodies of persons. This broad scope means that JMBs, MCs, and RAs—despite not being profit-driven—are required to comply.
However, these entities exist solely to manage and maintain stratified properties on behalf of property owners. Their financial operations are straightforward:
No Profit Generation: JMBs, MCs, and RAs do not earn profits or distribute dividends.
Funds Solely for Management: Maintenance fees collected from owners are used entirely for property upkeep, with any surplus reserved for future expenses.
No Corporate Tax Liability: As non-profit organizations, they are not subject to corporate tax, making tax compliance concerns irrelevant.
Imposing e-invoicing on these entities creates an unnecessary administrative burden without yielding tax benefits.
The Role of JMBs, MCs, and RAs
JMBs and MCs are statutory bodies under the Strata Management Act 2013 (Act 757), while RAs are registered under the Registry of Societies. Their responsibilities include:
Collecting maintenance fees and sinking funds for expenses like security, cleaning, and repairs.
Managing facilities and administration to ensure the smooth operation of communities.
Ensuring compliance with legal and safety standards.
Given these responsibilities, requiring e-invoicing compliance only complicates their operations without any practical benefit.
The Administrative Burden and Rising Costs
For JMBs, MCs, and RAs, transitioning to e-invoicing comes with substantial costs, including:
Software & System Setup: Procuring and maintaining e-invoicing software.
Training Expenses: Staff and committee members require training to understand and implement the system.
Ongoing Compliance Costs: Resources must be allocated for managing data and submitting invoices.
A mid-sized condominium’s JMB in Kuala Lumpur estimates an annual cost of RM20,000 for implementing e-invoicing, covering software, training, and administrative overhead. These expenses would ultimately be passed on to property owners through increased maintenance fees, adding to the financial burden of homeowners already facing rising living costs.
A Misallocation of Government Resources
From a governmental perspective, enforcing e-invoicing on JMBs, MCs, and RAs is inefficient. These organizations do not contribute to tax revenue, so monitoring their compliance offers little return on investment. Instead, resources would be better spent ensuring compliance among large corporations, where tax evasion is a real concern.
No Risk of Tax Evasion or Financial Misconduct
One of the main objectives of e-invoicing is to prevent tax evasion and ensure financial transparency. However, JMBs, MCs, and RAs already operate under strict financial regulations, including:
Annual audits mandated by the Strata Management Act.
Transparent financial reporting at annual general meetings.
Banking regulations that enforce accountability.
Since these entities do not engage in commercial transactions, the risk of tax evasion is non-existent. Imposing e-invoicing on them does not address any genuine financial risk.
A Call for Exemption
Given the challenges associated with e-invoicing, Malaysia’s Housing Ministry and Finance Ministry should reconsider its application to JMBs, MCs, and RAs. Countries like Singapore have exempted non-profit organizations from e-invoicing requirements, recognizing that they do not contribute to the tax base.
Stratified property owners must voice their concerns to the authorities. By advocating for an exemption, we can ensure that JMBs, MCs, and RAs remain focused on their primary responsibilities - maintaining properties efficiently - without being burdened by unnecessary administrative costs.
Conclusion
While digitalization is essential for progress, its implementation should be practical and necessary. Imposing e-invoicing on JMBs, MCs, and RAs is a misguided policy that does more harm than good. A more logical and fair approach would be to exempt non-profit property management entities from e-invoicing requirements, allowing them to continue serving property owners effectively without unnecessary financial strain.
By raising awareness and taking collective action, we can push for a policy change that supports rather than hinders the management of our stratified communities.