Refundable vs Non-Refundable Deposits in e-Invoicing
Streamline your invoicing with the MyInvois Portal and API integration. e-Invoices are validated by LHDN in near real time, offering a seamless and efficient way to issue invoices, receipts, debit, and credit notes. Whether you’re an SME, startup owner, or finance professional, understanding key concepts like refundable vs. non-refundable deposits and the differences between portal-based and API e-Invoicing can save you time and ensure compliance.
Malaysia e-Invoicing Basics
An e-Invoice is a structured tax document validated by LHDN in near real time, issued through the MyInvois Portal or via API integration. It replaces traditional invoices, receipts, debit notes, and credit notes and includes a validation link/QR for verification by buyers.
Whether you’re a startup owner, SME manager, or finance executive in Malaysia, grasping the distinction between bookkeeping vs. accounting can help you choose the right tools, like AutoCount, to support your operations and improve your financial management.
MyInvois Portal vs API
- Portal
Best for SMEs issuing invoices manually with low transaction volume.
- API Integration
Ideal for higher volumes; integrates directly with POS/ERP systems for automation.
Why Deposit Handling Matters: Classifying deposits correctly prevents double taxation, avoids audit flags, and ensures clean month-end reconciliation.
Key Principles for Deposits (Refundable vs Non-Refundable)
Refundable Deposits
- No e-Invoice on collection (not income on receipt).
- No e-Invoice on return of deposit; use a receipt/payment voucher.
- Issue an e-Invoice only when the deposit is forfeited (becomes income) or applied to a sale.
Non-Refundable Deposits
- Issue an e-Invoice immediately on collection (income recognized).
- On final billing, reference the earlier deposit e-Invoice and show the deduction.
Partially Refundable Deposits
- Split the deposit into non-refundable and refundable parts.
- Issue an e-Invoice for the non-refundable portion when collected.
- Issue an e-Invoice for the refundable portion only if forfeited or applied to the sale.
When Refundable Becomes Non-Refundable
If the contract provides that a refundable deposit becomes non-refundable when certain conditions are met (e.g., cancellation within 48 hours), you must issue an e-Invoice at the moment of forfeiture.
Quick Comparison Table
| TYPE | ON COLLECTION | ON REFUND | ON FORFEITURE | ON FINAL SALE |
|---|---|---|---|---|
| Refundable | No e-Invoice (issue receipt) | No e-Invoice (voucher/receipt) | Issue e-Invoice for forfeited amount | Deduct deposit in final e-Invoice |
| Non-Refundable | Issue e-Invoice immediately | Refund Note e-Invoice (if any goodwill refund) | Already treated as income | Reference deposit; bill balance |
| Partially Refundable | Invoice non-refundable part; receipt for refundable part | No e-Invoice for refundable part | Invoice only the portion forfeited | Show both deductions clearly |
Identifying Deposit Types in Practice
- Usually Refundable
- Security/damage/key deposits (rental, hotel, equipment)
- Container deposits
- Performance/security retentions (by agreement)
- Usually Non-Refundable
- Booking/Reservation fees (to secure capacity)
- Advance payments/Down payments
- Deposits clearly labelled “non-refundable” in the contract
Tip: Put the deposit status in the contract, receipt, and e-Invoice description. Ambiguity leads to disputes and reporting errors.
Step-by-Step e-Invoice Treatment
Collecting a Deposit
- Check contract: refundable, non-refundable, or split.
- If refundable → No e-Invoice. Issue a normal receipt.
- If non-refundable → Issue e-Invoice immediately.
- If partially refundable → e-Invoice only the non-refundable portion; receipt the refundable portion.
Applying the Deposit to a Sale
- Include a line in the final e-Invoice: Less: Deposit Received (Ref: INV-XXXX).
- For refundable deposits applied, the application is taxable if the underlying supply is taxable.
Refunding a Deposit
- Refundable deposits: issue payment voucher/receipt; no e-Invoice.
- If you refund a non-refundable deposit (goodwill), raise a Refund Note e-Invoice for the refunded portion.
Forfeiture
- When conditions trigger forfeiture, the amount becomes income.
- Issue an e-Invoice for the forfeited amount on that date.
Industry Examples (Malaysia)
Rental Property Security Deposit (RM3,000)
- Collection: No e-Invoice; issue receipt.
- Full refund: No e-Invoice; issue payment voucher/receipt.
- Partial deduction (RM500): Issue e-Invoice for RM500 only; refund the balance.
Event Venue Booking Fee (Non-Refundable RM1,000; Total RM10,000)
- Collection: Issue e-Invoice for RM1,000 immediately; label clearly “non-refundable booking fee.”
- Final billing: Issue e-Invoice for RM9,000; reference the deposit e-Invoice; show deduction lines.
Custom Furniture Order (RM1,000 Non-Refundable + RM4,000 Refundable)
- Collection: e-Invoice for RM1,000 only; receipt for RM4,000.
- Cancellation: Refund RM4,000 (no e-Invoice).
- Completion: Final e-Invoice shows both deductions.
Hotel Deposit with Cancellation Policy (RM500 Refundable → Forfeited if <48 hours)
- Collection: No e-Invoice; issue receipt.
- Late cancellation: Issue e-Invoice for RM500 on forfeiture date.
- Stay completed: Deduct RM500 in the final e-Invoice for room charges.
Consolidated e-Invoices for Non-Refundable Deposits
If your business collects many small non-refundable deposits and buyers do not request individual e-Invoices, you may issue a Consolidated e-Invoice.
| ITEM | WHAT TO DO |
|---|---|
| Eligibility | Non-refundable deposits where individual invoices were not requested; ensure your industry isn’t mandated for per-transaction e-Invoices. |
| Timing | Submit within 7 calendar days after month-end (e.g. by 7th of the next month). |
| Data | Aggregate by buyer (if applicable) or as permitted; keep internal receipt trail to support consolidation. |
| Exceptions | Some sectors may still need individual e-Invoices; check latest LHDN notes. |
Always confirm customers’ preferences. If a buyer asks for an individual e-Invoice, issue it even if you typically consolidate.
Compliance Toolkit for SMEs
Contracts & Documentation
- State deposit status (refundable/non-refundable/conditional) and triggers (e.g., forfeiture).
- Align receipts and e-Invoices with that status to avoid mixed messages.
- Retain proof: signed T&Cs, emails, booking confirmations.
Accounting & SST Pointers
- Refundable deposit: liability on collection; move to income only when forfeited/applied.
- Non-refundable deposit: income on receipt; use Refund Note e-Invoice to reverse if refunded.
- SST: only when applied to a taxable sale or forfeited related to a taxable supply.
Audit Trail Must-Haves
- Clear cross-references: deposit receipt ↔ deposit e-Invoice (if any) ↔ final e-Invoice.
- Date-sensitive actions (e.g., forfeiture date) should match e-Invoice issue dates.
- For cross-border: self-billed e-Invoices may apply if supplier is foreign.
Official resources: LHDN e-Invoice Guidelines.
Frequently Asked Questions
Do I need an e-Invoice when I collect a refundable deposit?
No. Issue an e-Invoice only if the deposit is forfeited or applied to a sale.
How do I handle a non-refundable deposit that I later refund?
Issue a Refund Note e-Invoice for the refunded portion to reverse revenue and update IRBM records.
Can deposits be grouped in a consolidated e-Invoice?
Yes, for small non-refundable deposits where buyers didn’t request individual e-Invoices. Submit within 7 days after month-end.
Do cross-border deposits follow different rules?
Rules are similar, but if the supplier is foreign, a self-billed e-Invoice by the Malaysian buyer may be required as proof of expense.
Can customers insist on an e-Invoice for a refundable deposit on collection?
They can request documentation, but an e-Invoice is typically not issued until application/forfeiture. Provide a receipt or pro-forma.
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