With the nationwide implementation of e-invoicing, many individuals and businesses are asking how this new system affects donations and contributions to charities and other organisations. Do you need an e-invoice for a donation? Is the charity required to issue one?

The answer, according to the latest LHDN guidelines, is: it depends entirely on whether the donation is tax-deductible. This guide will break down the new e-invoicing requirements from the perspective of both the donor and the recipient.

The Golden Rule: It’s All About Tax Deductibility

The core principle is simple: If a donation is made to an institution that is officially approved by LHDN to receive tax-deductible donations, then an e-invoice is required. This e-invoice will serve as the official proof for the donor to claim their tax deduction.

For any donation that is not tax-deductible (e.g., contributions to non-approved organisations or personal causes), the e-invoicing requirement does not apply, and the existing practice of issuing a standard receipt continues.

A Guide for Donors (The Giver)

As a business or individual making a donation, here is what you need to do:

• If your donation IS tax-deductible…
  • This applies when you donate to an institution approved by the Minister of Finance under Section 44(6) of the Income Tax Act 1967.
  • You must request an e-invoice from the recipient organisation. This validated e-invoice is your official proof to claim your tax deduction when filing your tax return. The traditional paper receipt will no longer be the primary document for LHDN.
• If your donation IS NOT tax-deductible…
  • You should follow the existing practice. You are not required to obtain an e-invoice for the transaction.

A Guide for Recipients (Charities & Approved Institutions)

As an organisation receiving donations, your obligations depend on your status and the type of donation.

• If you ARE an LHDN-approved institution (under Section 44)…
  • When you receive a monetary donation, you are required to issue an e-invoice to the donor. If the donor does not request an individual e-invoice, you may be able to issue a consolidated e-invoice, but you must still capture the transaction details.
  • When you receive a non-monetary donation (e.g., goods, equipment), you are not required to issue an e-invoice.
• If you ARE NOT an LHDN-approved institution…
  • You are not required to issue an e-invoice for any monetary or non-monetary donations you receive. You can continue to issue your standard acknowledgement receipts.

What About Business Contributions to Community Projects?

The flowchart also references Section 34(6)(h), which allows businesses to claim a tax deduction for contributions made to approved charity or community projects that directly relate to their business. The same principle applies: if the contribution is tax-deductible for your business under this section, you must obtain an e-invoice from the project owner.

Ensuring Your Corporate Giving is Compliant

For businesses making contributions, correctly documenting these transactions is crucial for both fulfilling your corporate social responsibility goals and for claiming your rightful tax deductions.

At SMONE, our Accounting & Tax services help you properly record and classify all your corporate donations. We ensure you differentiate between tax-deductible and non-deductible contributions and obtain the correct documentation—like a validated e-invoice—to support your claims during your annual tax filing.

Contact us today to ensure your company’s generosity is also reflected accurately in your tax returns.

(Disclaimer)
This article is for general informational purposes. The rules for tax-deductible donations and e-invoicing can be complex. Please consult with a qualified tax professional for advice tailored to your specific situation.