VAT E-invoicing in Saudi Arabia

Zakat, Tax and Customs Authority (ZATCA) introduced e-invoicing in the KSA and started implementing it in 2 phases beginning from December 4, 2021. As we see small and medium sized businesses coming within the ambit of e-invoicing and integration with ZATCA, it would be interesting to understand some of the basic aspects of the e-invoicing system.  

What is E-invoicing? 

E-invoicing is an online process, where invoices are generated electronically or in a digital format by means of an e-invoicing solutions. Such e-invoice can be accessed and stored electronically.  

A PDF or scanned version of a paper invoice is not an e-invoice.  

An e-invoice is always generated through e-invoicing solutions that include online cash register, e-invoicing software installed on PC or cloud based solutions. For instance, taxpayers in the UAE may consider solutions like Zohobooks, TallyPrime, ClearTax Middle East etc.  

Is E-invoicing mandatory? What are the timelines for implementation? 

E-invoicing is mandatory in the KSA.  

KSA's e-invoicing regulations are implemented in two phases:  

• Phase 1 or the Generation Phase, since December 4, 2021, necessitates issuing and storing e-invoices compliant with ZATCA, without reporting to the portal. It applies to all taxpayers (excluding non-resident taxpayers), and any other parties issuing tax invoices on behalf of suppliers subject to VAT. 

• Phase 2 or the Integration Phase, starting January 1, 2023, mandates integration of taxpayer’s invoicing solutions with ZATCA's system (the Fatoora portal). This phase rolls out gradually for different taxpayer groups based on their annual taxable revenue, with a 6-month notice before integration.  

What information is available in an E-invoice? 

Just like a paper invoice, the e-invoice contains details like -

• date and time of the invoice  
• details of seller/buyer like – name, address, VAT registration number  
• particulars of goods sold or services provided – quantity, rate etc., amount, VAT rate and VAT amount 

Additionally, the e-invoicing solution allows generation of a unique sequential number and QR Code that are different for each invoice.   

Types of E-invoices 

There are 2 types of e-invoices prescribed by the KSA’s VAT regulations: 

• Standard E-invoice – It is applicable to B2B, B2G transactions. The seller generates the e-invoice, shares it with ZATCA and, procures ZATCA’s clearance and then shares it with the buyer who can access it through a QR code.  

• Simplified E-invoice – It is generally applicable to B2C transactions. The seller generates the e-invoice, shares it with the buyer (who can access it through a QR code) and reports to ZATCA within the prescribed time.  

E-invoices must be issued in Arabic. However, the seller/supplier may add another language, say English, in the invoice.   

Can you change the E-invoice once it is generated? 

In real life scenarios, there may be a change in the invoice for various reasons like a change in the quantity of goods or the selling price. Under the e-invoicing mechanism, once an e-invoice is generated, it cannot be changed. Yet, the seller can issue a debit note or a credit note (with reference to the original e-invoice) to implement the changes in quantity or rate.  

Conclusion 

E-invoicing is revolutionizing business operations by integrating taxpayers with the ZATCA. It aims to standardize invoicing formats, phasing out paper-based methods and curbing fraudulent activities. Centralized databases enable easier auditing for tax authorities, potentially reducing the audit frequency. For taxpayers, benefits include faster tax credit processing, reduced errors, and streamlined processes. Indeed, a step in the right direction! 

Disclaimer: Content posted is for informational and knowledge sharing purposes only, and is not intended to be a substitute for professional advice related to tax, finance or accounting. The view/interpretation of the publisher is based on the available Law, guidelines and information. Each reader should take due professional care before you act after reading the contents of that article/post. No warranty whatsoever is made that any of the articles are accurate and is not intended to provide, and should not be relied on for tax or accounting advice. 

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