Awarded as best CA & auditors at the IRECMS Dubai awards 2022

It is a great pleasure for us to announce that we have been awarded again as the best CA & Auditors at the IRECMS Dubai Awards 2022.

Obtaining this recognition two years in a row shows us that we are continuing on the right path, and encourages us to continue improving and growing to offer our clients the best possible service.

Thank you all so much for this opportunity and for the fantastic experience!

EmaraTax – Important Alert for all Tax Payers (from FTA – Federal Tax Authority, UAE)

EmaraTax

Effective 5 December 2022, FTA online e-services portal shifted to EmaraTax.

It is important for all Tax Payers to access the online FTA account through the new online e-services portal now “EmaraTax”.

To access the online FTA e-services account (for all Tax Payer services e.g., Submitting VAT returns etc.) all Tax Payers must reset the password by following the instructions provided on the FTA’s website.

It is advised that all Tax Payers holding valid accounts with FTA must reset their password by following the instructions providing on the e-services portal of FTA https://eservices.tax.gov.ae/.

Once the password reset request is generated, Tax Payer shall receive an email from official FTA emailer with <Temporary Password>, once that <Temporary Password> is entered on the new online e-services portal (EmaraTax) of FTA, Tax Payers will be eligible to set a new password to the online FTA e-services portal (EmaraTax) and fulfill their Tax Obligations.

Since this is a major transition, it is advised that all Tax Payers have the procedures followed as described by the FTA.

It is important to understand that the new system offer only “4 Attempts” (with incorrect/invalid/old password) to access the online FTA account. Should you require any assistance in updating the password to access the new online FTA’s e-services portal “EmaraTax”, reach us at taxation@affiniax.com and we will assist you through this transition smoothly.

#EmaraTax #FTA

New criteria for TAX residency certificate (TRC) in the UAE

New criteria for TAX residency certificate (TRC) in the UAE

Overview:

The government of UAE through its Cabinet Decision No. 85 of 2022 for determination of tax residency, issued a guideline on 2nd September 2022 to determine the tax residency for a natural and legal person.

The new rules broaden the criteria of UAE tax residency as this embarks another step taken by UAE in strengthening their position in global tax compliance and provides much needed clarity with regards to the statutory definition of UAE tax residency.

Brief:

Prior to the issuance of this decision, the UAE did not have a statutory definition for ‘tax residency’. Previously, the Federal Tax Authority (FTA) determined the tax residency for natural persons primarily based on the number of days spent in UAE (at least 180 days in a relevant year) supported with certain documentary requirements and for legal persons it must have been established for a period of at least one year supported with certain documentary requirements.

Significant changes pursuant to issuance of decision for determination of new tax residency:

For Legal Persons:

As per Article 3 of the Cabinet Resolution, a legal person (i.e., the company or entity) shall be considered as a tax resident of UAE in either of the following cases:

  • if it was incorporated, formed or recognized in accordance with the legislation in force in the State, and that does not include the branch that is registered by a foreign juridical person in the State; or
  • it is considered a Tax Resident in accordance with the Tax Law in force in the State.

For Natural Persons:

As per Article 4 of the Cabinet Resolution, a natural person (i.e., an individual) shall be considered as a tax resident of UAE, whereby any of the following conditions are satisfied:

  • if his usual or primary place of residence and the center of his financial and personal interests are in the State, or he meets the conditions and criteria determined by a decision from the Minister; or
  • if he has been physically present in the State for a period of 183 days or more, within the relevant (12) twelve consecutive months; or
  • if he has been physically present in the State for a period of 90 days or more, within the relevant (12) twelve consecutive months, and he is a UAE national, holds a valid Residence Permit in the State or holds the nationality of any member state of the Gulf Cooperation Council, and meets any of the following:
  • he has a Permanent Place of Residence in the State; or
  • he carries on an employment or Business in the State.

However, as per article 6 of the Cabinet Resolutions, if any International Agreement sets out certain conditions for determining the tax residency, the provisions of that International Agreement on determining the tax residency shall apply for the purposes of this International Agreement.

The Minister shall issue a decision specifying the form and manner of issuing certificates for determining the tax residency for the purposes of the International Agreement.

Effective date of this decision?

This decision shall be effective from 1st March 2023.

Application for TRC

The legal or natural persons whoever satisfies the aforementioned conditioned shall submit a request to apply for a TRC which shall be approved as per requirements of the FTA. The FTA may further ask for more relevant documents to satisfy itself to issue TRC as and when required.

Role of “Affiniax Partners” in TRC application?

The “Affiniax Partner” with its team of experts shall guide you (all natural and legal persons) in determining eligibility and application for TRC.

Please feel free to get in touch with our team of experts.

Written by Ms. Neha Upadhyay.

Landmark VAT legislation update since 2018; amendments effective 1 January 2023

While UAE VAT legislation is about complete its 5th year since its implementation back in 2018, the Ministry of Finance introduced a major revision to the original VAT legislation (by issuance of Federal Decree-Law No. 18 of 2022). The proposed changes are effective 1 January 2023. The revised legislation have minor amends to various articles among further additions of articles. Some of the major updates in the legislation are as under:

  1. 100% Exporters (eligible to avail VAT registration exceptions)

The current provisions of the VAT legislation did allow an exception from VAT registration and compliance where the supplies are only subject to the zero-rated. Under the new amendment the same benefit has been extended to the business e who registered previously for VAT and were unaware of such benefit. Effective from 1 January 2023 the registered business will also be eligible to apply for the exception and avail of this benefit.

  1. Statute of Limitation

Generally, the FTA can conduct a Tax Audit or issue a Tax Assessment within 5 years timeframe from the end of the relevant Tax Period (monthly/quarterly)., Under the amended  legislation the condition of 5 years  have been overruled and the FTA can conduct a tax audit or issue a Tax Assessment even after 5 years from the end of the relevant tax period subject to the taxpayer has been notified before the expiration of the 5-year period and the such audit shall be concluded within 4 years from the date of the notification.

  1. Limitation to filing Voluntary Disclosure

The legislation now restricts a Taxable Person to file for Voluntary Disclosure after the lapse of 5 years from the end of the relevant Tax Period.

  1. Extension to Statue of Limitation attached to Voluntary Disclosure

Upon the submission of Voluntary Disclosure by Taxable Person in the 5th year (from the end of the relevant Tax Period) the timeframe to conduct a tax audit will be extended to an additional 1 year.

  1. Tax Evasion / non-registration

The authority may conduct Tax Audit and/or issue Tax assessments within 15 years from the end of the Tax Period in which the tax evasion occurred or if the person failed to complete VAT registration (as required in the legislation).

  1. Tax Invoice and Tax Credit Note Issuance timeline

The legislation now mandates that the Registrant must issue a Tax invoice (continues or non-continuous supplies) and Tax Credit Note within 14 days from the date of supply or required.

Previously the 14 days rule was appliable only for non-continuous supplies (Article 25 of the Decree-Law)

  1. Additional compliance for input credit on import of service

Many businesses pay for services to overseas service providers on the basis of agreements without requiring the service providers to issue an invoice. As per the recent changes in the VAT laws, for import of services, input credit could only be recovered if the taxpayer receives and retains invoices in accordance with the VAT laws.

Further to learn how the amendment in legislation affects your VAT compliance reach us as: taxation@affiniax.com

Written by Jilal Ahmed

Soft Close Audit

Soft Close Audit

Preparation and finalization of management accounts for getting ready and reconciling the supporting schedules, while the audit is being conducted, may result in delays in meeting the deadline to deliver the audited financial statements promptly, and further distract and pile up the day-to-day operational tasks of the company’s management.

Having a comprehensive audit strategy and adopting best practices by the companies throughout the year can help everyone relax when the audit team arrives.

One of the practices is to plan and conduct a soft close audit, to review, verify and confirm the books of accounts, supporting schedules and related information are up-to-date, further, these will be ready and available to consolidate the subsequent period transactions (until the FY end) at the time of the year-end audit.

The soft close audit is the practice wherein the external auditors majorly focus on verifying historical transactions up to the cut-off date e.g. 10-month soft close audit (Oct 31). The auditors generally perform the test of the internal controls along with supporting samples, performing or/and planning a detailed walkthrough on the material and complex transactions during the soft-close to facilitate his year-end audit work.

This helps him to identify material discrepancies in the books of accounts, if any, beforehand to discuss with the management and ensure a timely conclusion of the audit post-year-end.

Soft Close Audit provides an opportunity for the management to plan and prepare the following points:

  • Closing Checklist: Will be performed to ensure that all month-end processes are completed, and all journal entries are posted. If there is no checklist to follow, quarterly and annual entries may be overlooked.
  • Document Verification: Management should not be scrambling at the hard close audit stage to find documentation for the auditors, e.g. if the Verification of documents and related agreements are required, like debt agreements, leasing arrangements, and contracts with major customers and vendors could be identified at the soft close audit stage to arrange them at time of the year- end audit.
  • Internal Controls: Soft close audit provides enough time to plan and conduct a test of controls to the external auditors to verify, whether these controls are effective, efficient, and up to the standards.
  • New Accounting Standards: Helps external auditors and management to reconcile the applicable interpretation (if any) of the newly introduced standards, changes, or amendments before closing and reporting the books of accounts for internal review purposes.
    To give awareness of new accounting pronouncements and modifications to existing pronouncements continually being introduced. It’s important to pay attention to the effective dates, and you should start on them earlier than you expect since they usually require more work.
  • Non-Recurring Transactions: If there are non-recurring transactions like the sale of property, acquisition, significant leases, a new incentive plan for management, a new line of business with a unique revenue stream, a change in debt, etc. Reach out early to soft close the audit, as it will take time for discussion and reach out to a consensus.
  • Balance Sheet Reconciliations: Balance sheet reconciliation at the soft close is audited to find any discrepancies, and fix processes throughout the year. For example, old outstanding checks on the bank reconciliation can be a sign of lost or duplicate checks.
  • Revenue Testing: To ensure accurate recording of revenue, having a process to verify that all shipments or services are billed promptly.
  • Expense Testing: A review of repair and maintenance can give an indication of impairment and identify the items that should have been capitalized as fixed assets.

Written by Raheel Tamimi, Mian Muhammad Azeem and Mufaddal Shabbir

Corporate Tax (0% and 9%) in UAE from 1 June 2023

Introduction and effective date

In a landmark decision the Ministry of Finance (“Ministry”) on 31 January 2022 announced the United Arab Emirates (“UAE”) will introduce Corporate Tax (a type of direct taxes) effective on or after 1 June 2023. The Federal Tax Authority (“FTA”) will be responsible for the enforcement, collection, and administration of UAE Corporate Tax. Corporate Tax will be applied to all UAE businesses and commercial activities alike, except for the extraction of natural resources, which will remain subject to Emirate level Corporate Taxation.

The news came in as the UAE aims itself as a world leading hub for business, innovation and competitiveness to align itself on global level for achieving transparency and preventing harmful Taxes practices together with accelerating the UAE’s development and transformation to achieve its strategic objectives.

 

Rate of Corporate Tax and threshold

The Corporate Tax Rate will be

9% Standard rate for companies (with annual income above AED 375,000)

0% to support small business (with annual income below AED 375,000) – to that the Ministry added “The Tax regime will be amongst the most competitive in the world”

A different tax rate for large multinationals that meet specific criteria set with reference to ‘Pillar Two’ of the OECD Base Erosion and Profit Shifting project (this will further be explained in the legislation).

 

Examples for Corporate Tax application

A business that has a financial year starting on 1 July 2023 and ending on 30 June 2024 will become subject to UAE CT from 1 July 2023 (which is the beginning of the first financial year that starts on or after 1 June 2023). The taxable income will be the accounting net profit / income of a business, after making necessary adjustments for certain items to be specified under the UAE Corporate Tax Law (draft not yet available).

 

Exclusions (out of scope of UAE Corporate Tax) – explicitly defined by the Ministry of Finance

Personal income from employment

Real Estate investment (by individuals)

Dividend income, capital gains and other income earned from owning shares or other securities (by individuals), also Dividends and capital gains earned by a UAE business from its qualifying shareholdings will be exempt.

Interest income (by individuals)

Any income generated by individual (which is not arising as a result of a business)

No withholding Taxes

Free zone businesses will be subject to UAE Corporate Tax, but the UAE Corporate Tax regime will continue to honor the Corporate Tax incentives (if any) currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business with mainland UAE.

 

Corporate Tax Returns – cycle of submission

Only one Corporate Tax Return will need to be filed per financial period, no provisional or advance CT filings will be required, a financial period will generally a year. UAE businesses will not be required to make advance UAE Corporate Tax payments (as observed in regimes in other countries).

 

Corporate Tax Violations

Similar to other Taxes in the UAE (e.g. VAT), businesses will be subject to penalties for non-compliance with the Corporate Tax regime.

 

Immediate action required

UAE companies will need to consider impact assessment and readiness towards the Corporate Tax and its implementation, upgrade ERP as required.

To understand accurately how this Corporate Tax regime will impact your business, preparing an implementation plan and assistance with reporting and updating your ERP, reach out to our Tax Team at Taxation@affiniax.com.

 

Author Jilal Ahmed – 31 January 2022

If Something Can Go Wrong, It Will

Consultant to help implement ISO 22301 Business Continuity Standard

‘If something can go wrong, it will’.

So, it is surprising to find out that over 60% of businesses in the Middle East do not have a Business Continuity Plan in place.

In light to the last 2 years, many businesses have had a wakeup call with the need for being prepared.  Business continuity is a necessity, and that has become painfully obvious for the many businesses, big and small, that have closed.

According to Ventures Middle East, the 10 top threats to Business Continuity in the Region are:

  • Cyber-attacks & Data breach
  • Adverse weather like Rain Floods, Sand Storms, Earthquakes etc.
  • Fire
  • Active War
  • Terrorism
  • Pandemics & Infectious Disease
  • Security incident
  • Unplanned IT or telecom outages
  • Supply chain disruption
  • Utility supply interruption

These can, and as we have seen, do cause serious damage to a business, its products or services, its reputation, and its continued existence. Now more than ever it is important to think continuity.

It doesn’t just affect big businesses! For SMEs it is critical to be prepared as you haven’t the resources that big companies and multi-conglomerates have.

Implementing the ISO 22301:2012 Business Continuity Management System (BCMS) can help you identify the risks, action plan against them, keep your staff aware and put procedures in place to keep the business running when problems strike.

Among the benefits of implementing ISO 22301 BCMS are:

  • Reduces impact and frequency of business disruptions
  • Enhances your ability to respond when disruptions do occur
  • Gives you confidence in your responses and ensures appropriate and agile contingencies
  • Better stakeholder/interested party relationships
  • Protects and enhances your reputation and credibility
  • Improves your ability to win tenders
  • Greater visibility of business risks both externally and internally across the business
  • Cost savings through mitigating impact of disruptions

To maintain some surety in the marketplace, now is the time to think business continuity.

At Affiniax Partner we have a cost effective way to document the ISO 22301 BCMS, through using the Affiniax Toolkit.  We provide you with all the unique templated, the policies, processes, procedures and forms for you to completed in house and make the manual unique to your company.  If you would like to know more about the Toolkits, please contact us on mail@affiniax.com or +971 54 745 0844.
We look forward to hearing from you!

An Easy And Inexpensive Way To ISO Certification

Many businesses are put off going for the globally acclaimed management standards by the ISO. These include ISO 9001:2015 Quality Management, ISO 14001:2015 Environmental Management and ISO 45001:2018 Occupational Health and Safety Management systems.

The cost of employing a consultancy is very expensive. To do it in-house, they may not have the experience or time.  These are main reasons for businesses for not obtaining ISO certification in their chosen management system or systems.

Now, there is an easier and inexpensive way of achieving ISO certification. It can be done by your own staff, with support from experts (this is also costed within the price), using the toolkits provided through Affiniax Partners, based in Dubai and offices around the Middle East.

The toolkits provide the documents and forms required for you to become compliant with the required ISO standard. All the documents are formatted in a way that is easily amended to your business logo and name.  They are multiple examples within the documents with suggestions as to what to change to fit your business. The forms are equally easy to adapt to your business. Besides the ISO required documents, there are other documents to help you with the implementation, action plans to track your progress and other documents for project status and tracking your compliance.

The documents are easy to follow, written in plain English, so the technical aspects of the ISO standard are made clear.

Once you purchase your selected ISO toolkit you are entitled to 12 months of email support, from experts across all the standards. We also provide 1 remote audit prior to certification via Zoom Teams, the audit is to help ensure you are compliant with the requirements of the relevant ISO standards.

It is also possible to integrate 2 or more standards, such as ISO 9001:2015 Quality and ISO 14001:2015 Environmental management systems. This reduces the number of documents required and makes them easier to manage.

For more information on these outstanding toolkits contact our qualified consultants on mail@affiniax.com or +971 54 745 0844 and we will help you achieve the end goal by having the documentation ready for your certification.

How ISO 9001:2015 Toolkits can help your business Grow

Whatever the reasons for seeking compliance and certification, many organisations fail to capitalise on the potential benefits that ISO 9001 accreditation can bring. These organisational benefits can include process improvements, reputation benefits, and cost savings, as well as ensuring consistency of product and delivering customer satisfaction. These benefits can be realised by using the Affiniax Toolkits.

Making the most of ISO 9001:2015

The sooner an organisation realises that an ISO 9001 accreditation is actually a marketable tool, the sooner that organisation will be able to expand its business using that very accreditation as a foundation. The organisation should know that new markets are open to operate in that previously would have been closed, for example:

  • Ability to tender for local and national government contracts– These opportunities will increase due to most entry levels stipulating ISO 9001 accreditation. However, these contracts will not come looking for the organisation, your appropriate departments will need to investigate, register, and prepare the team for the bidding and presentation process ahead.
  • Ability to trade with larger businesses– Many blue chip organisations simply refuse to trade with organisations that do not have ISO 9001 as a starting point. The organisation will now be qualified to seek associations and partnerships with larger operations showing that it can not only provide added value to their supply chains, but can use ISO 9001 accreditation as proof of its credibility and commitment to customer satisfaction.

Using ISO 9001 as Leverage in Business

Presenting your organisation as an ambitious and capable partner can be challenging but, using ISO 9001 principles, it is a task you can embrace. Whether on a face-to-face level, presenting at trade shows, or even recording video marketing presentations – which is a modern, but effective marketing tool – your organisation can promote the use of ISO 9001 quality management principles to advertise its qualities:

  • Customer Satisfaction – Your organisation can correctly claim that the desire to be accredited against ISO 9001 comes from the intrinsic company ethos, which is to provide unrivalled quality of product and service to the end user.
  • Customer Focus – One of the advantages your organisation can claim over larger conglomerates is better customer focus and service. A more timely and effective reaction to the customer and any problems can be seen as an excellent selling point, and utilising examples of its customer feedback and corrective action processes, your organisation can demonstrate an edge in this area.
  • Emphasize Your Operational Control – If you are in a service or manufacturing environment, almost nothing is more impressive than displaying operational control and consistency of product. Again, this is something that many larger organisations find more difficult to control, and whether providing non-conformity rates, displaying process documents, or offering facility visits, this is another area in which your organisation can claim advantage over the larger corporation.
  • Continual Improvement – The ability to improve and demonstrate to a potential customer is a valuable bargaining tool. Evidence of continual improvement can demonstrate a willingness to listen, take action, and improve – again, a quality that is often slower to be demonstrated within larger organisations where things often happen more slowly.

Advertising ISO 9001 to the benefit of the Organisation

Your organisation should understand the rules of advertising its ISO 9001 accreditation by ensuring that the correct logo is used on your website and stationery. Look to join local trade organisations, which will allow you to network with new potential customers and partners. Consider throwing an open house to celebrate your ISO 9001 accreditation, where you can gain some new contacts, attract some media attention, and say “thanks” to everyone who has worked hard to gain accreditation (and who will need to continue to do so to maintain compliance and improve standards in the future).

Use your ISO 9001 accreditation to leverage your organisation’s ability to move in higher circles, and use the elements suggested above to drive home the advantages a small organisation can have over a larger business. Use 9001 as the leverage to take you from being an smaller organisation to a bigger organisation. Nobody else will do it for you.

Why is ISO 9001 a good idea for your Organisation?

The benefits of ISO 9001 are not overstated; companies large and small have gained great benefits from using this standard by discovering cost and efficiency savings. Here are the explanations of six main benefits and why they are important:

Improvement of your Credibility and Image – Because ISO 9001 is an internationally recognised standard, it has become the basis for creating a quality management system around the world, replacing many previously published requirements. When a company is looking for a supplier, it is often a requirement to have a QMS based on ISO 9001 in order to be considered. This is particularly the case if you are competing for public sector jobs in many countries. Attaining ISO 9001 certification can be a powerful marketing tool.

Improvement of Customer Satisfaction – One of the quality management principles that are the foundation of the ISO 9001 requirements is to improve customer satisfaction by planning for and striving to meet customer requirements. By improving your customer satisfaction you will retain more repeat customers since happy and satisfied customers are the key to keeping customer loyalty. And such customers bring in additional revenues.

Better Process Integration – By looking at the overall process interactions through the process approach of ISO 9001, you will be able to easily find improvements in efficiency and cost savings. This is done through eliminating the waste that can occur when processes are maintained without a view of the inefficiencies that can arise during process hand-off. The better process flow can also be used to drive efficiency towards fewer errors and resulting reworks, which can improve cost savings.

Improve your evidence for decision making – A second quality management principle of ISO 9001 is the need to use evidence-based decision making. By driving your decisions based on the evidence, rather than on “gut feelings,” you can be more focused on applying resources to the areas that will improve efficiency and increase cost savings with less trial and error to find the right decision. In addition, by monitoring the process you are improving, you will be able to see how much improvement has happened based on the data.

Create a continual improvement culture – Continual improvement is a third quality management principle of ISO 9001. By adopting this culture to improve your processes and organisational output, you will find efficiency and cost savings, including the use of systematic processes when problems occur in order to reduce the impact of the problem and increase the speed of recovery. By making this continual, improving year after year, the company can see continuing benefits from this.

Engagement of employees – Employees who are involved in the improvements of the processes they work with are happier and more engaged employees. Who better than the people working on the process to best identify the areas that need improvement, and to help to test and advance these improvements when they are implemented? Engaged employees are more productive and will help the company better improve and save, especially when they understand how the quality of the process depends on them.

To learn more on how ISO 9001:2015 can benefit your organisation, big or small, contact Affiniax Partners by email mail@Affiniax.com  or call +971 55 589 7152 or visit our website: www.affiniax.com

New E-Invoicing Requirements in the Kingdom of Saudi Arabia

E-Invoicing requirements in Saudi Arabia

With Saudi Arabia mandating e-invoicing to increase transparency and compliance with tax regulations, ZATCA (Zakat, Tax and Customers Authority), formerly known as GAZT, has issued new regulations for controls, requirements, and technical specifications.

The Generation stage commences from 4th December 2021 and businesses are required to generate, issue and store electronic invoices and notes and should notify the Authority if any technical error arises. The second phase, Integration commences 1st June 2022, by which time taxpayers must mandatorily integrate their systems with ZATCA’s (the Authority) systems by using an Application Programming Interface (API).

In accordance with ZATCA’s regulations, all the transactions which earlier required tax invoices to be issued must comply and follow e-invoicing requirements:

  • Supplies of goods and services that are either subject to the standard VAT rate or zero rate;
  • Export of goods and services from the Kingdom;
  • Intra-GCC supplies in accordance with the Agreement, VAT law and its Implementing Regulation;
  • Nominal supplies by the taxpayer in accordance with the Agreement, VAT, and Implementing Regulation; and
  • Any payments related to supply of goods or services and received by the taxpayer before the actual supply.

The transactions for which notes are issued as per Article 40 and 54 of the VAT Implementing Regulation shall also have to comply with the latest regulation in the following instances:

  • Cancellation or suspension of the supplies after its occurrence either wholly or partially
  • In case of essential change or amendment in the supply, which leads to the change of the VAT due; and
  • Amendment of the supply value which is pre-agreed upon between the supplier and consumer, in case of goods or services refund.

Transactions that are not required to follow the regulations are:

  • Transactions with Exempted Supplies;
  • Any payments related to exempted supplies and received by a taxpayer;
  • Supplies subject to VAT pursuant to Reverse Charge Mechanism; and
  • Import of goods to the Kingdom.

What changes should businesses observe from 4th December 2021?

During the transition phase, businesses will be required to adjust their accounting systems and internal processes to meet the e-invoicing requirements through an ‘e-invoice generation solution’. The ‘e-invoice generation solution’ will be considered as compliant after prior verification of its conformity to all specifications and requirements by the Authority, third party or self-certified by the person subject to e-invoicing regulations.

Business entities and banks must ensure that their accounting system has enhanced capabilities both for VAT compliance and e-invoicing solution:

  • The compliant solution should be able to connect to an internet connection and integrate with external systems by using an Application Programming Interface (API). Taxpayers will be required to work with their IT team to ensure that technical requirements are met.
  • The e-invoices and associated notes must contain mandated fields as specified by ZATCA which will help with integration.
  • Business entities should be able to generate e-invoices in XML format or PDF/A-3 format (with embedded XML) and share the same with customers.
  • The Authority shall create a Cryptographic stamp (an electronic stamp created via cryptographic algorithms to ensure authenticity of origin and integrity of content) after receiving the e-invoices and electronic notes pursuant to the integration procedures starting from the date determined by the authority.
  • Businesses need to prepare themselves to share tax invoices or its associated notes that have been generated electronically in XML format or PDF/A-3 format (with embedded XML), in the same format of such invoice or note with customers.
  • Businesses should be able to export generated invoices and associated notes into an external archival system.

What should the compliant e-invoice generation solution be able to do?

  • The compliant solution must be able to generate invoices and their associated notes in the XML format or PDF/A-3 format (with embedded XML) as per the requirements of electronic invoices formats.
  • The compliant solution must be tamper-resistant and include a mechanism which prevents tampering and should reveal any tampering attempts that might occur by the user or any third party in accordance with the specifications and requirements specified by the Authority. The Authority has the power to verify the e-invoicing generation solution to the specifications and requirements.
  • The compliant solution must be able to protect the generated electronic invoices and electronic notes from any alteration or undetected deletion, and contain some functionalities which enable the person subject to e-invoicing regulation to save electronic invoices and electronic notes and archive them in XML format without an Internet connection.
  • The compliant e-invoice generation solution must be able to generate a Universally Unique Identifier (UUID) in addition to the invoice sequential number which identifies and distinguish each VAT Tax Invoice, Simplified Tax Invoice, and their associated notes in accordance with the specifications, requirements and timelines. This shall be for each electronic invoice or electronic ote as per the requirements and timelines. UUID is a 128-bit number, generated by an algorithm chosen to make it unlikely that the same identifier will be generated by anyone else.
  • The compliant solution which is used for generating Simplified Tax Invoices and their associated notes, must be able to generate a Cryptographic Stamp for each electronic invoice or electronic note. Such cryptographic stamp must have an identifier as per the requirements and timelines
  • The compliant solution must be able to generate a hash (an enciphered text obtained by applying a one-way algorithm upon data which prevents the return to the original data or amending or tampering it) for each generated electronic invoice or electronic note within the sequence of the electronic invoices and electronic notes. The hash of the invoice is then embedded in the next invoice in the sequence. This hash is used to protect the sequence of Invoices from tampering whether by deletion or replacement
  • The compliant solution must be able to generate a QR code which is a type of matrix barcode, with a pattern of black and white squares that is machine readable by a QR code scanner or the camera of smart devices in order to enable basic validation of electronic invoices and electronic notes.
  • The compliant solution must have a tamper-resistant invoice counter that cannot be reset. The counter must increment for each generated invoice or associated note and the compliant solution must record the value of this counter in each invoice or associated note. This counter is used to ensure that invoices cannot be deleted from the end of the invoice sequence without detection.

Will there be any fines or penalties for non-compliance?

Yes, all provisions related to tax invoices in the VAT Law are applicable to electronic invoices including fines and penalties.

Further regulations relating to the generation of e-invoices shall be made available by ZATCA in the coming months.

Affiniax has collaborated with Pagero, a digital solution provider to ensure all our clients are compliant with the forthcoming E-invoice mandate.

Not sure if these requirements apply to you? Read our blog on applicability, as well as other commonly asked questions to learn more.

If you would like to know more about the E-Invoicing Requirements, please feel free to approach our team.

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