New regulations have recently been issued by Saudi Arabia to mandate electronic invoicing (e-invoice) effective from December 4, 2021, for all registered entities and businesses. The Zakat, Tax and Customers Authority (ZATCA), formerly known as the General Authority of Zakat and Tax (GAZT), has published a framework about the implementation which focuses on increasing transparency and compliance with tax obligations, which, in turn, leads to high consumer protection.
Who does it apply to?
The new invoicing regulations are applicable to all taxable persons (excluding non-resident taxable persons) who are a resident in KSA. Any customers or third parties that issue a tax invoice on behalf of a taxable person who is a resident of the Kingdom shall also be required to comply with this regulation. Taxpayers who are not residents of KSA are excluded from these regulations.
What is the KSA e-invoicing regulation all about?
Taxpayers under the KSA e-invoicing regulation are expected to issue invoices and amendments (such as debit and credit notes) electronically for all their purchase and sale transactions (including exports which may be zero rated).
The taxpayer residents and business entities will have to comply with a standard electronic format and be prepared to issue, receive and store e-invoices in a particular electronic format with predefined data fields.
But firstly what is an e-invoice and electronic notes, and what will be the content?
An e-invoice is simply a tax invoice that is issued in an electronic format. Electronic notes comprise of debit and credit notes which shall also be issued in an electronic format. A handwritten or scanned invoice will henceforth not be considered an electronic invoice, even if they are sent digitally. Only e-invoices generated in the specified format are acceptable.
The terms, requirements and conditions applicable to tax invoices as per Article (53) of VAT Implementing Regulation will be determined at a later stage by ZATCA for a smooth transition.
Can I issue scanned copies or PDF documents for invoices?
No, scanned and PDF invoices will not be considered as an e-invoice. Invoices that are handwritten, Microsoft Word invoices and any unstructured invoice on a webpage or email will not be accepted.
Should a taxable person generate the e-invoices for sales outside the Kingdom (exports)?
Yes, it is mandatory for all taxable persons to issue and store the e-invoices starting from December 4, 2021, for all taxable supplies, whether it is subject to standard rate or zero rate for resident and non-resident consumers.
When will this be implemented?
ZATCA will be implementing e-invoicing in two stages. ZATCA issued their first e-invoicing regulations on December 4, 2020, by giving a period of 12 calendar months from the date of publication for businesses to start generating invoices.
Hence, the first phase of Generation shall commence from December 4, 2021, and it will be mandatory for businesses and entities (excluding non-resident taxable persons) to generate, issue and store electronic invoices and electronic notes, related to their processing and record keeping as well as any other third party issuing tax invoices on behalf of a taxable supplier.
From June 1, 2022, all taxable persons must integrate their internal systems with ZATCA’s system through an API (Application Programing Interface). The timelines for integration with the system and phases are yet to be announced.
Affiniax Partners has collaborated with Pagero, a digital solution provider to ensure all our clients are compliant with the forthcoming E-invoice mandate.
In case you would like to learn more about the E-Invoicing requirements mandated under the regulation, read our blog on the subject.
If you would like to know more about the E-Invoicing Regulations, please feel free to get in touch with our team.