How Saudi Arabia's mandatory e-invoicing regulations affect you?

It seems that organizations need to be clear after the publication of the e-invoicing regulations by the Kingdom of Saudi Arabia's General Authority of Zakat and Tax. This article will help anyone unsure about the Saudi Arabian regulations, as well as who they affect and what it means to everyone in Saudi Arabia.

On 4th December 2020, the GAZT published final electronic invoicing (e-invoicing) regulations in Arabic. It stipulates that all taxpayers must save, modify, and issue e-invoices no later than December 4, 2021. This regulation also contains basic requirements and controls for e-invoicing integration within 180 days of the initial issuance.

A public consultation was held on March 18, 2021. It included technical specifications, conditions, rules, and procedures for integrating the system. GAZT invited taxpayers and others to share their feedback on the draft before 17 April 2021.

All taxpayers in Saudi Arabia have to comply with the new regulations for e-invoicing, effective immediately. They will need to integrate their internal systems with GATZ's using an API.

Important to remember that e-invoicing includes all provisions related to VAT legislation and tax invoices. All provisions regarding electronic transactions and electronic signatures, as well as proof of electronic transactions, shall apply to electronic invoices and notes.

Saudi Arabian obligatory e-invoicing

Saudi Arabia's e-invoicing regulations cover standard tax invoices (or simple invoices) and simplified tax invoices. It also covers the debit and credit notes that are associated with each type of invoice.

Standard tax invoices can be used for B2G or B2B transactions, while simplified tax invoices can be used for B2C transactions.

All Saudi Arabian residents are required to create electronic invoices for VAT purposes. These regulations are applicable to domestic transactions, but not cross-border transactions or those who are not residing in Saudi Arabia.

These regulations include several important points that every Saudi Arabian taxpayer should be aware of. These are the most important issues:

  1. Invoices will be issued starting from the 4th of December 2021.
  2.  At a later date, the second phase will also be in effect. The second phase will also include electronic invoices for taxpayers. Debit and credit cards must be linked to GAZT's systems for sharing data and information.
  3. Within 180 days of the publication date, details about both phases' requirements, procedures, and control will be made public.
  4. Arabic must be used to publish e-invoices. Other languages may be permitted but they must not be published in Arabic.
  5. All taxpayers who are Saudi Arabian citizens can use e-invoicing. It applies to all taxable supplies that are subject to VAT standard or zero rates, and to both resident and non-resident consumers.

Why did the KSA government implement e-invoicing?

Two main reasons Saudi Arabia's government implements e-invoicing Saudi Arabia are security and efficiency.

By using e-invoicing, you can improve the efficiency of transactions:

  • Transparency in trading and transactions.
  • Reduce costs and increase payments speed.
  • Giving the government an improved understanding of the country's market conditions.
  • Enhance fair competition and customer protection in the market.
  • Assisting the government in achieving international best practices.

By using e-invoicing, you can increase the security of transactions

  • Assisting the government in detecting and mitigating the shadow economy, and monitoring goods and services.
  • Assisting with the monitoring of cash flow in real-time.
  • Assisting in determining the best strategy.
  • Improving tax compliance rates.
  • This regulation will provide greater transparency for commercial transactions.
  • Enhancing data-informed decision making.

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