E-Invoicing in Saudi Arabia by GAZT to Support Tax Automation and Zakat

E-Invoicing in Saudi Arabia by GAZT

The Kingdom of Saudi Arabia follows an international trend concerning e-reporting and CTC e-invoicing. The new clearance platform will be introduced completely by 2023. At an initial stage starting from December 2021, all the e-invoices will be generated through an e-invoicing system besides storing them securely in an electronic vault. The second phase is expected to initiate by 1st January 2023 in which central e-invoicing will start making real-time e-reporting and e-invoicing clearance.

About e-invoicing issued by GAZT

The General Authority of Zakat and Tax issued e-invoicing regulations and a guide related to the same. The FAQs in the guide can assist taxpayers and make them comprehend compliance obligations that fall under the new system. Article-No. 6 states that all the future decisions regarding the controls, details, requirements and processes for e-invoice integration shall be published within 180 days from when the regulations have been issued. Following it, GAZT highlighted requirements, procedural rules and technical specialities for implementing e-invoicing compliance in a draft on 18 March 2021. From 1st June 2021, every taxable individual will have to integrate their internal system with the GAZT systems using an application programming interface.

The objective behind introducing e-invoicing in Saudi Arabia

One of the main objectives behind implementing e-invoicing in the Kingdom is to minimise the unofficial economy size, ensure consumer protection and promote fair competition. The GAZT seeks to control the tax society and prevent tax evasion.

Who needs to comply with e-invoicing rules?

Every resident of KSA who is taxable needs to comply with the newly implemented e-invoicing system. The system will also apply to the third parties who issue tax invoices on behalf of taxable residents.

Who is exempted under the e-invoicing system?

A non-resident of KSA but registered for VAT will not have to adhere to the new e-invoicing rules.

What is an e-invoicing?

Technically, an e-invoice can be defined as an electronic form that is prepared electronically. Any form of scanned or photoshopped invoice does not fall under the e-invoicing category.

Who are eligible to provide an e-invoicing solution?

An e-invoice generation solution needs to be verified either by a GAZT member, any third party or by a self-certified taxable person who follows e-invoicing regulations appropriately.

What are the Violations and penalties associated with e-invoice?

All the rules mentioned by the KSA VAT Implementing Regulations related to tax invoices are applicable on e-invoicing too. Similarly, penalties and violations are also the same as VAT law. The Middle East group dealing in e-invoicing can further guide you on how to avoid them and follow KSA invoicing regulations.

What can be expected from an e-invoice?

Although GAZT is yet to declare complete technical specifications about e-invoicing, they are expected to meet the below-mentioned criteria’s:

  • It can be accessed online
  • The invoice can be accessed by the external system with the help of APIs
  • E-invoice will have a control mechanism that guarantees its authenticity and information integrity
  • The invoice will comply with cybersecurity and security requirements of the Kingdom

Which format does not fall under e-invoicing related documents?

  • Any form of unstructured invoice data that has been issued in a Word or PDF format besides a few other formats.
  • A scanned invoice issued in any electronic format such as JPG or PDF
  • Any unstructured invoice released on an electronic mail or webpage.

What are Electronic Notes?

All forms of Debit and Credit notes issued in an electronic format due to amendments caused in the e-invoice are electronic notes. Scanned or photocopied papers are not considered electronic notes.

Why is Saudi Arabia introducing e-invoicing?

Although there are many reasons due to which Saudi Arabia is introducing e-invoice, some of the significant reasons are mentioned below:

  • Preventing commercial disguise
  • Reducing fake economy portrayal
  • Strengthen compliance associated with tax obligations
  • Implementing best practices that are adopted globally and make Saudi Arabia rank high amongst international indices
  • Ensure consumer protection and fair competition in the Kingdom

Do we need to store e-invoice and electronic notes?

Yes, we have to generate and store e-invoices and electronic notes starting from 4th December 2021. Every taxable person will need them for VAT purposes and other purposes such as third-party issuing tax invoices on behalf of suppliers.

What needs to be filled in an e-invoice?

An e-invoice must contain terms, conditions and requirements that are applicable to tax invoices according to Article 53 of VAT Implementing Regulation. Other than this, there are a few data fields that will be ascertained by the GAZT at the later phase to ensure successful e-invoicing has been done.

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