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E-Invoicing Regulations in Saudi Arabia
On December 4th, 2020, it was decided in Saudi Arabia that electronic invoicing will be introduced from December 4th, 2021. All taxpayers who are resident in KSA are then obliged to issue electronic invoices, direct debits and credits for all transactions and taxable deliveries. Cross-border transactions are also covered by this regulation and an electronic invoice must be issued for these as well.
The main aim of this decision is to limit the shadow economy, to promote fair competition and consumer protection, and to combat trade and tax fraud.
The implementation of the e-invoicing system should take place in two phases:
- First, e-bills, e-debits and e-credits are issued and saved in an electronic format. The system must contain all tax invoice requirements for this.
- The taxpayers’ systems are then connected to the General Authority for Zakat and Taxes (GAZT) so that all data can be transmitted. It is not yet clear how frequently the data must be transmitted and whether invoices that are not transmitted are valid at all.
The requirement for e-invoicing in KSA has been split into two phases, the first still enforceable from 4th December 2021, but with a simplified scope. The second more complex integration is described as starting no sooner than 1st January 2023, it will be implemented in waves, meaning that not all taxpayers will come on to phase 2 at the same time.
Phase 1: Generation
The first phase of the e-invoicing implementation in Saudi Arabia, which comes into effect on December 4, 2021, is intended to serve as an entry point for implementation and conversion. No central e-invoicing platform is yet required for this.
Generation
Taxpayers must create their invoices in a structured, electronic format. No format is prescribed, but it is recommended to use the format that will be mandatory from January 2023. The invoices must contain all relevant mandatory fields specified by ZATCA. In addition, a QR code must be included on them so that important invoice data can be scanned with a smartphone.
Exchange process
In phase 1, the electronic invoices do not need to be verified or signed in order to be sent. In addition to the electronic format, the invoice can also be sent in phase 1 in any other readable format or even in paper form.
Archiving
Taxpayers must store their invoices electronically. In addition, taxpayers must be able to store e-bills both offline and off-site. In general, e-bills must be stored locally.
Phase 2: Implementation
In phase 2, to be implemented from January 2023, the e-invoicing solution will be integrated with the new ZATCA central e-invoicing platform. The affected taxpayers will be informed 6 months in advance.
Generation
In the second phase, the format in which the invoices must be issued is mandatory. Electronic invoices must be generated either in Saudi Arabian XML format or as a PDF/A-3 invoice file with embedded Saudi Arabian XML invoice. The generated invoice is then transmitted to the ZATCA platform and provided with a cryptographic stamp and a hash value as a Universally Unique Identifier (UUID).
Exchange process
After the invoice has been approved and signed accordingly by ZATCA, it is sent by the supplier to the buyer. B2B invoices do not become legally effective until they have passed ZATCA’s verification.
Archiving
Electronic invoices must be archived in local offline archives as well as externally.
The GAZT recommends that taxpayers check whether they are subject to the e-invoicing regulation. They should also save their e-bills in order to meet the minimum requirements.
Companies now need to address how to implement relevant technologies and prepare for compliant formats for e-invoicing over the next 12 months. They must also meet certain minimum requirements relevant to e-invoicing issuance. These include:
These include:
- access to the internet
- control of data, information or cybersecurity
- tamper protection
- ensuring the exchange with API via external systems
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Muzaffer Havcarci
INPOSIA e-Invoicing-Specialist
