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, they will be given 6 months advance notice.
In Phase 1, the mandatory requirements are:
- Stop issuing manual invoices and move to an electronic invoice solution
- Include the buyer VAT number on the invoice when the buyer is VAT registered
- Add a QR code to the e-invoice (included B2C and B2B)
There is no clearance or post-audit reporting in Phase 1, there is also no mandated format to use. However, it is allowed to use the official Phase 2 format earlier and also integrate with the authority early. Also, there is no requirement in Phase 1 for the solution provider to be certified by the authority.
The details for phase 2 are unclear yet, but the XML format has been published and a clearance model is expected but could still change in the future, as they have extended the rollout.