Saudi Arabia, having a relatively new indirect taxation regime, is keeping pace with digital taxation. The General Authority of Zakat and Tax (GAZT) has announced the implementation the e-invoicing. The recent implementation of a value-added tax (VAT) system also raises challenges to the local economy, including competition issues and fraud. One reason for the introduction of the e-invoicing regime is that business operators will benefit from a streamlined invoicing process and more effective business operationsWhat is Electronic Invoicing?
Electronic Invoicing is a procedure that aims to convert the issuing of paper invoices as well as credit and debit notes into an electronic process that allows the exchange and processing of invoices, credit and debit notes in an structured electronic format between the buyer and seller.
What is an Electronic Invoice?
An Invoice issued, stored and amended in a structured electronic format through an electronic system, which included all the requirements of a tax invoice. A handwritten or scanned invoice is not considered an Electronic invoice.
What are Electronic Notes?
Credit and debit Notes which are issued in an electronic format, as a result of amendments conducted on the previous taxable supplies for which Tax/Electronic invoices had been issued Paper amendments which are photocopied or scanned, are not considered Electronic amendments.
Date of enforcement of generation and storing of e-invoices
December 4th, 2021
Who is subject to the Electronic Invoicing Regulation?
All taxable persons for VAT purposes (excluding non-resident taxable persons), in addition to any other party issuing tax invoices on behalf of a supplier subject to VAT.Why is Saudi Arabia implementing Electronic Invoicing?
The Kingdom of Saudi Arabia is implementing Electronic Invoices for several reasons. These include, but are not limited to:
1. Reducing the shadow economy
2. Increasing compliance with tax obligations
3. Reducing commercial concealment
4. Adopting global best practices and improving the Kingdom’s ranking in relevant international indices
5. Enabling fair competition and improving consumer protection
How will Electronic Invoicing be implemented?
The implementation of Electronic Invoicing has two main phases:
1. Phase One: Generation and storing of tax invoices and electronic notes in a structured electronic format issued through an electronic solution, and including all the requirements of tax invoices.
2. Phase Two: Integration of the taxable persons’ electronic solution used to generate electronic invoices and notes, with GAZT’s systems, with the objective of sharing data and information.
What is meant by “Electronic Means” in the definition of Electronic Invoice in the Electronic Invoicing Regulation?
Any device, electronic solution, or application used for the generation of Electronic Invoices and Electronic Notes that meets the following minimum requirements:
1. Ability to connect to the Internet.
2. Compliance with the requirements and controls for data & information security or Cybersecurity in the Kingdom.
3. A tamperproof solution, which allows the detection of any tampering performed (antitampering).
4. Ability to integrate with external systems using Application Programming Interface (API).
What actions should be taken now to start the Electronic Invoicing journey?
The first step is to determine whether the Electronic Invoicing Regulation applies to you, as well as assessing how ready you are to generate Electronic Invoices as per the minimum requirements outlined in the Regulation.
In addition, it is important to monitor GAZT’s official communication channels to be aware of any update or specification.