Saudi Arabia: E-invoicing Regulations In The Kingdom Of Saudi Arabia (KSA)

The General Authority of Zakat and Tax (GAZT) has published its new E-invoicing Regulations, which are now available in English. The GAZT has also released a guide on e-invoicing and a list of FAQs which should help taxpayers to understand their compliance obligations under the new regulations. The official documentation can be reviewed here.

Article No.6 of the regulations states that further decisions related to the requirements, controls, details and procedures for integrations of the e-invoicing systems will be published within 180 days from the date in which the regulations were issued. In light of this, the GAZT shared a draft resolution on 18 March 2021 for public consultation in which the GAZT identified the requirements, technical specifications and procedural rules for implementing the provisions of the e-invoicing regulations. The GAZT invited taxpayers to express their opinions and share feedback on the draft by 17 April 2021.

Starting from 1 June 2022, all taxable persons must integrate their internal systems with the GAZT's systems by using an application programming interface (API). The timelines for integration with the GAZT's systems and the implementation phases, will be announced in a separate resolution by the GAZT.

Key points:

What is the objective behind implementing e-invoicing in KSA?

The primary objectives in introducing an e-invoicing system are to reduce the size of the unofficial economy, promote fair competition and consumer protection, control the tax society and avoid tax evasion.

Who should comply with the e-invoicing regulations?

Taxable persons resident in KSA will have to comply with e-invoicing regulations which are also applicable to third parties who are issuing tax invoices on behalf of resident taxable persons.

Who is exempted under the e-invoicing regulations?

A taxable person who is not a resident in KSA (non-resident person but registered for VAT purpose) will not be required to adhere to the e-invoicing regulations.

What is an e-invoice?

An e-invoice is a tax invoice issued in electronic form. Hence, scanned or photocopied invoices should not be considered e-invoices.

What is the scope of the e-invoicing resolution?

A) The resolution identifies controls, requirements, technical specifications, or procedural rules required for the implementation of the e-invoicing regulations provisions, which are related to the following:

• Generation of electronic invoices and electronic notes, including provisions related to their processing, and record keeping, effective on 4 December 2021.
• Integration phase, transmission of electronic invoices and electronic notes, and sharing them with the authority, which shall be implemented through phases, starting from 1 June 2022.
• All taxpayers mentioned in Article No. 3 of the e-invoicing regulations published on 4 December 2020 are obliged to follow the regulations for electronic invoices when issuing tax invoices and simplified tax invoices set under Article No. 53 of the KSA VAT Executive Regulations. Electronic e-notes should be applied to tax notes set under Articles No. 40 and 54 of the KSA VAT Executive Regulations.

B) The draft resolution excluded the following transactions from the scope of the e-invoicing regulations:

• Exempted supplies;
• Any payments received by a taxpayer which are related to exempted supplies;
• Supplies subject to VAT pursuant to Reverse Charge Mechanism (RCM); and
• Import of goods to the Kingdom.

Who should verify the E-invoice Generation Solution?

The E-invoice Generation Solution could be verified either by the GAZT, a third party, or could be self-certified by the taxable person who is subject to the e-invoicing regulations.

What are the specifications the E-invoice Generation Solution should have?

• The ability to generate invoices and their associated notes in XML format or PDF/A-3 format (with embedded XML).
• The ability to generate e-invoices and e-notes which include all the data fields required, as per the resolution.
• The ability to prevent tampering and reveal any tampering attempts that might occur by the user or any third party.
• The ability to protect the generated e-invoices and e-notes from any alteration or undetected deletion and be able to save e-invoices and e-notes and archive them in XML format without an internet connection.
• The ability to generate a Universally Unique Identifier (UUID) in addition to the invoice sequential number.
• The ability to generate a cryptographic stamp for each e-invoice and e-note.
• The ability to generate a QR code which is a type of matrix barcode, with a pattern of black and white squares that is machine readable by a QR code scanner, or a camera on a smart device, in order to enable basic validation of e-invoices and e-notes.
• A tamper-resistant invoice counter that cannot be reset.
• The ability to connect to an internet connection and integrate with external systems by using an API.

According to the draft resolution shared by the GAZT, the taxable person is prohibited from using any e-invoice generation solution which is not compliant with the specifications and requirements set by GAZT stated above.

The taxable person is required to register the units used for generating simplified tax invoices and their associated e-notes in accordance with the mechanisms and controls stated by the GAZT.

The taxable person should preserve the cryptographic stamp identifiers and its associated components in a safe way and protect them from copying or illegal use. It is prohibited to use them for purposes other than those for which they are intended.

Violations and penalties:

All regulations related to tax invoices, as mentioned in the KSA VAT Implementing Regulations, will be applicable on e-invoices, as well as the violations and penalties prescribed in the VAT law.

TMF Group's team in the Middle East can assist your company during the implementation of the e-invoicing regulations in KSA.

The transitional process:

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.