E-invoicing will become mandatory for businesses operating in Saudi Arabia, making the Kingdom the first Middle Eastern country to implement an e-invoicing reform.
The General Authority of Zakat and Taxes (GAZT) has issued the finalized version of the rules of e-invoicing in Saudi Arabia, which specify the technical details and the requirements that Saudi taxpayers will need to meet. The GAZT has also undergone a restructuring, after being merged with the Customs authority, and is now called ZATCA (the Zakat, Tax and Customs Authority).
As in other countries, the goals of this reform are to allow the government to improve tax collection, prevent tax fraud, and have a better visibility into trade transactions in the KSA.
In this article, we’ll look into the changes that are being introduced and how they’ll impact businesses operating in the Kingdom of Saudi Arabia (KSA).
When will e-invoicing be introduced in Saudi Arabia, and what are the requirements?
The Saudi e-invoicing system will be rolled out in two phases.
The first phase
The first phase will begin on December 4, 2021. After that date, all taxpayers will be required to begin using e-invoices, i.e. to be able to create, store and modify them. During the first phase, e-invoices, electronic credit or debit notes will not need to be issued in a specific format, but they must contain all necessary information, including a QR code.
Invoices cannot be tampered with, and invoice numbers need to be from a single sequence (multiple sequences are not allowed).
The second phase
The second phase is scheduled for January 1, 2023. At this point, businesses must start logging their invoices and electronic notes into the ZATCA’s electronic system. For B2B invoices, a clearance model will be introduced, while B2C invoices will need to be transmitted in a 24-hour period.
As the second phase is rolled out, the Saudi government will use a CTC (Continuous transaction controls) system. Invoices will be issued in XML format that is UBL-based, and can be sent to buyers either in a XML format, or in PDF/A-3 format, with embedded XML.
For B2C transactions, businesses must use simplified invoices that they print out.
What will be the requirements for e-invoicing solutions in Saudi Arabia?
For the second phase, e-invoicing solutions must have a number of features to be compliant with the requirements of the KSA’s government. They must have:
- An UUID (Universally Unique Identifier) generator
- A hash and a cryptographic stamp generator
- A security layer that prevents tampering and unauthorized modifications
- An archive to store issued invoices, both an internal and an external one
- A QR code generator.
Changing the time or exporting the stamping key will be prohibited.
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