Businesses in the Kingdom of Saudi Arabia have less than 7 months to implement the relevant technology for issuance and storage of electronic invoices, in order to comply with regulations published by the General Authority of Zakat and Tax (GAZT) on e-invoicing in Saudi Arabia. As announced by the GAZT, the primary objectives of the e-invoicing mandate are to provide more transparency, to promote fair competition and to enhance consumer protection.
Who should comply with the e-invoicing regulations?
Taxable persons resident in Saudi Arabia will have to issue and store invoices, debit notes and credit notes in electronic format with predefined data fields for all their transactions. The requirements also apply to third parties who are issuing tax invoices on behalf of resident taxable persons.
E-invoice definition
An e-invoice is a tax invoice issued in a structured electronic format. Hence, scanned or photocopied invoices are not considered e-invoices.
Technical requirements of an e-invoice
The regulations contain preliminary requirements for the e-invoicing technology, including:
- The ability to connect to the internet and to integrate with external systems by using an API (Application Programming Interface);
- The ability to generate invoices and their associated notes in XML format ou PDF/A-3 format (with embedded XML);
- Compatibility with all the requirements and controls applied in Saudi Arabia in relation to data or information security or cybersecurity;
- The ability to generate a cryptographic stamp et QR code for each e-invoice and e-note;
- The ability to prevent tampering and reveal any tampering attempts that might occur by the user or any third party.
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.
The E-invoice Generation Solution could be verified either by the GAZT or a third party, or could be self-certified by the taxable person who is subject to the e-invoicing regulations.
Deadline for implementation of the e-invoicing rules
Taxpayers will need to be ready to issue, receive and store e-invoices by 4 December 2021. After this date, all VAT-taxable companies must begin issuing and storing electronic invoices, credit notes and debit notes to justify the sale of supplies and services. Invoices will be issued through the GAZT system for electronic information exchange.
Violations and penalties
All regulations related to tax invoices, as mentioned in Saudi Arabia VAT Implementing Regulations, will be applicable on e-invoices, as well as the violations and penalties prescribed in the VAT law.
E-invoicing model still to be announced
For the moment, the method by which mandatory e-invoicing will be implemented is still being worked on. Any of the below models may be adopted:
- Clearance: invoices must be approved by the tax administration prior to exchange between trading parties;
- Real-time reporting: invoices must simultaneously and automatically be exchanged between trading parties and reported to the tax administration;
- Interoperability: invoices must be exchanged electronically directly between trading parties, and the engaged software vendors will report the underlying data to the tax administration.
How to prepare for this change
Businesses in Saudi Arabia should begin to prepare now by conducting an impact assessment of the new e-invoicing rules and of their readiness to comply with the new requirements.
The global trend of digitalization of business processes is accelerating and first movers in the adoption of these technologies benefit from a distinct competitive advantage. Why not take advantage of this opportunity to re-evaluate and fully digitalize your own processes? Starting with e-invoicing, you can provide your customers with frictionless commerce and you can gain access to real-time data, business insights and competitive intelligence. And the best part: the solution will pay for itself very quickly.
We can help you in your digital journey regardless of where you are starting from. We begin by assessing your readiness to comply with the new mandate. We then take care of the implementation of the e-invoicing solution for you, with the least amount of disruption to your business.
Beyond e-invoicing, businesses of all sizes can unlock the full potential of their digitalization through end-to-end automation. Our Business Ecosystem Automation (BEA) solution, compatible with over 200 ERPs, will not only help you be compliant, but also provide you with real-time visibility across all your business flows and generate a fast ROI on your investment. Business Ecosystem Automation enables you to take control of your processes through your entire business ecosystem: connecting you digitally with your clients, suppliers, logistics partners, as well as financial and public institutions. Business processes should do more for you than simply move your documents along for payment and billing ; they can create real value and competitive intelligence.
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