On May 28th 2021, ZATCA (Zakat, Tax and Customs Authority), previously known as GAZT, published the final Resolution of Controls, Requirements, Technical Specifications, and Procedural Rules for Implementing the Provisions of the E-Invoicing Regulation in the Kingdom of Saudi Arabia. The scope of the mandate remains the same: all resident taxpayers subject to value-added tax (VAT), and other parties issuing tax invoices on behalf of the taxable supplier, need to comply with the e-invoicing system.
The most important change of the final resolution is that the “Integration” (Phase 2) has been postponed from June 2022 to January 2023. The deadline for Phase 1, “Generation and Archiving”, remains the same – December 4th 2021.
Phase 1: Generation and Archiving (December 4th 2021)
Taxpayers will be required to generate e-invoices (tax invoices and simplified tax invoices) in a structured XML format, according to the new content specifications, and store them electronically.
Mandatory steps in Phase 1:
- Updating or installing new invoicing systems;
- Adding QR codes to invoices;
- If registered for VAT, adding the buyer’s VAT registration number.
E-invoicing procedure in Phase 1:
- The seller issues and saves the invoice through an e-invoicing system that is compliant with the ZATCA requirements for Phase 1;
- The invoice must contain all the items required in a tax invoice;
- The buyer receives a copy of the invoice.
Phase 2: Integration and Clearance (January 2023)
Taxpayers will be required to be integrated with ZATCA’s e-invoicing platform.
- Tax invoices will follow the centralized pre-clearance approach, whereby the supplier first sends the invoice to ZATCA – who validates and applies the e-signature – before sending it to the buyer;
- Simplified tax invoices will follow the real-time reporting approach, whereby the supplier will have to apply its e-signature to the invoice before sending it to the buyer. The simplified tax invoice must then be reported to ZATCA within 24 hours of issuance.
For Phase 2, ZATCA will give notice to specific taxpayers or industries at least six months in advance.
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.
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