e-Invoicing Regulations in KSA have introduced the clearance and reporting systems of approval by the Zakat, Tax and Customs Authority (ZATCA) starting from 1st January 2023 (Second phase called ‘Integration’).
Both clearance and reporting of electronic invoices and electronic notes are required in different scenarios. This article covers details of the requirements that the taxpayers of Saudi Arabia must ensure to have complied before sharing e-invoices to buyers or customers. Otherwise, such e-invoices and electronic notes will be invalid under the law.
Clearance of e-invoices from the ZATCA is required for both the Business-to-Business (B2B) and Business-to-Government (B2G) transactions, also classified as non-simplified under VAT. It applies to standard invoices and related credit or debit notes issued by any VAT-registered resident taxpayers of Saudi Arabia subject to the e-Invoicing Regulations.
The taxpayers must declare and get B2B and B2G invoices cleared from the ZATCA via the API integration. Such real-time transaction integration must be between the compliant e-invoice solution and the ZATCA’s system, mandatory from 1st January 2023. One must note that the clearance process is not compulsory for invoices during the first phase of e-invoicing in KSA.
Electronic invoices are then verified for the set criteria. The ZATCA will approve and stamp such validated e-invoices, after which they will be returned to the taxpayer.
Following are the steps in the process of clearance of e-invoices and associated notes, starting from 1st January 2023-
Step 1: The supplier creates or generates an invoice on the e-invoice solution or platform in XML form.
Step 2: Such invoice is automatically transferred to ZATCA’s e-invoice portal through API integration. It requires a stable internet connection to do the same.
Step 3: The e-invoice portal then validates, puts stamp, adds the QR code and clears the e-invoices. It also intimates this to the supplier.
Step 4: The supplier shares the signed e-invoice with the buyer.
Step 5: Lastly, the supplier stores such e-invoices on his system or server.
The criteria looked into by the ZATCA to ‘clear’ e-invoices is listed below-
Reporting e-invoices to the ZATCA is needed for all the Business-to-Consumers (B2C) transactions, also classified as simplified invoices under VAT. It applies to electronically generated invoices and related credit or debit notes issued by any VAT-registered resident taxpayers of Saudi Arabia subject to the e-Invoicing Regulations.
It is mandatory to report simplified e-invoices and notes to the ZATCA’s e-invoice portal within 24 hours of its issuance. Such e-invoices must bear a cryptographic stamp instructed under the fourth clause of the e-Invoicing Regulations.
Such reporting of e-invoices must be done via integration directly with the ZATCA portal. It works as a near-real-time transaction system, which means it does not require immediate reporting to the ZATCA. The authority will verify it, acknowledge the simplified e-invoice and intimates the same to the supplier.
A compliant e-invoice solution must be used for generating simplified e-invoices as well. Further, these invoices should also adhere to the ‘Controls, Requirements, Technical Specifications and
Procedural Rules’ governing the implementation of the e-Invoicing Regulations, including any consequent resolutions.
The following are the steps in the process of reporting B2C invoices and related notes, starting from 1st January 2023-
Step 1: The supplier creates or generates an e-invoice and shares it directly with the customer.
Step 2: Such e-invoice must have the option for placing a QR code so that the customer can scan the same.
Step 3: The supplier shares or reports simplified e-invoice and notes to the ZATCA’s e-invoice portal within the applicable time limit of 24 hours of its issuance in XML form.
Step 4: Lastly, the supplier stores such simplified e-invoices on his system or server.
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