The Zakat, Tax and Customs Authority (ZATCA) has implemented the provisions of e-Invoicing, effective from 4th December 2021. The taxpayers, currently registered under VAT in Saudi Arabia, are required to comply with them. This article attempts to highlight the regulations around data storage and archival requirements under these new provisions.
Data storage and archival, in general, relates to the storage of documents and information so that they can be used for reference in future. In terms of e-invoicing, it refers to the storage of e-invoices and their associated notes. The taxpayers are required to store such invoices to comply with the requirements set forth under the new e-Invoicing regulations implemented by ZATCA.
It is pertinent to ensure proper storage and archival of generated e-invoices as it helps in future reference in case of any disputes and litigations.
The ZATCA has formulated detailed requirements for record-keeping electronic invoices and their associated notes under its regulations and implementation guides. Let us look at them in detail:
1. Taxpayers must store data in a dedicated physical server within their premises or online through a cloud store. Such cloud stores should be in accordance with the e-invoicing solution used for the generation of e-invoices. Further, it should comply with the laws and regulations in KSA.
2. If the data is stored on the cloud, the data should be available for access through a direct link, which can be shared with ZATCA and other authorities on demand.
3. The e-invoicing solution used by taxpayers to generate e-invoices should allow taxpayers to export and save the invoices onto an external archival system.
4. The invoices stored must follow a naming convention consisting of VAT registration number, timestamp (date and time of generation of invoice) and invoice reference number.
5. The taxpayers are also required to comply with additional requirements related to data storage on the cloud specified by the National Cybersecurity Authority and any other applicable regulations or controls.
Taxpayers, subject to the e-invoicing regulation, might also be subject to ZATCA tax audit. In such cases, the ZATCA may appoint its auditors, and the taxpayers are required to cooperate with them by providing unrestricted access to the e-invoicing data.
This will enable the auditors to verify the compliances that the taxpayers must abide by, as mentioned in VAT legislation and e-invoicing regulations. Thus, taxpayers should ensure that the e-invoicing data was stored correctly and archived; otherwise, it may invite serious implications, especially during tax audits by the ZATCA.
The taxpayers may face serious challenges and issues, especially in the initial days of implementation. Some of the common issues faced by taxpayers are as follows:
1. The taxpayers may find it difficult to export the e-invoices for storage in case of bulk generation. This could be due to the inadequate capacity of the e-invoicing solution to handle bulk invoices. Thus, taxpayers need to ensure that an e-invoicing solution will be capable of handling bulk invoices.
2. The taxpayers need to ensure that they get uninterrupted access to e-invoicing solutions and online cloud services for smooth functioning. Thus, the network infrastructure should be strong enough, and entities should also have backup facilities.
3. The taxpayers might face serious threats from online frauds and cyber breaches. Thus, they should have strong firewalls and anti-virus software installed in their systems.
One solution for the above problem is finding a third-party service provider to manage the taxpayer’s data storage and archival process. However, even after outsourcing the invoice generation process to a third party, the taxpayer will remain responsible for any breaches and non-compliances.
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