e-Invoicing Regulations in Saudi Arabia

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08 min read.

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e-Invoicing regulations are published by the Zakat, Tax and Customs Authority (ZaTCA), erstwhile called the General Authority of Zakat and Tax (GAZT). It is issued for implementing the electronic invoicing system or Fatoorah in the Kingdom of Saudi Arabia (KSA), starting from 4th December 2021. 

Overview of e-Invoicing Regulations in the KSA

GAZT, now known as ZaTCA, issued the draft e-Invoicing Regulations in KSA in March 2021. The authority allowed the public and stakeholders to provide their feedback on the eInvoicing Regulations on or before 17th April 2021. The e-Invoicing Regulations were finally published on 28th May 2021.

Additionally, draft rules for requirements, controls, technical specifications, and procedures were published to effectively implement the e-Invoicing Regulations in KSA. Further, Electronic Invoice XML Implementation Standard, Electronic Invoice Data Dictionary, and Electronic Invoice Security Implementation Standards have also been hosted on the official portal of the ZaTCA.

The e-Invoicing Regulations in KSA have six Articles that range from Article Two to Article Seven. These Articles cover the scope, applicability, definitions, power to issue technical and procedural rules, and enforcement of e-Invoicing Regulations in KSA, explained in further sections.

The first phase of e-invoicing in the KSA (Fatoorah)

The first phase of the e-invoicing system begins on 4th December 2021, covering all the resident taxpayers. The deadline calls for generation, processing and storing e-invoices and electronic debit and credit notes in a particular manner outlined by the e-Invoicing Regulations in KSA. 

Even though no standard format is prescribed for electronic invoices and electronic notes during the first phase, certain invoice information must be mandatorily part of electronic invoices and electronic notes. The e-invoice solution should adhere to specific parameters for the electronic invoice and electronic notes to be e-Invoicing compliant in KSA.

The second phase of the e-invoicing system in the KSA

The second phase of the e-invoicing system begins on 1st January 2023. Earlier, this was set to 1st June 2022. During this phase, certain resident taxpayers must also integrate their invoicing or billing systems with the system of ZaTCA using the Application Programming Interface (API). 

The resident taxpayers having Business to Consumers (B2C), Business-to-business (B2B) and Business-to-Government (B2G) transactions must transmit those electronic invoices and notes to the ZaTCA for verification and approval. With this, the Saudi e-invoicing system will be labelled as a Continuous Transaction Controls (CTC) e-invoicing system from 1st January 2023 to provide a legal tag to every e-invoice. The second phase of Fatoorah will be implemented group-wise, and the selected group of taxpayers will be notified six months in advance to get ready.

Saudi taxpayers have about three more months left to adopt, test and implement the e-invoicing system.

Article Two: Purpose and scope

The purpose of the e-Invoicing Regulations is to recognise the terms, conditions and requirements of the electronic invoices for Value Added Tax (VAT) purposes as per Article (53) of the VAT Implementing Regulation. 

e-Invoicing Regulation shall be a core part of the VAT Implementing Regulation and supports the objective of it.

Article Three: Persons subject to this regulation

The following persons are subject to the e-Invoicing Regulations in KSA: 

  • The taxable person, being a resident in the Kingdom. 
  • The customer or a third party person who issues tax invoice on behalf of the resident taxable person as per the VAT Implementing Regulations. 

Such persons must issue electronically generated invoices for all their transactions requiring tax invoices. Further, it applies to electronic notes such as debit notes or credit notes, wherever required by the VAT law and its Implementing Regulation. 

The e-Invoicing Regulation in KSA also clarifies that persons not being residents in the KSA need not issue electronic invoices or electronic notes for supplies or amounts received that are taxable in the Kingdom. In other words, invoicing for cross-border transactions or people non-resident for VAT purposes is not subject to this regulation.

Article Four: Provisions related to electronic invoices and electronic notes

The electronic invoices and electronic notes raised under this regulation are tax invoices, credit, and debit notes in line with the VAT law and its implementing regulation. Therefore, all provisions that apply to tax invoices, credit, and debit notes shall also apply to electronic invoices and notes inclusively.

Some of the specific provisions of VAT that apply to electronic invoices and notes are as follows:

  • Fines and penalties as per Chapter (16) of the VAT law.
  • Contents of tax invoices and simplified tax invoices as per article (53) of the VAT Implementing Regulations.
  • Manner of issuing debit and credit notes provided in article (54) of the VAT Implementing Regulations.
  • Record keeping and invoice issue provisions as stated in article (66) of the VAT Implementing Regulations.

The rules regarding electronic signature and proof of electronic transactions as outlined in the Electronic Transactions Law of the KSA continue to apply here, subject to any exceptions given in these regulations.

The Governor may issue additional rules for defining the contents of the electronic invoices and notes.

Article Five: Technical specifications and procedural rules

e-Invoicing solutions refer to the hardware, software, integration routes, networks, etc. The following are technical specifications regarding the e-invoicing solutions to be used by the applicable resident taxpayers for electronic invoicing in KSA.

  • Such a technical solution or the e-invoicing solution should be able to connect to the internet.
  • The e-invoicing solution must be tamper-proof and must have a trail to detect any kind of tampering by taxpayers or any other person.
  • Such a technical solution or the e-invoicing solution should be able to connect with external systems using API.
  • The e-invoicing solution should adhere to all the controls and specifications on data or information security applied in the KSA.

The Governor may issue additional technical rules for processing, transmission, and storing electronic invoices and notes.

Article Six: General provisions

The Governor can define the time limits and targeted groups. It can also notify the essential decisions and instructions to implement the provisions of the e-Invoicing Regulation in the KSA. 

The Governor may issue the requirements, controls, and procedures for integrating the electronic invoicing systems within a maximum of 180 days from publishing the e-Invoicing Regulations in the Official Gazette, i.e., 28th May 2021. The Governor can also define the time limits that precede the obligation to perform the integration requirements.

Article Seven: Enforcement and obligation

These regulations shall come into effect from the publication date in the Official Gazette. All resident taxpayers are given 12 months (of a calendar) from its publication date in the Official Gazette to implement these provisions, i.e., 28th May 2021.

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