Taxpayer's Obligations under e-Invoicing in KSA

e-Invoicing is a newly introduced invoicing system that aims to digitising invoices issued in the Kingdom of Saudi Arabia (KSA). Accordingly, the tax authority in Saudi Zakat, Tax and Customs Authority (ZATCA), implemented phase 1 of e-invoicing on 4th December 2021.

Also, it planned to implement phase 2 of e-invoicing in waves by dividing taxpayers into targeted taxpayer groups. Till now, ZATCA announced the below waves:

1. Wave 1 under phase 2: VAT-registered businesses in KSA with more than SAR 3 billion turnover in 2021 fall under wave 1 w.e.f 1st January 2023.
2. Wave 2 under phase 2: Businesses registered under KSA VAT, having more than SAR 500 million turnover in 2021, fall under wave 2 w.e.f 1st July 2023.

Though the e-invoicing process is online, taxpayers must take care of many e-invoicing obligations. This article lists such obligations announced under KSA e-invoicing. 

Applicability of e-Invoicing in Saudi Arabia

To understand e-invoicing obligations, it is essential to understand their applicability. e-Invoicing regulations are applicable to-

• All resident taxpayers who are subject to Value Added Tax (VAT) under current regulations
• Others issuing tax invoices on behalf of the VAT registered suppliers

 e-Invoicing is applicable to the following supplies:

1. Supplies that are subject to standard VAT rate and zero VAT rate
2. Export of goods from Saudi Arabia
3. Intra-GCC supplies as per the Agreement, VAT Law and VAT Implementing Regulation
4. Nominal supplies as per the Agreement, VAT Law, and VAT Implementing Regulation
5. Advances received before the actual supply of goods or services

However, Zakat, Tax and Customs Authority (ZATCA) has exempted the following transactions from e-invoicing:

1. Exempted supplies or payments received on them
2. Taxable supplies are subjected to a reverse charge mechanism
3. Import of goods into the KSA

Obligations of the Taxpayers Subject to the e-Invoicing Regulations

There are certain e-invoicing obligations that all 

VAT-registered taxpayers need to adhere to under the new e-invoicing regime in the Kingdom of Saudi Arabia (KSA).

1. VAT-registered taxpayers must generate all invoices in electronic form w.e.f. 4th December 2021, using a compliant e-invoicing solution. 
2. Also, once phase 2 (integration phase) begins, the applicable taxpayers must integrate with the Fatoora portal to clear the standard tax e-invoices before sharing them with the customers and report simplified tax e-invoices within 24 hours from the time of generation.
3. Taxpayers must comply with all the requirements under e-Invoicing Regulations, including technical specifications and other procedural requirements like having QR codes, UUID and other components on the invoice.
4. The taxpayers are also advised to comply with all the deadlines strictly. Thus, they must adopt a compliant e-invoicing solution and integrate with ZATCA well before the last date to implement phase 2.
5. The e-invoices and related Credit or Debit Notes (CDNs) generated need to be shared with the ZATCA in XML format.
6. Such e-invoices and related CDNs must be stored digitally for the period specified in VAT Regulations.

Additional Obligations for the Taxapyers Subject to the e-Invoicing Regulations

The e-invoicing applicable taxpayers must adhere to the following additional obligations:

1. Taxpayers need to notify the ZATCA in case of any incidents, technical error or emergencies which hinders their ability to generate e-invoices. Also, taxpayers must follow the procedures as determined by the ZATCA in such cases.
2. Taxpayers should not be using an e-invoicing solution that is not compliant with the specifications and requirements specified in the guidelines.
3. Taxpayers must register the e-invoice solutions used for generating standard or simplified tax invoices and related CDNs with ZATCA.
4. The Cryptographic Stamp Identifiers and their associated components, which are mandatorily required on e-invoices, must be preserved safely to protect them from copying or illegal usage and should be strictly used for intended purposes only.
5. Under Phase 2, which commenced in January 2023, the taxpayers must integrate their ERP/billing/POS systems with the ZATCA’s system to generate e-invoices.

Also, the taxpayers falling under e-invoicing are subject to ZATCA tax audit. The taxpayer should cooperate with ZATCA auditors and provide them with all the data required to check compliance with VAT legislations, e-Invoicing  Regulations and other related resolutions.

There might be other e-invoicing obligations that the ZATCA may intimate from time to time. Thus, taxpayers need to keep themselves up to date with such amendments.