Impact of e-Invoicing on Third-Party Billing in KSA

Self-billing and third-party billing are two types of invoicing methods prevalent in the Kingdom of Saudi Arabia (KSA). This article explains the impact of e-invoicing on third-party billing.

What is third-party billing?

It is an invoicing mechanism where a third party issues invoices on behalf of the registered VAT seller. This third party can be any accounting or other professional firm that fulfils certain criteria specified under VAT legislation.

How does third-party billing work under e-invoicing

The third-party billing mechanism remains intact under the new e-invoicing regime. However, the e-invoices by the third party need to contain an electronic marker, indicating the invoice is issued by a registered third party. However, this electronic marker will not be visible on the human-readable version of the e-invoice.

Requirements for third-party billing

A VAT-registered seller, who has outsourced its billing process to a third party, must keep the following points in mind:

1. e-Invoices should be issued only for taxable supplies on behalf of a seller who is duly registered under VAT Regulations.
2. The Tax Identification Number (TIN) of the VAT-registered seller should be appropriately disclosed upon the e-invoice in a manner that distinguishes the TIN of the third party from that of the seller.
3. Any e-invoice issued by a third party should contain a statement stating that the invoice is issued on behalf of the seller.
4. Two invoices cannot be issued for the same supply. If the third party has already issued the e-invoice under its name, then no further e-invoice can be raised for the same supply under the seller’s name.
5. The contract for e-invoices between the seller and third party should be notified to the ZATCA Authority as per the specified procedure. If the Authority rejects the same, then any e-invoice issued by a third party on behalf of the seller shall be void.

Liability for e-invoices

It is the responsibility of the VAT-registered seller to ensure that the details issued in the e-invoice are valid. Also, the liability to deliver goods and services to buyers and deposit VAT collected to the authorities is the sole responsibility of the VAT-registered seller. Apart from issuing e-invoices on behalf of the seller, the third party will not have any involvement in the underlying supply of goods and services. If any fake or incorrect details are provided in the invoices, the seller shall be solely responsible for the same.

Example for third-party billing under e-invoicing

Al Raseem Co. Ltd., a leading online bookselling company in the Kingdom of Saudi Arabia, has outsourced its invoicing process to a CPA firm- Al Nakheem. For all the online sales, invoices are issued by Al Nakheem to buyers on behalf of Al Raseem. All such e-invoices should appropriately reflect the TIN of Al Raseem and contain a statement saying that invoices are issued on behalf of Al Raseem Co. Ltd. The e-invoice, generated through an identified generation utility, will contain an electronic marker, which will not be visible to human eyes.