E-Invoicing in Saudi Arabia gearing towards First phase implementation.

Written By: Shahzeen Eram

Leading forward towards Vision 2030, Kingdom of Saudi Arabia has made massive moves towards digital transformation of all sectors of governance.  

Digitization as a growth enabler has powered every facet of the Saudi economy today.  Adding to the digitized infrastructure Saudi Arabia has introduced the E- invoicing system.

Greater emphasis with this has been drawn towards Kingdoms e- governance initiative for building   government institutions that are effective, transparent and accountable.

The Zakat, Tax and Customs Authority(ZATCA) issued the electronic invoicing (e-invoicing) regulations on 4 December, 2020 and further announced the mandatory implementation for resident taxpayers to be fully equipped to generate, store and modify tax e-invoices by 4 December 2021.

In accordance with Saudi vision 2030 digitalization, e-invoicing will add to the ease of doing business in assisting financial transactions moving towards paperless initiative and cashless transactions.

Moreover, it will encourage and improve productivity and make things simpler for entrepreneurs.

With barely 6 months from the first phase implementation of e- invoicing, businesses are gearing up to keep track of the regulations and guidelines issued by ZATCA before December 2021.  

ZATCA has laid out the implementation of e- invoicing in KSA to be realized in two phases. The first entails generating e-invoices containing the required data but does not yet require the full format.

First phase of implementation:

This stage will become effective on 4 December, 2021.

During this pending transitional period, businesses are required to adjust their invoicing systems and internal procedures in order to meet the e-invoicing requirements.

In practice, this means that within less than six months phase on of e-invoicing will become effective and obligatory on residents VAT Taxpayers.

The first phase lead to the generation of electronic invoices and related documents, including provisions related to their processing and record-keeping.

Second phase of implementation:

The second phase (the integration phase) includes the most advanced features of the e-invoicing concept, i.e., the transmission of electronic invoices and exchange with ZATCA.

For businesses that are already in compliance with VAT (Value Added Tax) and legislation as per Article 53 (6) of KSA Vat implementation regulation and KSA Electronic transaction law Article (5) the transformation process will be a smooth process.

The regulation says that Tax Invoices shall be issued in an electronic format in cases where this is prescribed in any regulations issued by the Minister of Finance or the Board of Directors surrounding the requirements and conditions for issue of electronic Invoices, provided these Regulations are in force as at the date of the Supply.

Taxpayers shall be able to generate tax invoices and simplified tax invoices, as well as related documents, such as credit and debit notes. Importantly, the first phase does not include a specific format requirement, which means that the electronic invoices and other documents will at least have basically the relevant content based on relevant tax regulations.

One reason for the introduction of the e-invoicing regime is that business operators will benefit from a streamlined invoicing process and more effective business operations.

With a vision of a comprehensive transformation by 2030, diverse reforms in laws, regulations and procedures in both public and private sector has been made in KSA to develop a competent monitoring mechanism for the trading and fiscal sustainability.

Following enforcment of the first phase, ZATCA will effectively move to the implementation of the second phase starting from 1st of January 2023, in phases. Where the Authority will notify the subjective taxpayer groups six months in advance. It is worth to mention that the second phase will additional technical features.