E-invoicing is a requirement for all customers in the Kingdom of Saudi Arabia. How can I comply with this requirement?

Within Saudi Arabia, e-invoicing has become mandatory. It is therefore important to be aware of expectations and what to expect in the future.

In the wake of the announcement of electronic invoice regulations. That were made by The General Authority of Zakat and Tax (GAZT) of Saudi Arabia (KSA). Here are some suggested ways businesses can implement before the new regulations that will come into force.

Introduction to the e-Invoicing Mandate:

GAZT issued the final version of its electronic invoice (e-invoicing) regulations in Arabic on 4th December of 2020. On December 4, 2021, all taxpayers in the country will be able to create, save, and edit electronic invoices.

The regulations define the conditions of the terms and conditions, that apply to electronic invoices, as well as electronic credit and debit notes. 

It is crucial to understand that the laws governing e-invoicing contain all the provisions related to tax invoices within the VAT law. Furthermore, any infraction could trigger penalties from GAZT.

IT state that as well as these regulations and VAT laws the Electronic Transactions Law of the Kingdom of Saudi Arabia applies to electronic bills and notes and electronic signatures.

Alongside the guidelines, GAZT has also published an electronic invoice guide, as well as questions and answers.

What are the most important aspects of e-invoicing for Saudi Arabia?

Companies operating from Saudi Arabia need to consider the following factors:

  • By December 4th, 2021 All invoices will be electronically issued. The first step is already taken.
  • In January 2023, tax-paying systems will be linked to GAZT’s systems for sharing information.
  • E-invoices must be submitted by email in Arabic (additional versions are acceptable).
  • Electronic invoices are a requirement for all businesses. They apply to all tax-deductible purchases and are subject to the regular or zero rates of VAT, as well as to non-residents and residents (i.e. for sales that aren’t located in KSA).

What’s the rationale behind the KSA government utilizing E-invoicing?

The KSA government is currently working on electronic invoicing to address a range of reasons.  Efficiency and security are two broad categories of tax invoices.

  • E-invoicing increases the effectiveness of transactions since it helps make transactions smooth and efficient, results in quicker payment times and lower costs as well as gives the government an understanding of the current market conditions. It also promotes fair competition, enhances business competitiveness for firms, and enhances consumer security in the market, which is consistent with the best practices of international standards.
  • From a security perspective, e-invoicing allows the government to recognize and limit the effects of this shadow market. Additionally, it allows for tracking the movement of services, goods, and cash within a sensible timeframe, based on the system that is in place. This could lead to higher rates of tax compliance and also greater transparency in commercial transactions and allow data-driven decision-making.

Electronic invoices for Saudi Arabia what we need to know?

GAZT will announce further information about the procedure for e-invoicing in the initial 180-day period after the release of the rules as mentioned in the previous paragraph.

It will likely contain details regarding the nature and scope of the standardizationInvoices and notes need to follow a certain method.

Some countries that have embraced e-invoicing have employed a less proactive method, where buyers and sellers can share electronic documents directly (or through connecting points) and tax authorities determine the auditing rules and can access the information.

In some countries, tax authorities may inspect the process through electronic receipts of invoices sent to vendors to record transactions or examine each invoice before sending it to the receiver (i.e. clearing models).

However, Gazt has stated that it will introduce a two-phased system for e-invoicing implementation.

The stages of e-Invoicing implementation:

The first suggestion is that businesses are in a position to create and save tax invoices as well as notes in an organized electronic format. An online system for issuance of tax invoices. That doesn’t need direct communication with tax authorities.

The next step is to integrate the tax-paying citizens’ electronic solution, which creates electronic invoices as well being notes when integrated with GAZT’s system. This could lead to a shift towards the more clear-based model. This means that GAZT could facilitate the introduction of electronic invoices in KSA by using a more straightforward model (without directly interacting with people who pay the tax as well as GAZT) as well as shifting towards an e-invoicing software Saudi Arabia that is more clearance-based that will directly share information with GAZT systems.

There is a myriad of reasons, transactions and invoices require approval and therefore, businesses should think about every option and scenario.

What are the steps to follow?

  • First, find out whether the e-invoicing regulations apply to the business. This includes all VAT-taxed individuals (except tax-paying residents of other countries). Also, any other company that can issue tax on behalf of the provider).
  • After this everyone who is VAT taxable (except non-residents taxable).
    The affected companies must then evaluate the effect of the proposed regulations.

Guidelines for E-Invoicing and their conformity:

Guidelines for electronic invoices and their conformity will require an evaluation of the

  • Examine the effect of their ERP, POS, or billing systems and procedures on electronic invoicing.
  • Find out what transactions are appropriate (from both a sales as well as an acquisition viewpoint);
  • Review the capabilities of current ERP providers and bill systems, and adjust their systems to comply with the requirements of electronic invoices.
  • Examine the potential of the systems (with their provider of services). Connecting to GAZT can be made simpler by the integration of accessibility points and systems that work with GAZT.
  • Present capability to generate all bills in Arabic within the company as well as inside its system. Modifications that are required to attain the capabilities required. In addition to the timeframes indicative of the process may require.
  • Be aware that you will be notified upon the publication of any other technical guidelines by GAZT. Creation of master information reports will require additional steps. Therefore, the designing, working and integration needs to be completed.

How to Be Compliant:

To integrate the electronic invoice system (Fatoorah) companies must install the e-invoicing program in Saudi Arabia required by ZATCA which can create electronic invoices. Absolute Solutions, an IT company based in Riyadh has developed the software. It is ideal for this program to be able of generating electronic invoices in both Arabic as well as English. This software must automate every step involved.

That’s where software for e-invoicing located in Saudi Arabia, comes into application. The software is capable of offering complete solutions to make your company compliant with the electronic invoicing requirement set by ZATCA. This program has the following advantages for your company.

  • E-invoicing is a simple integration system into your company.
  • Efficient Invoice Processing.
  • An automated billing system.
  • End-to-End In compliance with ZATCA requirements.
  • It’s very user-friendly.
  • It supports Arabic as well as English Languages.
  • The product comes with 24/7 customer assistance.

The only thing you have to do is to reach the best IT Company in Riyadh And then, get their E-invoicing is a service for Saudi Arabia, to your business. During the integration process and afterwards, complete assistance as well as guidance will be provided.

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