E-invoicing is mandatory in the Kingdom of Saudi Arabia. How to get compliant with this mandate.
In Saudi Arabia, E-Invoicing has become mandatory. So, it is helpful to understand expectations and next steps.
In light of the announcement of electronic invoice regulations by the General Authority of Zakat and Tax (GAZT) of Saudi Arabia (KSA). Here are some suggestions of steps businesses can adopt in advance of the new regulations coming into force.
Introduction to e-Invoicing Mandate:
GAZT released its final electronic invoice (e-invoicing) regulations in Arabic on the 4th of December, 2020. By December 4, 2021, it is mandatory for taxpayers who live in the country to have the ability to create, store, and edit electronic invoices.
The regulations outline the conditions, terms, and conditions for electronic invoices as well as electronic debit and credit notes. An electronic invoice type has not been identified. By January 1, 2023, the project should be completed.
It is vital to know that the regulations governing e-invoicing include all provisions that relate to tax invoices in the VAT legislation. Moreover, any violation could result in sanctions from GAZT.
The regulations also state that, in addition to these rules and VAT legislation, the Electronic Transactions Law of the Kingdom of Saudi Arabia applies to electronic notes and bills as well as electronic signatures.
In addition to the rules, GAZT has also published an electronic invoice guide as well as Questions and Answers.
What’s essential for e-invoicing in Saudi Arabia?
Businesses operating in Saudi Arabia need to take the following points into account:
- On or before December 4, 2021, all invoices will be issued electronically. We’re already there.
- By January 2023, taxpaying systems will be connected to GAZT’s system for sharing data.
- E-invoices must be sent in Arabic (additional languages are also acceptable).
- The provisions for electronic invoices apply to all supplies that are tax-deductible that are subject to the normal or zero rates of VAT, and also to residents and non-residents (i.e. for sales that are not in KSA).
What is the reason for the KSA government using E-invoicing?
The KSA government is currently implementing electronic invoicing for a variety of reasons. These are divided into two general categories: security and efficiency.
- E-invoicing improves the efficiency of transactions as it makes trade smooth, efficient, and leads to faster payment and lower costs, all while giving the government a better understanding of market conditions. It also facilitates fair competition, improves the competitiveness of businesses, and enhances consumer protection on the market which is in line with international best practices.
- From a security standpoint, e-invoicing enables the government to identify and limit the influence of the impact of the shadow economy. As well as tracking the flow of goods, services, and cash within a reasonable timeframe, depending on the system in place. This will lead to higher tax compliance rates, as well as more transparency regarding commercial transactions, and enable data-driven decisions.
What do we need to know more about e-invoicing in Saudi Arabia?
GAZT will release further details regarding the process of e-invoicing within the first 180 days following the publication of the regulations following above.
It will likely contain details regarding the nature and scope of the standardization
Invoices and notes need to follow a certain method.
A few countries that have implemented e-invoicing have used a less active approach, in which the supplier and buyer share e-documents directly (or via an access point) and the tax authorities set the rules for auditing and have access to the data.
Alternatively, in some countries, the tax authorities can monitor the process by sending electronic invoices to suppliers to report transactions, or they can check each invoice prior to delivery to the recipient (i.e. clearing models).
GAZT has indicated that it will use a two-phased approach to implement electronic billing.
Stages of e-Invoicing implementation:
The first stage suggests that companies should be able to produce and store tax invoices, as well as notes in an organized electronic format. This is issued by an electronic system that does not require direct communication with the tax authorities.
The next phase involves integrating the tax-paying individuals’ electronic solution, which generates electronic invoices, as well as notes in conjunction with GAZT’s systems. This suggests a shift towards a more clearing-based model. This implies that GAZT can facilitate the introduction of electronic invoices within KSA with a more direct model (without directly interacting between individuals who pay the tax and GAZT) while also shifting to an e-invoicing model that is more clearance-based, which will share data directly with the GAZT systems.
For a variety of reasons, invoices and transactions need to be approved, so firms should consider all options and scenarios.
What will be the next steps?
- The first step is to determine if the e-invoicing rules are applicable for them. That includes all VAT-taxable individuals, (except tax-paying non-residents). As well as any other entity that issues taxes on behalf of the supplier).
- Following this, all VAT taxable persons (except non-resident taxable persons).
The affected businesses must first conduct an assessment of the impact of the proposed regulations.
Requirement of E-Invoicing Guidelines and their compliance:
E-invoicing guidelines and their compliance require an assessment of the
- Analyze the impact of their POS, ERP, or billing systems and processes on electronic invoicing.
- Find out which transactions are appropriate (from both a sales and a purchase perspective);
- Examine the capability of the existing ERP providers and billing systems, to adapt their systems in compliance with e-invoicing requirements.
- Evaluate the possibilities of the systems (with their respective service providers). Connecting to GAZT can be simplified by integrating access points or systems with GAZT.
- Current ability to create all invoices in Arabic within the organization and within its systems. Changes that may be necessary to achieve the capabilities needed. Along with the indicative timeframes this process might need.
- Be aware that, upon the publication of any further technical guidelines issued by GAZT. It is possible that there will be additional actions to take for master data, reports. Hence, the actual implementation, design, and integration tasks needed.
How to Get Compliant:
In order to integrate the e-invoicing system (Fatoorah), businesses must implement the e-invoicing software Saudi Arabia required by ZATCA that can generate e-invoices. Absolute Solutions, an IT company in Riyadh, developed it. Ideally, this application should be able to generate e-invoices in both Arabic and English. It should also be capable of automating every step of the process.
This is where the e-invoicing software Saudi Arabia, comes into application. This software is capable for providing complete solutions for making your business compliant with the e-invoicing mandate by ZATCA. This software has the following benefits for your business.
- Effortless Integration of an e-invoicing system within your business.
- Efficient Invoice Processing.
- Automated billing system.
- End to End Compliance with ZATCA requirements.
- It is very user-friendly.
- It Supports Arabic and English Languages.
- Comes with a 24/7 Customer support service.
So, all you need is to contact the best IT Company in Riyadh, and get their e-invoicing application in Saudi Arabia, for your business. Complete Guidance and Support is provided throughout the integration process and after its completion.
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