Saudi Arabia: From no VAT to promoting a centralised e-invoicing solution – what’s next?

Yinghan Miao
September 25, 2018

Following the introduction of the brand-new Value Added Tax (VAT) regime in January 2018, the Kingdom of Saudi Arabia has also started promoting a national electronic invoicing platform called ESAL. This is a joint effort between the Saudi Arabian Monetary Authority (SAMA) and the General Authority of Zakat and Tax (GAZT). These measures are in response to the low oil price of recent years, as well as the increasing levels of tax evasion in the country.

This national e-invoicing platform aims to provide suppliers and buyers with a single point to where eInvoices can be sent, received and processed. By building ESAL’s e-invoicing platform on top of an existing e-bill payment service called SADAD – which facilitates connections between businesses and Saudi Arabian banks – the aim is to also provide a “single source of truth between suppliers and buyers”. More importantly, the platform facilitates communication channels for suppliers and buyers for invoicing processes, including real-time notification and technical means for rejection and approval of eInvoices.

As Saudi Arabia has relatively strict record-keeping rules that require taxpayers to store invoices locally in the Kingdom, it is not surprising to see that the platform also provides an eInvoice archiving facility for the transacting parties. This functionality will further enhance the tax record centralisation and localisation in the country.

By establishing such a platform, the tax authority aims to monitor business activities and track billing and invoicing status to ensure better collection of VAT and reduce tax evasion. Although it is a platform involving only suppliers and buyers – and while there has so far been no indication of real-time clearance of transaction data in the invoicing process – using this platform would, of course, imply a certain level of compliance under the invoicing requirements set out in the Saudi Arabian VAT law. What we have seen in past years is that in countries where there is a centralised e-invoicing solution provided by government authorities either for public procurement invoicing or for businesses to use on a voluntary basis, such systems could be the basis for future e-invoicing mandates and the entering point for government clearance.

As one of the two members that implemented VAT and relevant technical measures in a timely manner following the Gulf Cooperation Council (GCC) VAT Framework Agreement, Saudi Arabia could be the key indicator of the future trend of VAT control in the GCC.

Take Action

Discover more about how Sovos enables companies to stay ahead of the digital transformation of tax.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Author

Yinghan Miao

Yinghan Miao is a Regulatory Counsel at Sovos TrustWeaver. Based in Stockholm and originally from China, Yinghan’s background is in law and IT with a professional focus on international tax law, tax compliance, and cyber security. Yinghan earned her degree in Law in China and her masters in Law and IT from Stockholm University in Sweden.
Share This Post

Asia Pacific Tax Compliance VAT & Fiscal Reporting
January 21, 2020
China: Draft VAT Law Review

The Ministry of Finance and the State Taxation Administration are pressing ahead with China’s VAT reform having issued a Consultation Draft of the VAT law of the People’s Republic of China on 27 November 2019.  It called for feedback from the public and other interested stakeholders. This draft law aims to consolidate the reforms and […]

ShipCompliant
January 20, 2020
BevAlc Roundup | California Proposes Expanding Bottle Bill Rules, Opportunity in a Slowing-Growth Market, and Looking Back on Prohibition

2020 marks 100 years since the start of the Prohibition Era (the Volstead Act, which implemented the 18th Amendment, and prohibited the sale and production of any product with more than 0.5 percent ABV, came into effect on January 17, 1920). As such, there has been a lot of coverage in the media of this […]

Tax Compliance Tax Information Reporting United States
January 14, 2020
See the Latest IRS FY19 Updates on Crypto and Gig Economy Enforcement

The IRS commissioner Chuck Rettig issued the agency’s FY19 updates last month, which included updates on compliance and education initiatives aimed at the emerging gig and crypto industries.   Publication 5382 was released in December to provide taxpayers with updates on the IRS’  FY19 goals. Of the six goals discussed in the report, goal two promised […]

E-Invoicing Compliance EMEA Italy
January 14, 2020
A New Countdown to NSO – Italy’s Electronic Purchase Orders Platform

On 27 December 2019, the Italian government issued a decree delaying and establishing new dates for when the NSO platform would go live.  The Purchase Orders Routing Node platform (Nodo di Smistamento degli Ordini, NSO) had initially been scheduled to be effective on 1 October 2019. The NSO is the Italian government owned platform through […]

EMEA VAT & Fiscal Reporting
January 14, 2020
Recent Developments: Complex Reporting Requirements in the European Union

Digital tax reporting requirements have arrived and are here to stay.  As the global VAT gap continues to grow (estimated to be as high as half a trillion EUR), countries are increasingly using complex reporting requirements to gain insight into VAT activities.  In this rapidly changing environment, it’s of utmost importance for companies to ensure […]