Proposed Amendments to Saudi Arabia’s VAT Implementation Regulations (VATIR): What is Changing?

The Saudi Authorities are proposing changes to the VAT Implementation Regulations (VATIR). The proposed changes are open to public consultation, with interested parties able to submit their opinions until 23 October 2021.

Why are changes being proposed to VATIR?

According to the Zakat, Tax and Customs Authority (ZATCA), the changes aim to harmonise e-invoicing related provisions and requirements with the VATIR. The VATIR is a secondary legislation that describes the application of VAT Law provisions in detail.

Considering that the VATIR was drafted before the e-invoicing regulation and includes provisions relating to both paper and electronic invoices, proposed amendments were expected to the changes related to e-invoicing rules. This is an indication that the ZATCA, having learned from the roll-out of the tax reform, is preparing to resolve any potential issues and adapt processes where needed to ensure a complete and well-rounded framework.

What is changing?

The proposed changes are made to a few key articles of the VATIR.

Article 53 sets forth the rules relating to “Tax Invoices”. The proposed amendments made in this article are expanding the scope of instances which require the issuance of a tax invoice by counting more cases (e.g. interstate supplies, export of goods and services), changing rules relating to self-billing and third-party issued invoices, summary invoices, the instances in which a simplified invoice can be issued and the issuance time for a simplified tax invoice. The addition of a new paragraph 10 gives ZATCA the authority to exempt certain taxpayers from the scope of e-invoicing.

Article 54 envisages rules relating to “Credit and Debit notes”. The proposed changes target requirements relating to issuance and content of credit and debit notes.

Article 66 prescribes rules relating to the concept of “Records” with the introduction of two new clauses. The first clause states that: “The final accounts and the balance sheet may be extracted directly from the computer. In the event that the traditional computer-assisted accounting method is used in some accounting items, all settlement entries must be available in Arabic.” The second clause states that taxable persons subject to the e-invoicing regulation must retain their invoices in accordance with the e-invoicing regulation.

These amendments mean that taxpayers should be prepared to make necessary process changes for issuing tax invoices, credit and debit notes and the storage of these documents in accordance with the relevant storage rules.

What is next for the VATIR?

After reviewing the feedback received on the proposed amendments, the ZATCA will take those into consideration and finalise the changes. After that, an amended version of the VATIR will be published. Saudi Arabia is going through a VAT digitization process and therefore, the rules relating to VAT and VAT controls are also evolving. Further developments and changes concerning VAT can be expected in Saudi Arabia especially after the e-invoicing system goes live on 4 December 2021.