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

Yinghan Miao
September 25, 2018

This blog was last updated on March 11, 2019

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

North America Unclaimed Property
February 10, 2025
Delaware Announces 2025 VDA Invitation Dates

This blog was last updated on February 10, 2025 Mark your calendars – April 11, 2025 and August 15, 2025 are this year’s anticipated release dates for the Delaware’s Secretary of State (SOS) VDA program invitations. In the event that an organization receives an invitation to participate in the Voluntary Disclosure Agreement (VDA) program  , […]

North America Sales & Use Tax
February 6, 2025
The Tariff and Sales Tax Mishmash – Untying the Mess

This blog was last updated on February 6, 2025 Talk of tariffs dominates the current news cycle with some commentators suggesting that tariffs will spell disaster for our economy while others say the exact opposite. We’ve seen the stock market sometimes fluctuate as tariffs are announced but later suspended, leaving us to wonder whether an […]

retailer dtc wine shipping
North America ShipCompliant
February 6, 2025
Retailer DtC Wine Shipping: The Time Has Come

This blog was last updated on February 6, 2025 By Tom Wark, Executive Director, National Association of Wine Retailers We are often reminded by the media and those in the wine industry—as well as by wine enthusiasts—that the three-tier system of alcohol distribution in most states hinders consumer access to the expansive number of wines […]

Montana 1099-DA
North America Tax Information Reporting
February 5, 2025
State Filing Alert: Montana’s New 1099-DA Requirements for Crypto Brokers

This blog was last updated on February 5, 2025 Reporting digital asset transactions on Form 1099-DA just got a little more complicated. For 2025 transactions, crypto brokers that file Form 1099-DA with the IRS will be required to file the 1099-DA with the State of Montana. This makes Montana the first state to introduce a […]

North America ShipCompliant
January 23, 2025
DtC Wine Shipping in 2024: A Year-in-Review

This blog was last updated on January 28, 2025 The direct-to-consumer (DtC) wine shipping channel faced a storm of challenges in 2024, navigating some of the toughest market conditions in over a decade. As inflation tightened wallets and consumer behaviors shifted, the industry recorded its steepest declines in shipment volume and value since the inception […]