The General Authority of Zakat and Tax’s (GAZT) previously published draft rules on ‘Controls, Requirements, Technical Specifications and Procedural Rules for Implementing the Provisions of the E-Invoicing Regulation’ aimed to define technical and procedural requirements and controls for the upcoming e-invoicing mandate. GAZT recently finalized and published the draft e-invoicing rules in Saudi Arabia.
Meanwhile, the name of the tax authority has changed due to the merger of the General Authority of Zakat and Tax (GAZT) and the General Authority of Customs to form the Zakat, Tax and Customs Authority (ZATCA).
The finalised rules include a change to the go live date of the second phase from 1 June 2022 to 1 January 2023. They revealed the time limit to report B2C (simplified) invoices to the tax authority´s platform for the second phase.
According to the final rules, the Saudi Arabia e-invoicing system will have two main phases.
Saudi Arabia E-Invoicing System: The First Phase
The first phase begins on 4 December 2021 and requires all resident taxpayers to generate, amend and store e-invoices and electronic notes (credit and debit notes).
The final rules state businesses must generate e-invoices and their associated notes in a structured electronic format. Data in PDF or Word format are therefore not e-invoices. The first phase does not require a specific electronic format. However, such invoices and notes must contain all necessary information. The first phase requires B2C invoices to include a QR code.
There are a number of prohibited functionalities for e-invoicing solutions for the first phase:
- Uncontrolled access
- Tampering of invoices and logs
- Multiple invoice sequences
Saudi Arabia E-Invoicing System: The Second Phase
The second phase will bring the additional requirement for taxpayers to transmit e-invoices in addition to electronic notes to the ZATCA.
The final rules state the second phase will begin 1 January 2023 and will be rolled-out in different stages. A clearance regime is prescribed for B2B invoices while B2C invoices must be reported to the tax authority platform within 24 hours of issuance.
As a result of the second phase requirements, the Saudi e-invoicing system will be classified as a CTC e-invoicing system from 1 January 2023. All e-invoices must be issued in UBL based XML format. Tax invoices can be distributed in XML or PDF/A-3 (with embedded XML) format. Taxpayers must distribute simplified invoices (i.e. B2C) in paper form.
In the second phase, a compliant e-invoicing solution must have the following features:
- Generation of a Universally Unique Identifier (UUID) in addition to the invoice sequential number
- Tamper-resistant invoice counter that increments for each invoice and electronic note issued
- Contain some functionalities which enable taxpayers to save e-invoices and electronic notes and archive them in internal and external archive
- Generation of a cryptographic stamp for each e-invoice or electronic note
- Generating a hash for each generated e-invoice or electronic note
- Generation of a QR code
The second stage will furthermore bring additional prohibited functionalities for e-invoicing solutions on top of requirements mentioned in the first phase:
- Time change
- Export of stamping key
What’s next for Saudi Arabia’s e-invoicing system?
After publishing the final rules, the ZATCA is organising workshops to inform relevant stakeholders in the industry.
Some of the details remain unclear at this point, however the Saudi authorities have been very successful in communicating the long-term goals of the implementation of its e-invoicing system, as well as making clear documentation available and providing opportunities for feedback on the documentation published for each phase. We expect provision of the necessary guidance within the near future.
Contact us to discuss your Saudi Arabia VAT requirements. In addition, to find out more about what we believe the future holds, download VAT Trends: Toward Continuous Transaction Controls.