Over the past decade, the Middle East region has undergone impactful financial and fiscal changes. VAT was introduced as one of the solutions to prevent the impact of decreasing oil prices on the economy after the region’s economic performance started to slow down.
After realising the benefits of VAT to the economy, the next step for most governments is to increase the effectiveness of VAT controls. Currently, most Middle Eastern countries have VAT regimes in place. Like many countries, Middle Eastern countries are paving the way to introduce continuous transaction controls (CTC) regimes to achieve an efficient VAT control mechanism.
E-invoicing in the Middle East
Saudi Arabia is leading the way, introducing its e-invoicing system in 2021. This e-invoicing framework, in its current form, doesn’t require taxpayers to submit VAT relevant data to the tax authority in real-time. However, that is about to change, as the Saudi tax authority will enforce CTC e-invoicing requirements from 1 January 2023. This means that taxpayers will be required to transmit their invoices to the tax authority platform in real-time. More details on the upcoming CTC regime are expected to be published by the ZATCA.
The introduction of the CTC concept in Saudi Arabia is expected to create a domino effect in the region; some signs already indicate this. Recently, the Omani tax authority issued a request for information that revealed their plans to introduce an e-invoicing system. The tax authority’s invitation to interested parties stated that the timelines for implementing the system have not been set yet and could involve a gradual rollout. The objective is to roll out the e-invoicing system in a phased manner. The e-invoicing system is expected to go live in 2023 on a voluntary basis and later on a compulsory basis.
The Bahrainian National Bureau for Revenue (NBR) has made similar efforts. The NBR requested taxpayers to take part in a survey asking the number of invoices generated annually and whether taxpayers currently generate invoices electronically. This development signals upcoming e-invoicing plans – or at least a first step in that direction.
In Jordan, the Ministry of Digital Economy and Entrepreneurship (MODEE) published a “Prequalification Document for Selection of System Provider for E-Invoicing & Integrated Tax Administration Solution” that was, in fact, a request for information. The tax authority in Jordan previously communicated its goal to introduce e-invoicing. As the recent developments suggest, Jordan is moving closer to having an up and running platform for e-invoicing which will likely be followed by legal changes in the current legislation concerning invoicing rules.
The global future of CTCs
The overall global trend is clearly toward various forms of CTCs. In recent years, VAT controls and their importance and the advantages presented by technology have changed the tax authorities’ approach to the digitization of VAT control mechanisms. As governments in the Middle East countries are also noticing the benefits that the adoption of CTCs could unlock, it’s reasonable to expect a challenging VAT landscape in the region.