Update: 24 October 2022 by Dilara Inal
Phase two of Saudi Arabia’s e-invoicing system rollout is fast approaching. See below for details about the timeline and the requirements for the integration stage of implementation.
Implementation will begin in January 2023 and taxpayers will need to issue and submit e-invoices in a specific format.
The first wave of implementation will cover taxpayers with an annual turnover of 3 billion riyals (approximately 800 million USD) or more for the 2021 period.
Phase 2 is planned as a gradual implementation, and taxpayers cannot choose to voluntarily implement the continuous transaction system (CTC) system.
Taxpayers who are in the scope of the first wave are notified by the tax and customs authority (ZATCA) about their obligations under phase 2 – these obligations start six months after this notification, even though the official date has been announced as 1 January 2023.
Firstly, all invoices must be issued in UBL 2.1 format. B2B invoices are subject to a CTC clearance regime, whilst B2C invoices are reported to the tax authority within 24 hours.
Under the new regime, B2B invoices can only be sent to the buyer after the tax authority’s approval which gives legal validity to invoices.
Each invoice must be generated in a single sequence and include a hash value computed from previous invoices’ elements. This hash function ensures that invoice data isn’t modified or tampered with.
Also, an invoice counter value and a globally unified identification number (UUID) must be included. The QR code is generated by ZATCA during the clearance of an invoice, and it must be shown in case B2B and B2G invoices are sent to the buyer in human-readable form. For B2C invoices, the QR Code is generated and applied by the taxpayer during issuance of the invoice. In addition, self-billing is permitted for domestic B2B transactions and the invoice must contain a statement declaring it is self-billed.
Taxpayers who are yet to be notified by ZATCA for phase 2 implementation should continue to comply with phase 1 requirements without any change.
We advise all taxpayers to follow upcoming updates to ensure they are prepared for phase 2’s complex requirements. Considering the impact of this CTC regime, other e-invoicing initiatives are expected to be implemented in the Gulf region in the near future
Still have questions about Saudi Arabia’s e-invoicing phase 2 implementation? Speak to our tax experts.
Update: 30 May 2022 by Selin Adler Ring
Saudi Arabia´s e-invoicing system is being rolled out in two phases; the second phase’s requirements differ from the first phase. The first phase started as of 4 December 2021 for all resident taxable persons. The second phase will go live on 1 January 2023, and the impacted taxpayer group has not yet been announced. However, the Zakat, Tax and Customs Authority (ZATCA) has made considerable progress in kicking off phase 2.
Phase 2 will introduce a Continuous Transaction Controls (CTC) regime in which e-invoices, electronic credit and debit notes will be transmitted to the ZATCA platform in real-time. A clearance regime is prescribed for B2B invoices, while B2C invoices must be reported to the tax authority platform within 24 hours of issuance. Therefore, ZATCA was expected to introduce its e-invoicing platform well in advance of the launch of phase 2.
As expected, the ZATCA recently announced the launch of an E-Invoicing Developer Portal (Sandbox). Users will use the Sandbox to simulate the integration with ZATCA’s platform and can access details on the APIs and other requirements through this platform upon registration.
ZATCA has proposed specific changes to e-invoicing rules. The proposed changes are under public consultation and interested parties may submit their feedback until 10 June 2022.
The changes aim to clarify some requirements (e.g. Cryptographic Stamp, hash, counter etc.) rather than introducing new ones.
The last clarifying changes to the e-invoicing rules are underway, and the developer portal has been launched. We’re now expecting ZATCA’s announcement of the taxpayer groups in the scope of the mandate and expect it to happen at least six months before the go-live date. As the ZATCA plans to roll out phase 2, there will be different timelines for different taxpayer groups. We expect this information within the coming months.
Need to ensure compliance with the latest CTC requirements in Saudi Arabia? Get in touch with Sovos’ team of tax experts.