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Saudi Arabia CTC Requirements
Understand more about Saudi Arabia’s continuous transaction controls including when businesses need to comply, phase one and two compliance and how Sovos can help.
Saudi Arabia - E-Invoicing
Saudi Arabia leads the way to continuous transaction controls in the Gulf
Saudi Arabia e-invoicing from December 2021
Saudi Arabia introduced an e-invoicing regime with a phased approach in December 2021. Having only introduced VAT on 1 January 2018, the country is already leading the way in digitizing tax compliance in the Gulf Region.
According to the finalised rules published by Saudi Arabia’s tax authority, Zakat, Tax and Customs Authority (ZATCA) the go-live date of the second phase is 1 January 2023.
In addition to other requirements, Phase 2 also introduced integration with a digital ZATCA platform for continuous transaction controls (CTCs), requiring taxpayers to clear invoices ahead of transmission to buyers.
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Mandate Quick Facts
Phase 1 – Mandatory e-invoicing generation with post audit controls: Started on 4 December 2021
- Applies to all resident taxable persons in Saudi Arabia.
- Requires taxpayers to generate, amend and store e-invoices and electronic notes (credit and debit notes) across B2B, B2C and B2G transactions, including exports.
- Businesses must generate e-invoices and their associated notes in a structured electronic format.
- Electronic invoices and notes must contain all necessary information.
- Any structured electronic format permitted.
- B2C invoices must include a QR code.
- All invoices must contain a time stamp.
- Integrity of e-invoices is explicitly required.
- Storage requirements same in Phases 1 and 2. Must be archived in a system or server that is physically located within the territory of Saudi Arabia. Upon meeting certain additional requirements, taxpayers who have a subsidiary in Saudi Arabia may have their central computer systems located outside Saudi Arabia.
- Suppliers must store e-invoices in a structured format regardless of how they’re exchanged with buyers.
- Certain prohibited functionalities for e-invoicing solutions.
Phase 2 – CTC regime: Started on 1 January 2023, requiring taxpayers to transmit e-invoices in addition to electronic notes to tax authority ZATCA for clearance
- A phased implementation approach based on taxpayers’ revenue.
- Voluntary participation in Phase 2 before the taxpayer’s enforcement date arrives.
- B2B invoices operate under a clearance regime, while B2C invoices must be reported on ZATCA’s platform within 24 hours of issuance.
- All e-invoices must be issued in the mandatory XML format.
- Tax invoices can be sent in XML or PDF/A-3 (with embedded XML) to buyers. B2C invoices must be presented in paper form. However, based on mutual agreement by the parties, B2C invoices can be shared electronically or through any other way where the buyer can read it.
- A compliant e-invoicing solution must have the following features:
- Generation of a universally unique identified (UUID) plus invoice sequential number.
- Tamper-resistant invoice counter.
- Some ability to save and archive e-invoices and electronic notes.
- Generation of a cryptographic stamp for B2C invoices, a hash, and a QR code for each e-invoice and electronic note.
Important dates for e-invoicing in Saudi Arabia
Phase 1: 4 December 2021 – All resident taxable persons in the Kingdom to generate, amend and store e-invoices and electronic notes (credit and debit notes).
Phase 2: 1 January 2023 – Additional requirements for taxable persons to transmit e-invoices and electronic notes to the ZATCA. It will be a phased adoption starting with larger companies, with more gradually coming into the scope of the mandate. Companies can expect six months’ notice before the deadline by which they must comply.
How Sovos can help
Need help to ensure your business is VAT compliant in Saudi Arabia? Sovos serves as a true one-stop-shop for managing all e-invoicing compliance obligations in Saudi Arabia and across the globe. Sovos uniquely combines local expertise with a seamless, global customer experience.