Issuing an electronic bill in the Kingdom of Saudi Arabia

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What is the meaning of issuing an electronic invoice?

Electronic invoice issuance is the process of creating invoices in a digital format, so that you can issue and store them electronically. The Zakat, Tax and Customs Authority (ZATCA) in the Kingdom of Saudi Arabia has issued regulations requiring companies to adopt the electronic invoicing process.

For VAT taxpayers in Saudi Arabia, electronic invoices will be similar to VAT invoices that are generally issued, but will be generated through an online system. Note that a paper invoice that is copied or scanned is not an electronic invoice.

Once an electronic invoice has been issued, it cannot be edited. However, you can issue electronic notes (credit and debit notes that are VAT compliant and issued through an electronic system). It must be issued with reference to the original invoice that was issued. For example, if a buyer returns your product, you cannot change the original invoice, but you can issue a credit note through the electronic invoicing system.

All of your e-billing transactions and notes must be conducted through the same e-billing system, and must be in compliance with ZATCA regulations. This standardizes the way transactions take place, ensuring that everything is done uniformly and information is stored securely.

You will have to issue electronic invoices for sales made within the country, exports made from Saudi Arabia to other countries, and goods and services for which you have received advance payment. Electronic invoices are not required for VAT-exempt supplies and related payments, imports entering the Kingdom of Saudi Arabia, or supplies subject to the reverse charge mechanism.

Why is the electronic billing system introduced?

These regulations are published so that companies can operate more efficiently and safely both locally and internationally.

The ultimate goal of this step is to integrate your business data with the ZATCA system to make trading smoother and more transparent. The government can standardize the way invoices are reported to the system, in a common machine-readable format, while staying up-to-date on transactions being pushed to their online portal. Storage of handwritten papers and invoices will be phased out, and since all invoices will be documented on the ZATCA portal, fraudulent activities such as fake invoices can be detected.

Electronic invoices will also create a common database for audits. With this readily available information, the tax authorities will not need to conduct audits as frequently as before.

Other benefits of the electronic invoice issuance process For taxpayers:

  • Better experience for sellers and buyers: When invoices are issued quickly in real time, input tax credits will be processed faster.
  • Electronic data will be more secure and less prone to error than paper entries. With a proper system of validation of invoices, there will be less chances of fraud, which leads to fair competition and better trade.
  • The simplified electronic invoicing process reduces errors and additional hassle for business owners. Your workload is reduced, you get paid faster, and you can easily retrieve documents when they’re stored digitally.

To comply with the rules, it is imperative that every resident taxpayer be prepared for the bills. Here’s what you need to know about how VAT regulations in Saudi Arabia will affect you, and what you need to do going forward.

Guidelines for electronic billing in the Kingdom of Saudi Arabia

  • The provisions for electronic billing will apply to all taxable goods and services subject to VAT (whether standard or non-VAT).
  • All business owners registered for VAT (excluding taxable non-residents) in the Kingdom of Saudi Arabia who make sales inside and outside the Kingdom are required to adopt the electronic invoicing process. If you are a third party in Saudi Arabia issuing a tax invoice on behalf of a taxable person, you will have to adopt the electronic invoicing process as well. For example, an accounting firm that issues invoices on behalf of a textile seller will be responsible for these regulations.
  • Electronic invoicing is mandatory for all B2B transactions B2G and B2C. While issuing an electronic invoice to the buyer, you must provide a hard copy as well.
  • Invoices must be in Arabic. You can choose to translate it or add another language, but it is necessary to issue the electronic invoice in Arabic.

Two phases of electronic billing systems in the Kingdom of Saudi Arabia

  • Phase 1 (December 4, 2021): Issuance and storage of electronic invoices

From this date, as a taxpayer, you will have to issue and store electronic invoices and electronic notes instead of physical invoices and debit and credit notes.

In the first phase, you will need to start using an electronic billing system that has internet access and is ZATCA compliant. An electronic billing system can be an online cash register, electronic billing software installed on your computer, or a cloud-based electronic billing solution.

All mandatory items and fields of the tax invoice must be included while issuing the e-invoice, such as vendor name, VAT registration number, time of invoice issuance, total VAT, total value of the invoice including VAT.

In the first stage, you do not need to share data and report bills to ZATCA.

  • Phase II (January 1, 2023): Integration with the ZATCA system

This phase will be implemented in different phases for the target taxpayer groups. Starting January 1, 2023, you will have to integrate your e-billing solution with the ZATCA system in order to be able to send the generated e-invoices to the portal for verification and verification. Because this phase will affect different people at different times, you will be notified by ZATCA of the date of the merger at least 6 months before it affects you.

By this point, you will need to issue electronic invoices in specific formats (such as XML or PDF/A-3 format with XML embedded).

This stage will also have more technical requirements, so it is best to have a system that complies with ZATCA guidelines. Your system must be able to communicate with external systems using application programming interfaces (APIs), generate a universally unique identifier (UUID), a digital signature, and a serial number that identifies each electronic invoice, hash, and cryptographic seal. Your system should also have anti-tamper features.

These features are not mandatory for stage 1, but are necessary in stage 2.

See also:

Types of electronic bills

Tax electronic invoice (standard electronic invoice)

Tax electronic invoices are issued for transactions B2B and B2G, generally used to claim input tax deduction by buyers. In the first stage, these invoices should be shared with the buyers in the required format. In Phase 2, these invoices can only be shared with buyers after they have been stamped and cleared before ZATCA.

electronic-invoice-form
electronic-invoice-form

If the buyer is VAT registered, you will have to add your VAT registration number to the invoice, and you can choose to add a QR code. Here’s an electronic invoice template:

The form of the tax invoice in Saudi Arabia (source - zatca.gov.sa invoice website)
The form of the tax invoice in Saudi Arabia (source – zatca.gov.sa invoice website)

Simplified electronic billing

Simplified electronic invoice issuance for B2C transactions at the point of sale. With these invoices, the buyer will not need to use the invoice to deduct the input tax. If you are issuing a simplified tax invoice (B2C invoice), your e-invoicing system should generate a QR code with the invoice. This is important to validate your electronic invoices.

In the first stage, all you have to do is share the simplified electronic invoices with your customers. However, in Phase 2, these invoices must be reported to ZATCA within 24 hours of their issuance.

A simple tax invoice (B2C) template
A simple tax invoice (B2C) template

These two can also be billed electronically (if approved by the IRS) or billed by a third party. If the invoice is self-paid (paid by the buyer on your behalf), you remain responsible for the accuracy of the electronic invoice generated. An electronic tag will indicate whether the bill is self-paid or billed by a third party.

How does the electronic billing process work in the Kingdom of Saudi Arabia?

Electronic billing is not much different from the usual billing process. It is basically the same process but done in a more efficient and safe way.

Here’s what you need to do for each transaction:

  • Use the compatible e-invoice system to generate the e-invoice with all required fields.
  • Issue a copy to the buyer. By stage 2, you will need to pay this invoice to the ZATCA portal and validate it before it is sent to the buyer.
  • Store the electronic invoice in your system for future reference. Moving to a cloud-based solution that provides you with e-billing features will make storage easier and automatically ensure compliance.

What to do about issuing an electronic invoice

If you are a taxpayer in Saudi Arabia, you must specify Electronic billing system or find a billing provider who can configure their system to provide electronic billing solutions in compliance with ZATCA.

In most companies, there may be more than one person managing accounts. Ensure that all your billing staff are well trained in using the electronic billing system, so that they are ready to manage transactions smoothly.

If you have developers and technical experts working with you, ask them to visit the ZATCA website to stay up-to-date with all technical and security requirements. can solve Cloud accounting It makes this process simpler by taking care of VAT compliance and keeping up with the latest changes in regulations put in place by the government automatically, without giving you any extra work.

What should be avoided when issuing an electronic invoice

Once electronic billing goes into effect, you cannot issue handwritten or manual bills.

While looking for an electronic billing system, avoid choosing one that:

  • Anonymous access is allowed.
  • It has no user management capabilities.
  • Allows electronic billing and associated notes to be edited or tampered with.
  • Allows creation of multiple e-billing sequences.
  • Allows time changes or export of the seal key.
  • Avoid amending invoices – instead, issue a debit/credit note and link it to the original invoice. Ensure that you do not delete any electronic invoices once issued, as they will be needed for future reference.

with Accounting programs smart like billed Andrestrictions ZATCA approved, electronic billing just got simpler! Easily maintain your VAT compliance, create paperless electronic invoices to run your business while staying on top of all the guidelines issued.

Source: Zakat, Tax and Customs Authority (ZATCA)

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