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The Kingdom of Saudi Arabia Imposes Electronic Invoicing in 2021

E-invoice is an electronic invoice and to be a tax invoice issued electronically through electronic means which excludes scans or copies of invoices. The new regulations define the terms, requirements, and conditions related to electronic invoices.

The draft rules aim to define technical and procedural requirements and controls for the upcoming e-invoicing mandate will be effective from 4th, December 2021.

The e-invoicing system have two main phases in Kingdom of Saudi Arabia:

The first phase begins on 4 December 2021 and requires all resident taxpayers to generate, process and store e-invoices and electronic notes (credit and debit notes). A compliant solution must have the following features:

– Generation of a Universally Unique Identifier (UUID) in addition to the invoice sequential number.
– Enable digital stamps/signatures to ensure authenticity of the origin and integrity of content of the e-invoice.
– Contain some functionalities which enable taxpayers to save e-invoices and electronic notes and archive them in XML format without an internet connection.
– Generation of a cryptographic stamp for each e-invoice or electronic note.
– Generation of a hash for each generated e-invoice or electronic note.
– Generation of a QR code.

The second phase of e-invoicing in KSA will bring an additional requirement for taxpayers to transmit e-invoices and electronic notes to the GAZT. Taxable persons must integrate their systems with the GAZT’s systems by using an Application Programming Interface (API).

As a result of the second phase requirements the Saudi e-invoicing system will be classified as a CTC e-invoicing (Continuous Transaction Controls) system from 1 June 2022.

A clearance regime whereby an e-invoice will gain a legal effect only if it is approved by the GAZT is expected for e-invoices relating to B2B and B2G transactions. However, a continuous transaction controls reporting requirement may be prescribed for B2C invoices.

The rules are expected to be published within the next couple of months following collection of feedback from the public consultation. This will give Saudi taxpayers approximately six months to prepare for the upcoming mandate.

Implications:

Businesses will adopt digital tax accounting and reporting to meet the new compliance requirements. Businesses should start considering the steps required to implement e-invoicing.

Merger of General Authority of Zakat and Tax (GAZT) with the General Authority of Customs

Saudi Arabia has decided to merge the General Authority of Zakat and Tax (GAZT) with the General Authority of Customs. The new merged entity will be in line with the latest international practices and will promote enhanced security, business and trade exchange, in addition to other Zakat, tax and customs procedures.