Impact of e-Invoicing on Self-Billing in KSA with Examples

Self-billing is a case where the buyer raises a tax invoice for the goods and services received on behalf of the vendor. This tax invoice will contain complete information about goods and services received and the tax amount, which the buyer will claim as input tax credit.

As per e-invoicing guidelines issued by ZATCA, the self-billing e-invoices generated by the buyer will contain an electronic marker indicating this fact. This marker will be generated automatically and will not be visible on the human-readable version of the e-invoice. The human-readable format of the invoice must contain a statement declaring that the invoice is a self-billing invoice.

How does self-billing work under e-invoicing in KSA?

1. Customers and suppliers need to agree on self-billing as the preferred method of tax invoice.
2. The parties need to take permission from the tax authority (ZATCA) and abide by the rules and regulations for e-invoicing in Saudi Arabia.
3. The supplier should not raise any tax invoice for VAT.
4. An agreement should be signed between self-biller and supplier based on terms of supply.
5. The supplier should be compulsorily registered under VAT in KSA.
6. It should clearly show the goods and services bought and the tax associated with claiming the input tax credit.
7. The supplier is responsible for proving the accuracy of the facts disclosed in the self-billed invoice.

Who should ideally use self-billing as a form of e-invoicing?

Self-billing can be advantageous, especially for small suppliers and sub-contractors who provide low-value but high-volume goods/services. Also, suppliers making continuous supplies to the customers such as laundry services to hotels, security services to banks, food supplies to restaurants can adopt self-billing for accurate and timely compliance to VAT laws in KSA.

Examples of self-billing under e-invoicing regulations in KSA

Example 1:

Al Dua regularly buys rice for their Asian cuisines from Al Bandino, a trusted name in Basmati rice in Saudi Arabia. Al Dua (customer) has entered into a contract with Al Bandino (supplier) to raise an invoice for the collective amount of rice supplied to the restaurant at the agreed price at the end of the month.

Both AL Dua and Al Bandino have to archive the copy of the e-invoice in their records on a system according to the provisions in VAT Law, VAT Implementing Regulation, e-Invoicing Regulation, and other relevant regulations in KSA. Also, the generated e-invoice should be compliant with the specification and requirements of ZATCA so that it can be integrated with the ZATCA portal once it is mandated.

Example 2:

Al Vadeh LLP enters into a 1-year contract to provide housekeeping services to Al Kamal Hospital. They further entered into an agreement that Al Kamal would raise a self invoice at the end of every month as per the agreed amount. Al Vadeh will verify the information in the invoice and archive them. Also, Al Kamal should take care that his e-invoice must be compliant with the specification and requirements of ZATCA.

How is self-billing under e-invoicing beneficial?

• Reduction in errors in invoicing and subsequent time spent in corrections.
• Multiple supplies from one supplier can be consolidated in a single tax invoice.
• Speedy recovery of the input tax credit as there is no need to wait for an invoice from the supplier.
• Saves time, effort, and administrative expenses of suppliers involved in invoicing.