The first phase of e-invoicing in Saudi Arabia is going to be implemented from 4th December 2021. The taxpayers subject to e-invoicing have to choose an e-invoicing solution or system that complies with the KSA VAT Regulations. This article explains the key considerations for business while choosing an e-invoicing solution in KSA.
Once the e-invoice is generated with the required details in an appropriate format, the supplier must electronically transfer the invoice data to the stakeholders, i.e., customers and the tax authorities. The integration must be done through APIs, making it easy to maintain these automated systems and secure processing. Also, the taxpayers need a solution to manage and store the e-invoices that they receive from suppliers and service providers.
The taxpayer must determine taxability and the applicable VAT rate for every line item and VAT calculated as per rules for every outward supply. Therefore, the adopted e-invoicing solution must allow users to make necessary changes when there is an amendment in VAT rules and rates.
It is mandated that VAT-registered suppliers must produce e-invoices documenting revenue and tax information on all taxable sales. Corresponding credit and debit notes must also be produced for adjustments and corrections, detailing the adjustments and corrections done. The e-invoicing solution must facilitate the generation and issuance of these documents to the customers within the specified time limit or on an ad-hoc basis.
The VAT regime in KSA charges VAT on the sale of goods and services, i.e., output VAT and deducting VAT paid on goods or services purchased from registered suppliers as input VAT. Hence, the e-invoicing solution must adhere to the rules for determining input VAT applicability and eligibility.
The adapted solution must be able to generate a QR code. For standard e-invoices, there is no requirement to generate a QR code while generating an e-invoice. However, the taxpayer’s e-invoicing solution must be able to QR code value which the e-invoicing integration portal can update during the clearance process. The QR code will then be printed to be visualised on the human-readable invoice by the taxpayer.
For simplified e-invoices, the QR code should be generated by taxpayers, including basic invoice and taxpayer information during the integration phase.
The e-Invoicing Regulations state that an e-invoicing solution must have internet connectivity. It must connect with an API published by the ZATCA to share invoices with them for clearance/reporting, as the case may be. The e-invoicing applicable taxpayers must use any of the following invoice solutions:
Every VAT regime has clear specifications on the periodicity of filing VAT returns, details to be reported and how to remit the VAT. For large taxpayers like banks, the e-invoicing solution must generate details required for filing the VAT returns.
The solution must enable secure storage of historical invoices and the underlying data and facilitate easy retrieval in audits.
In this digital era, there is a scope for digital threats. The adapted solution must be secure to prevent unauthorised changes to rules, data or reports, or other functionality. The e-invoicing solution should prohibit the following functions:
Zakat, Tax and Customs Authority (ZATCA) may introduce new compliance regulations from time to time. Banks must choose the right compliance solution that can be integrated with the existing VAT solution by ensuring minimum disturbance to core and ERP systems. It should also enable VAT and e-invoicing systems to absorb most changes except for key missing data from the upstream systems.