e-Invoicing for e-Commerce Businesses in KSA

Electronic commerce has become very popular over the last decade, and Saudi Arabia was no exception this. As per a survey, the net e-commerce sales of the top 100 Saudi Arabian online stores accounted for about US $1,103 million in 2021.

Also, the Government of Saudi plans to move towards a digital economy under the National Transformation Program by 2030. Accordingly, it initiated e-invoicing in two phases through Zakat, Tax and Customs Authority (ZATCA). It implemented phase 1 of e-invoicing in Saudi Arabia on 4th December 2021. 

In continuation, ZATCA announced that businesses with a turnover of more than SAR 3 billion in 2021 would fall under wave 1 under phase 2, and they must implement phase 2 from 1st January 2023. Recently, it announced that businesses with more than SAR 500 million turnover in 2021 fall under wave 2 under phase 2 and must implement phase 2 from 1st July 2023.

Hence, all e-invoicing applicable businesses in Saudi Arabia must gear up and integrate their ERP/ POS systems with ZATCA. Let’s see how the e-commerce businesses shall get ready to implement phase 2 of e-invoicing in Saudi Arabia.

What is an e-commerce business in KSA?

e-Commerce refers to the selling and buying goods or services through a website, electronic platform, application or social media store.

An online portal or interface facilitates the sale of goods or services from a supplier to a customer. It allows a transaction to be completed through it. An online interface or portal acts as an agent or intermediary.

The e-commerce models in Saudi Arabia include Business to Consumer (B2C), Business to Business (B2B), the combination of both B2B & B2C, Direct to Consumer (D2C), Consumer to Consumer (C2C), Consumer to Business (C2B).

Invoicing in e-commerce business

As per invoicing rules in Saudi, a VAT-registered supplier of taxable goods or services must issue a standard tax invoice and share it with the customer. However, they must issue a simplified tax invoice whenever they sell goods or services directly to the end consumer. 

This default rule applies irrespective of whether the goods are sold directly through an online portal, platform, or interface.

Suppose a VAT-registered agent sells goods or services on behalf of a principal. In that case, the agent can issue the tax invoice as if that agent had made the supply. Also, the tax invoice issued by the agent must contain all the particulars required under Implementing Regulations, including the principal supplier name and tax registration number.

However, suppose the agent is undisclosed. In that case, they are responsible for issuing a tax invoice in their own name. Also, a third party may issue tax invoices for taxable supplies if the conditions mentioned under the law are met.

How can e-commerce businesses implement e-invoicing in Saudi?

Under phase 2 of Saudi Arabia e-invoicing, the e-commerce businesses must integrate their billing/ ERP/ accounting systems with the ZATCA and get ‘Clearance’ for the tax invoices and related Credit and Debit Notes (CDNs) and ‘Reporting’ the simplified tax invoices and related CDNs.

e-Commerce businesses must perform Business Impact Analysis (BIA) to understand the 

• Existing invoicing process
• Modifications to the existing business processes
• Integration with logistics function
• Infrastructure requirements
• Required technical capabilities
• Mode of e-invoicing integration
• Archival requirements under Saudi laws
• Changes to the VAT return filing process
• Overall business impact

The transactions in the e-commerce business mostly fall under either the B2B or B2C category. Hence, it is recommended to integrate with ZATCA in real time to avoid disruptions in the business.

Also, e-commerce businesses are recommended to opt for a cloud-based e-invoicing software in Saudi Arabia, such as ClearTax, to integrate with ZATCA and implement phase 2 of e-invoicing seamlessly.