Value Added Tax (VAT) invoicing rules in the Kingdom of Saudi Arabia (KSA) mandatorily require a taxable person to issue a tax invoice, simplified tax invoice or summary tax invoice as the case may be. This article will explain everything about VAT invoicing in KSA, including tax invoices in special circumstances and other documents used under VAT in Saudi Arabia. So, let’s deep dive into the VAT invoicing KSA rules.
The Unified VAT Agreement requires every taxpayer to issue a tax invoice that will contain details of supply, VAT charged and details of the taxpayer and the recipient of goods or services.
A taxpayer must issue a tax invoice in the following cases:
- Standard rated taxable supplies of SAR 1,000 or more made to a taxable person or non-taxable business entity.
- Supplies made outside non-GCC states, i.e., export of goods
- Taxable supplies are charged at zero rates with a value of SAR 1,000 or more made to a taxable person or non-taxable business entity.
- Taxable supplies within GCC states (applicable after the complete introduction of GCC VAT)
- Supply made under the profit margin scheme for eligible used goods
- Taxable supplies made for no consideration – Nominal supplies
Prohibition to issue a tax invoice
As per the VAT invoicing in KSA, non-registered persons cannot issue a tax invoice or collect any VAT from the customers.
VAT invoicing rules consider it a violation of the act. The person issuing a tax invoice or a similar document that can be regarded as a tax invoice or collects VAT from customers will be liable to a fine up to SAR 100,000.
Contents of a tax invoice
Taxpayers can issue the tax invoice either physically or electronically. However, both such tax invoices must include necessary basic details as required by VAT invoicing KSA.
- The taxpayer must issue the tax invoice in Arabic in addition to any other language used as a translation. Arabic numerals either ‘1234567890’ or ١٢٣٤٥٦٧٨٩ can be used.
- The currency of the tax invoice could be any currency, but the VAT charged must be expressed in Saudi riyals. The conversion rate prescribed on the date of tax becoming due by the Saudi Arabian Monetary Authority should be applied.
- The taxpayer must include the following details in the tax invoice:
- Document Name as ‘Tax Invoice’
- Date of issue and date of supply
- The sequential number that the taxpayer can use to identify the invoice uniquely.
- Supplier details:
- Name of the supplier
- Address of the main business premises
- Tax identification number (TIN)
- Name and address of the customer. In case of self-accounting of VAT, TIN of the customer.
- The taxpayer must describe the nature of the goods and quantity or the nature of services and scope.
- Taxable amount that is excluding VAT
- The rate at which VAT is charged
- Amount of VAT in numbers and words
- The VAT and the taxable amount must be rounded off to the nearest halala (equal to one-hundredth of a rial) for that supply.
- The taxpayer may include other commercial details on the tax invoice, such as the amount inclusive of VAT or contact details.
A sample tax invoice is provided below:
Timing of issue of a tax invoice
The taxpayer must issue a tax invoice physically or electronically to its customer within 15 days after the month in which the supply was made.
For example, if a supplier sold goods in May, the tax invoice must be issued before the 15th of June.
It is important to remember that the taxpayer can only issue a tax invoice once. If he is required to issue again, then he must mention on the tax invoice clearly that this is a ‘copy of the original tax invoice.’
Impact of date of supply on tax invoices
The actual date of supply means the date of delivery of the goods or the performance of the services.
However, in a few cases, the date the supply takes place may be earlier than the actual date of supply.
- When a tax invoice is issued before the actual date of supply, the supplier must comply with VAT obligations such as VAT payment, return filing etc., based on the date of issue of the tax invoice.
- When advance payment is made before the actual date of supply, the date of payment will be considered the date of supply. In the event of part payment, the date of part payment will be considered the date of supply. Then, the supplier must issue a tax invoice within 15 days from the end of the month in which the advance payment was received.
Simplified tax invoice
A simplified tax invoice contains fewer details than the tax invoice where the supplier can only mention the transaction, and he does not need to mention the customer details.
Who should issue a simplified tax invoice?
A taxpayer can issue a simplified tax invoice in the following cases:
- If the value of goods or services is less than SAR 1,000
- When goods or services are supplied to the end consumers, i.e. individuals
However, in the following cases, the taxpayer cannot issue a simplified tax invoice. He will have to issue a tax invoice.
- Export of goods
- Intra-GCC supply of goods or services to businesses post complete introduction of GCC VAT and electronic services system.
Contents of a simplified tax invoice
The guideline issued by Zakat, Tax and Customs Authority (ZATCA) provides minimum details that must be included in the simplified tax invoice are:
- Invoice issue date
- Name, address and TIN of a supplier
- Description of goods supplied or services provided
- Amount of the consideration payable
- Amount of tax payable or a declaration stating that the amount is inclusive of tax
A sample of simplified tax invoice is provided below:
Summary tax invoice
Suppose a supplier supplies goods or services periodically to his customers. In that case, he can issue a single tax invoice that will contain all supplies of goods and services of the month falling in the same tax period.
In other words, a taxpayer can issue a summary tax invoice if he makes more than one taxable supply to a single customer for a month that is included in the same tax period.
The content requirements and other rules applicable to a tax invoice are also applicable to the summary tax invoices. The taxpayer may not be required to issue separate tax invoices for each supply mentioned in the summary tax invoice.
Invoices in case of special circumstances
The Unified VAT Agreement and the Implementing Regulations in KSA set out requirements to issue tax invoices in special circumstances. Let’s understand which are those:
Self-billed tax invoice
In the case of a self-billed tax invoice, the customer issues the tax invoice for the supplies made to him by the supplier. The authority may approve the application by the customer to allow him to issue a self-billed tax invoice if the following conditions are met:
- The customer must validate the supplier’s TIN that proves that the supplier is registered. Hence, the self-billed tax invoice must be issued only for the taxable supplies.
- It must be issued within 15 days after the month in which the supply was made.
- If the customer issues a self-billed tax invoice, the supplier cannot issue a separate tax invoice.
- The invoice must show the words ‘self-billed tax invoice’, or it must be marked as a self-billed invoice, and all the content requirements as applicable to a tax invoice must be followed to issue the self-billed tax invoice.
- Before the supply is made, the customer and the supplier must enforce an agreement to issue a self-billed tax invoice.
- The supplier and the customer must notify the authority of their agreement to issue self-billed tax invoices following the authority’s specified method.
If the following conditions are met, a third party is allowed to issue a tax invoice under VAT invoicing Saudi Arabia guidelines:
- The supplier shall provide taxable supplies to the customer.
- Third-party must indicate the supplier’s details along with the TIN. He must also clearly mention that the tax invoice is issued on behalf of the supplier. The third-party cannot mention his TIN on the invoice.
- The supplier must not issue a separate tax invoice if the third party has already issued the tax invoice.
- The responsibility for accurately providing details of the tax invoice and correctly reporting the output tax liability remains with the supplier.
- The supplier and the third party have to notify the authority of their agreement to issue third-party tax invoices following a specified method.
Self-accounting of VAT
The self-accounting of VAT is required if the following conditions are met:
- A resident of KSA receives goods or services in KSA
- The supplier is a non-resident in KSA
Hence, if a non-resident supplies goods or services in KSA to a resident in KSA, the recipient of such goods or services will have to self-account for VAT under the reverse charge mechanism.
In such cases, the customer is not required to issue a tax invoice to itself. But, if the non-resident supplier is registered under VAT in Saudi Arabia, then he must issue a tax invoice to the customer and mention on the tax invoice the words ‘customer must account for the VAT.’
Profit margin billing
The VAT invoicing rules for the profit margin scheme is analysed considering two situations:
- When a taxable buyer buys eligible used goods from a non-taxable supplier, the buyer must issue an invoice that is not a tax invoice but which complies with the implementing regulations.
- If a registered supplier opts for profit margin billing, he will issue a tax invoice to show the supply of the eligible used goods. However, the invoice must not show the VAT amount, and it is not deductible by the buyer. Hence, it will be included in the price, and the tax invoice must mention that the VAT is calculated using a profit margin scheme on the eligible used goods.
Other types of documents used in KSA VAT
Electronic invoicing is mandatory under KSA VAT from 4th December 2021 for all taxpayers. The e-invoices must be issued through the compliant solutions. The taxpayers are responsible for ensuring the authenticity of the origin of the e-invoice, integrity of the content, and the legibility of the e-invoice.
Credit note and debit note
A credit or debit note is issued if adjustments are made in the already issued tax invoice. Hence, a supplier will issue a credit note or a debit note if one of the following circumstances occur:
- The supply is cancelled after the supply is already made either fully or partially.
- A material change like supply leads to a change in the VAT charged.
- There is a change in the consideration amount already agreed. The reasons for the change can include the additional discount offered after sales.
- The customer returns the goods or services to the supplier, agreeing to such a return.
Frequently asked questions (FAQs)
The below are commonly asked questions about the issue of tax invoices:
Is it mandatory to stay connected to the internet to issue an e-invoice?
Yes, the e-invoices must be generated online and should have internet connectivity.
Do I need to mention the amount of VAT separately?
Yes, the tax invoice must mention the amount of VAT charged on the taxable supplies.
Should I charge VAT before applying discounts and deductions?
No, the VAT is charged on the actual value of the taxable supply and hence, any discounts or deductions must be deducted before charging the VAT.
Do I need to mention my group tax number on the tax invoices?
Yes, all the tax invoices issued by the member of a tax group must mention their group tax number.
Does the authority accept a copy of a tax invoice if the original invoice is lost?
Yes, the authority may accept the copy of the original invoice if sufficient evidence exists that it is a true copy of the original.