e-Invoicing in Saudi Arabia: KSA challenges and how to implement e-Invoicing?

The 4th of December 2020 saw Saudi Arabia’s GAZT or “General Authority of Zakat and tax” publish extensive guidelines on the implementation of an e-Invoicing solution for KSA. Also known as, Fatoorah, the Kingdom of Saudi Arabia has set a date of 4th December 2021 for it to become effective and binding on all.

The implementation of e-Invoicing in Saudi Arabia is an important change being incorporated into the currently applicable VAT System. It is one of the several initiatives taken by KSA to digitize its economic system.

Just before its introduction, a merger between the “General Authority of Zakat and Income” and the “Tax and Customs Authority” of Zakat was facilitated. A draft amendment incorporating this change was published on the 17th of September to make it official. This amendment also extensively covered electronic billing rules and regulations that commercial organizations must incorporate before the e-Invoicing implementation date.

What is e-Invoicing?

e-Invoicing is a procedure that facilitates the conversion of all paper invoices and debit/credit notes into an electronic format. This format streamlines the process and allows invoices, debit, and credit notes to be processed and exchanged in a structured manner between the seller and the buyer.

Why was e-Invoicing introduced in Saudi Arabia?

The KSA is introducing e-Invoicing primarily to improve the efficiency and security of the billing process.

Efficiency: The enhancement of transactional efficiency helps make trading in KSA seamless and efficient by:

• Resulting in quicker payments
• Reducing company overheads

The e-Invoicing system will provide its government with greater insights into the current market conditions after its successful implementation. Furthermore, this system enabled businesses in KSA to incorporate the best global business practices of:

• Fair competition
• Business competitiveness
• Improved consumer protection

Security: This is an important benefit as it enabled the government to:

• Improve the detection of the shadow economy and reduction in its volume
• Detect fake invoices by matching the input and output tax credits claimed on the ZATCA portal
• Monitor movement of money, goods, and services in real-time
• Achieve better tax compliance rates
• Enhance the transparency of commercial transactions
• Enable better data-informed decision-making

Along with the above, the government also hopes to bring uniformity to the invoicing process and further increase invoice interoperability and readability. Ultimately, e-Invoicing was introduced to boost VAT compliance and generate greater tax revenue for the Kingdom. To read the full guide click here: e-Invoicing in Saudi Arabia.