Kingdom of Saudi Arabia (KSA) is the first nation in the Gulf Cooperation Council (GCC) to announce e-invoicing (Fatoorah) under VAT officially. VAT is managed by the Zakat, Tax and Customs Authority (ZATCA), and it plans to implement e-invoicing in a phased manner. The implementation date of phase-1 is 4th December 2021, and phase-2 is from 1st January 2023.
The ZaTCA clarified that e-invoices (Fatoorah) should be issued for all types of tax invoices under VAT. Hence, there are different types of e-invoices. Let’s see them one by one.
A standard electronic invoice is used for Business to Business (B2B) and Business to Government (B2G) transactions. This electronic invoice is mandatory for claiming the deduction of input VAT by buyers as per Article 53 (5) of the VAT Implementing Regulations.
Standard e-invoices shall be issued in a notified format by the sellers to the buyers. Once the integration with the ZaTCA portal starts from January 2023, the standard invoices are to be issued only after being cryptographically stamped and cleared by the ZaTCA portal.
Standard electronic invoices shall contain details as per VAT legislation, including the seller and buyer, transaction and goods/services details, along with other technical information.
A standard e-invoice looks like the following:
Simplified electronic invoices are to be issued for Business to Consumer (B2C) transactions where the buyer does not need to use the invoice for input VAT deduction. The B2C e-invoice should contain the details mentioned in Article 53 (8) of the VAT Implementing Regulations and appendix of the e-Invoicing Resolution.
A simplified e-invoice is to be issued and shared with the customers at the point of sale, and a copy should be subsequently archived and stored.
During the first phase (generation), the applicable taxpayer can simply share the e-invoice without further action. However, during the second phase (integration), a simplified e-invoice should be reported in the ZaTCA portal within 24 hours of issuance.
A simplified e-invoice looks like the following:
Article 54 of the VAT Implementing Regulations deals with credit and debit notes and Article 40 (1) deals with the adjustment to the value of a supply. Suppose a taxpayer adjusted a transaction for which an e-invoice or simplified e-invoice has already been issued. In that case, they should issue an electronic credit/debit note.
Credit and debit notes must be issued against the original invoices. The taxpayer can use reference fields to indicate a date for reference, the invoice reference number, reference to all or multiple invoices in a period, and any other reference to the original sale. The types of credit or debit notes vary with the type of e-invoice issued. Also, the taxpayers should issue a standard credit/debit note against a standard electronic note and a simplified electronic note against a simplified e-invoice.
Summary tax invoices are issued where there is more than one supply of goods or services. The suppliers who have periodic invoicing practices may issue one commercial invoice containing all the supplies made in that period. For example, the seller can issue one summary invoice for all the goods supplied during a month.
According to VAT Legislation, a taxable person may issue a summary tax invoice, including all the taxable supplies of goods and services made to a single customer. There are no additional format or content requirements for summary tax invoices for VAT purposes.
It is to be noted that a taxable person who issues a summary tax invoice should not issue separate tax invoices for the individual supplies of goods and services together for which a summary tax invoice is to be issued. The taxpayer should issue an electronic summary invoice in these cases.
The Unified Agreement for Value Added Tax, VAT Law, and its implementing regulations allow the taxable buyer to issue tax invoices on behalf of the supplier. However, the tax authority should approve the buyer to issue self-billing invoices, and the buyer should follow the special requirements mentioned in the regulations.
Even though the buyer issues the self-billing invoice, the supplier remains responsible before the authority for the accuracy of the data included in the tax invoices. In this case, the buyer must generate tax invoices in an electronic format following the provisions of the e-invoicing regulation.
The self-billing e-invoices generated by a buyer should 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. Hence, the human-readable format of the invoice must contain a statement declaring that the invoice is a self-billing invoice.
An external party such as an accounting firm can issue invoices on behalf of the seller after fulfilling specific requirements as mentioned in the VAT legislation.
The e-invoices generated by a third party should 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. Hence, the human-readable format of the invoice must contain a statement declaring that the invoice is a third-party billing invoice.
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