New e-invoicing system in KSA

Dimah Talal Al-Sharif

Saudi Arabia’s newly implemented electronic invoicing system aims to transform the issuing of paper invoices and notices into an electronic process.

The electronic invoicing system allows the exchange of invoices, debit and credit notices, and all their related processes to take place in an electronic format between the seller and the buyer.

What is an electronic invoice? It is an invoice issued and saved in an electronic format organized through an electronic system and containing the requirements of the tax invoice. A handwritten or scanned invoice is not an electronic invoice.

Electronic invoicing will be applied in two phases. The first is the issuance phase, which will be applied from Dec. 4, 2021, to all taxpayers registered in VAT, excluding taxpayers who are not residing in the Kingdom, and whoever acts on behalf of the taxpayer to issue the invoice.

Issuing electronic invoices will be similar to issuing invoices today, but through a compatible electronic billing system. The invoice will include all the required items based on the type of invoice, as there are two types of tax invoices (tax invoice and simplified tax invoice).

Moreover, the used online system has to match the requirements of the Saudi Zakat, Tax and Customs Authority to make sure that all purposes are met.

What about the fines related to this mandatory transition? The authority shared the most prominent violations and fines for the application of the first phase of electronic billing. Such fines include the failure to issue and save invoices electronically, where its fine start from SR5,000 ($1,330).

Facilities will get warnings for the following violations: Not including the QR code in the simplified tax invoice; not writing the value-added tax registration number of the facility that made the purchase; and failure to inform the authority of any system glitch that hinders the issuance of electronic invoices,

The authority also clarified that the violation of deleting or amending electronic invoices after their issuance begins with a fine of SR10,000, noting that all fines are applied according to the type of violation and the number of times it is repeated.

Finally, I believe that this change will not support the digital transformation initiative that the Kingdom is participating in. Still, it will ensure the needed and required accuracy between the transaction parties, as it will mitigate the typos included in such invoices. It will also enable the parties for any reason to track their transactions and their related documentation instead of the paper invoices, especially in case of disputes and challenges.

The writer is a Saudi lawyer and legal consultant