Zatca E-invoicing in Saudi Arabia: Violations and Penalties

Why is ZATCA (The Zakat, Tax and Customs Authority) implementing e-invoicing?

• Increased efficiency and effectiveness of transactions

• Digitalising the tax payments will provide ZAKAT with market insight

• Ensures consumer protection

• KSA will be in par with international standards

• Elimination of black economy as transparency is assured

• Increase tax compliance rates

• Single source of authenticated transaction between buyer and seller

How is implementation planned by ZAKAT?

• Phase I – This is called “Generation and Storage” phase. This phase already started from 04.Dec.2021. The tax payers are expected to generate digital invoices in a stipulated form and guidelines given by ZAKAT.

• Phase 2 – This is called “Transmission” phase. This phase will be effective from Dec.2022. The tax payers are expected to communicate seamlessly with ZAKAT billing systems to get approval response for each invoice that is generated. Basically it will be a closed loop approach.

What are the key highlights of the GAZT (General Authority of Zakat and Tax) of the e-invoicing regulations?

• All E-invoices should have Arabic as default language and in addition any other language

• E-invoices is applicable to all taxable supplies and is subjected to normal VAT of 15% or zero VAT for export transactions (withholding taxes apply depending on the country of trading)

• The tax is applicable to resident and non-resident consumers and tax payers

• QR Code to be implemented in all invoices and the invoice should contain Seller CR no., Seller VAT no., Seller address, Buyer CR no., Buyer VAT no., Buyer address, Material Description (preferably Arabic), quantity, price, Date of Supply, Invoice Gross amount, Invoice Vat amount, Invoice Net amount, invoice currency

• The format is applicable for Tax invoices (B2B), simplified tax invoices (B2C), Debit notes and Credit notes

What happens if the e-invoicing is violated?

Below is an overview

What should you do?

• Determine which transactions or processes are subject to e-invoicing in your business

• Identify the input as well as output VAT transactions like sales, purchase, customs etc

• If you are using an ERP, try to develop the new norms. If your ERP is not scaling up, explore the possibility of integrating with an e-invoicing solution provider

• Explore e-invoicing solution providers. Assess their capability not only to generate e-invoices but also to integrate with ZAKAT in phase II

• Check the capability of solution providers to generate e-invoices in Arabic without much efforts

• Check how easy it is to customise the application in case of change in government norms

What you should NOT do?

• Do not generate invoices manually. This is highly riskier as well as could lead you to violation penalties

• Do not generate QR code from another application and paste in your manual invoice.

• Mistakes in calculations of VAT % or VAT amount will penalise you at a later stage

How can ACCQRATE help you to avoid penalties?

• ACCQRATE is a ZATCA certified e-invoicing provider owned by EtherGulf Trading, Saudi Arabia

• Hosted and secured in Saudi Cloud

• The solution is easy to use, support Arabic, QR codes and easily customisable

• For micro business with 5 invoices per month, we offer free online invoices

• For small and medium business, we offer cloud based e-invoicing solutions

• For enterprise, we offer extendable e-invoicing solutions to integrate with the existing ERP or in-house solutions.