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Types of e-Invoices in the Kingdom of Saudi Arabia

Electronic invoicing, also known as e-invoicing, is a process that aims to make paper invoices a relic of the past. As the name suggests, the process includes creating invoices, debit notes, and credit notes in an electronic format to make it easier to share with the concerned party.  It is easier to keep track of e-invoices as long as you use one of the top e-invoicing software in Saudi Arabia. 

The Kingdom of Saudi Arabia (KSA) became the first Gulf Cooperation Council (GCC) nation to implement e-invoicing to streamline the VAT invoicing process. The implementation of e-invoicing in Saudi Arabia will occur in a phased manner. While the first phase was implemented on 4th December 2021, the second phase will commence on 1st January 2023. 

According to the Zakat, Tax and Customs Authority (ZATCA), e-invoices (also known as Fatoorah) must be created for all tax invoices under KSA VAT. This implies that multiple types of e-invoices can be used based on the nature of one’s business and the situation. 

Understanding these different types of e-invoices to identify the correct one based on your needs and prevent mishaps. 

Types of E-invoices in KSA

Before you open your e-invoicing software in Saudi Arabia and get to work, you must understand which invoice to create. The main types of e-invoices in KSA are as follows. 

1. Standard e-invoice

A standard invoice is typically used for Business to Government (B2G) and Business to Business (B2B) transactions. Such invoices have been classified as mandatory per Article 53 (5) of the VAT Implementing Regulations to claim input VAT by buyers. 

Currently, the sellers can issue standard e-invoices in a notified manner to the buyers. However, with the implementation of phase 2, these invoices will be integrated with the ZATCA portal. They can be issued once they have been cryptographically stamped and cleared by the portal itself. 

Your standard e-invoice must contain all the pertinent details per the VAT legislation. When you are creating it on your e-invoicing software in Saudi Arabia, be sure to enter important details like the goods/service details, the name of the buyer and seller, and transaction details.

2. Simplified e-invoice

Simplified invoices are typically used for Business to Customer (B2C) transactions. In these cases, the buyer can not use the invoice for any input VAT deduction. When creating your B2C invoice, you must enter all the critical details needed as per Article 53 (8) of the VAT Implementing Regulations, as well as the appendix of the e-Invoicing Resolution.

Business owners must remember that these e-invoices must go to the customer immediately when the sale has occurred. It is also important to keep a copy of the invoice stored for your own records. Currently, business owners can simply share the e-invoice without any additional processes to be followed. However, once phase 2 is set in place, they must report the invoice on the ZATCA portal within 24 hours of issuing it. 

3. Electronic notes (credit and debit notes)

According to Article 54 of the VAT Implementing Regulations, taxpayers can issue an electronic debit/credit note if they have adjusted a transaction for which a standard or simplified e-invoice has already been issued. 

These debit and credit notes have to be issued against the original invoice. There are reference fields in the invoice format that can be used to indicate the invoice reference number, date of issuance, references to more than one invoice in a period, along with any other reference that clarifies the sum paid at the time of the sale. There are a few variants regarding credit notes, which vary based on the type of e-invoice that has been issued. 

It is important to note that a standard credit/debit note is applicable for a standard invoice, while a simplified credit/debit card is applicable for a simplified invoice. 

4. Summary e-invoice

A summary tax invoice is typically used when there happens to be more than one supply of certain services and goods. If supplier has multiple peridic invoices, they can issue one commercial invoice detailing all the supplies in that specific period. For instance, a summary invoice can be created to detail all the goods supplied in a month. 

A taxable person can issue a summary invoice to a customer detailing all the taxable services or goods given to them. The format itself is basic, and there are no additional requirements when it comes to sharing the invoice for VAT purposes. 

It is essential to understand that if you are issuing a summary tax invoice, you should not go ahead and issue a separate tax invoice for the individual supplies of the goods or services.

5. Self-billing e-invoice

A self-billing invoice is an invoice that the customer creates on behalf of the seller. The VAT Implementation Regulations,  Unified Agreement for Value Added Tax, and VAT Law let the taxable buyer issue tax invoices on behalf of the supplier. But, these invoices need to be approved by the tax authority to be valid. To ensure validity, the buyer has to follow a few special requirements mentioned in the regulations.

It is essential to note that the supplier is still responsible for the data accuracy in the e-invoice and must answer to authorities if there are any discrepancies. Generating an e-invoice can help prevent any issues in the data, as these can be fixed before processing and issuing. 

When a buyer creates a self-billing e-invoice, it should have an electronic marker that indicates this fact. This marker is typically generated automatically. It will not be visible on any human-readable version of the e-invoice. As a result, the human-readable format of the invoice should also contain a statement declaring that it is a self-billing invoice.

6. Third-party billing e-invoice

A third-party billing invoice is typically created by an external party (like an accounting firm) on behalf of the seller. This is issued after fulfilling specific requirements mentioned in the VAT legislation. 

As with the self-issued invoice, these e-invoices generated by a third party should also have an electronic marker indicating this fact.  It will not be visible on any human-readable version of the e-invoice. As a result, the human-readable format of the invoice should also contain a statement declaring that it is a self-billing invoice.

Creating your invoice accurately and issuing it on time is essential. Use e-invoice software in Saudi Arabia to make the process easier. 

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