The KSA’s e-Invoicing system, which is named Fatoora, was introduced by the tax authority (GAZT) in 2021 and divided it into two phases: generation and integration. Implementation of the new Saudi Arabia e-Invoice system covers two types of invoices: standard and simplified. Standard Tax invoices are mandatory for business-to-businesses transactions, though Simplified Tax invoices are mandatory for business-to-customers.
The generation phase (step 1) has been effective since December 2021. Now the new integration phase (step 2) will start in January 2023.
We have gathered the top-five questions from our clients and related webinar participants.
1. What are the differences between the generation and integration phases?
Enforcement of Phase 1 started on December 4th, 2021.
- Generate invoices in an electronic format (XML or PDF/A3 with embedded XML) with the required fields.
- E-Invoices must be stored.
- Added QR code only to the Simplified Tax invoices with limited information.
Enforcement of Phase 2 will start on January 1st, 2023.
- In January 2023 obligations first affect taxpayers whose revenue is subject to VAT for the year 2021 exceeding 3 billion SAR, and the scope will expand gradually thereafter.
- Taxpayers must integrate their ERP systems with the GAZT system.
- Additional parts of B2B tax invoices include the QR code, additional seller ID, subtotal, and invoice taxable amount.
- Additional parts of the simplified tax invoice for B2C should include the subtotal at line-item level.
- Issued invoices must include a cryptographic stamp and a hash value as a Universally Unique Identifier (UUID).
- A QR code is to be added to both B2B and B2C invoices.
2. Is the QR code mandatory in Phase 2 for B2B and B2C?
In the Generation Phase, a QR code is mandatory only for B2C invoices. After the Integration Phase, the QR code is one of the required details for both standard and simplified invoices.
From December 4, 2021, the QR code will consist of 5 TLV fields, such as the seller’s name, VAT registration number of the seller, the time stamp of the invoice, the invoice total (with VAT), and the VAT total. These tags are increased to 8 TLV fields for standard tax invoices (B2B) and 9 TLV fields for Simplified tax invoices (B2C). From phase 2, additional mandatory fields are a hash of the XML invoice, an ECDSA signature of the XML hash, an ECDSA public key extracted from the signing private key. For Simplified Tax invoices the ECDSA signature of the ECDSA signature of the cryptographic stamp’s issued by GAZT’s technical CA.
3. Are both Standard Tax Invoices (B2B) and Simplified Tax Invoices (B2C) signed by GAZT?
No, there are different signing procedures for the B2B and B2C invoices. The Standard Tax Invoice is an example of the clearance model because it’s signed by GAZT before being sent to the buyer. In contrast, B2C invoices are signed by taxpayers and sent to GAZT within 24 hours, and is an example of a reporting model. GAZT’s digital signature is called the ‘cryptographic stamp’.
4. Is there any obligation to process inbound e-Invoices?
The e-Invoicing regulations are as follows:
- Supplies of taxable goods and services,
- Export of goods and services from the KSA,
- Intra-GCC supplies due to, VAT Agreement, VAT Law and the VAT Implementing Regulation,
- Nominal supplies by taxpayers due to the VAT Agreement, VAT Law, and VAT Implementing Regulation.
On the other hand, inbound electronic invoices are not under regulation.
5. Under what conditions should invoices be stored?
People who are under obligation from the e-Invoicing regulation must archive invoices in a local server or in the cloud as per their solution and storage requirements. The most important condition is that during the audits the accounting data must be accessible via a direct link and available at the request of the authorities.
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