The Gulf Cooperation Countries (GCC) have identified various strategies to adapt the financial system in their countries to the digital age. One of these is to switch to a digital e-Invoice and e-Receipt system to prevent tax evasion and improve organization through digitalization. The leading country in this regard is the Kingdom of Saudi Arabia (KSA), which has become a role model for similar efforts in other GCC countries.
Let’s look at these countries and their developments.
Kingdom of Saudi Arabia
In Saudi Arabia, phase one of the Fatoorah e-Invoicing system has been in force since December 4, 2021. Under phase-one regulations, the VAT registration number is required and the addition of a QR code is optional for B2B transactions if the buyer is a registered VAT taxpayer. In terms of B2C transactions, a mandatory QR code needs to be generated based on the ZATCA’ s specifications. Phase two, also known as the integration phase, has been rolled out in waves. The timeline of gradual implementation of phase two, which started from January 1, 2023, is as follows:
- Wave 1 starting January 1, 2023 – Annual taxable revenues above SAR 3 billion
- Wave 2 starting July 1, 2023 – Annual taxable revenues above SAR 500 million
- Wave 3 starting October 1, 2023 – Annual taxable revenues above SAR 250 million
- Wave 4 starting November 1, 2023 – Annual taxable revenues above SAR 150 million
- Wave 5 starting December 1, 2023 – Annual taxable revenues above SAR 100 million
- Wave 6 starting January 1, 2024 – Annual taxable revenues above SAR 70 million
- Wave 7 starting February 1, 2024 – Annual taxable revenues above SAR 50 million
With phase two, electronic invoices need to be generated in XML or PDF/A-3 (with embedded XML) formats. A unique Identifier (UUID), cryptographic stamp, and hash and QR codes are required. Electronic invoices are mandatory for all taxpayers who are resident in the country. The mandatory archiving period is six years.
The introduction of e-Invoicing by the Sultanate of Oman Tax Authority is set to begin in 2023, however it is still not clear whether a post-audit model or clearance model will be adopted, and the details of the e-Invoicing proposal has not been released yet. It is intended that e-Invoicing will be voluntary at first, and will become mandatory later.
The National Bureau for Revenue (NBR), which is responsible for taxation in the Kingdom of Bahrain has issued a proposal about e-Invoicing central platform development and maintenance. Its aims are:
- To support businesses by creating a level playing field and by decreasing their compliance requirements and legal burdens.
- To develop and track economic policies.
- To address tax leakages with limited disruptions to economic activity and ultimately support Bahrain’s fiscal balance program.
It is noted that there is no official timeline, but it is expected that NBR will implement e-Invoicing in Bahrain in the last part of 2024. With the advancement of digital transformation in Gulf countries especially in the Kingdom of Saudi Arabia, Bahrain is close to implementing an e-Invoicing solution.
United Arab Emirates
Recently, the UAE government has allowed the use of e-Invoices for transactions between the counterparties. The E-Billing System project is being developed by the ministry of finance, which will automate the procedures for filing tax returns and improve tax compliance, thus reducing tax evasion. The various phases are to be implemented and targets set to be completed by July 2025. The UAE is likely to follow the Saudi Arabian model, which is based on the phased introduction of e-Invoicing for businesses of different sizes.
The Egyptian State has taken steps toward the mandatory e-invoicing system of Egypt Vision 2023, in which the stages of obligation are determined by various phases announced on different dates.
- March 2020: Announcement of mandatory use of electronic invoices
- November 2020: Phase 1 covering 134 companies
- February 2021: Phase 2, covering 350 companies
- May 2021: Phase 3, all remaining companies must enroll in Large Taxpayers Centre
- July 2021: Phase 4, mandatory use of e-Invoices for all public sector entities
- February 2022: Phase 5 and phase 6
- June 2022: Phase 7, begin for certain taxpayers
- July 2023: All taxpayers must enroll for e-Invoicing and taxpayers must register with the tax authority.
In addition, taxpayers are required to submit their e-Invoices in XML or JSON format to the ETA, the official e-Invoicing portal of the state. A digital signature is mandatory for submitted e-Invoices and the archive period is seven years.
In addition, Egypt, which has switched to the e-Receipt system for B2C transactions, has announced that the taxpayers who will be responsible for this application as a phase;
- 1 July 2022: 153 initial companies
- 1 October 2022: e-Receipt System to begin for an additional 400 taxpayers
- 15 January 2023: e-Receipt system extended to 2000 more companies announced by ETA
- April 15, 2023: all companies must comply with the regulation. It also announced the list of subgroups obliged under Phase 4 on 15 July 2023.
Full implementation is expected to be completed in 2024. E-Receipts, which must contain a digital signature, like e-Invoices, must also contain a QR code.