In this episode, we talked about the second phase of the e-Invoice implementation for the Kingdom of Saudi Arabia with Senior Account Manager Tuğçe Özgün and Account Specialist and Product Owner Emre Hüzmeli. We tried to discuss everything there is to know about Saudi Arabia e-Invoicing implementation.
1. What are the differences between the generation and integration phases?
Well firstly I can start the dates. The generation phase became mandatory on December 4th, 2021 and the integration phase will become mandatory on January 1st 2023.
In the generation phase the taxpayers should generate their invoices in an electronic format and store them. On the other hand, in the integration phase the taxpayers’ ERP system should be integrated with the ZATCA Portal. Also, there is a revenue of 3 billion. ZATCA firstly will start to have the invoices with those companies who are in the revenue.
2. Thank you Emre and we know that there is a requirement regarding the QR code. Can you explain a little bit, is this obligation valid for both B2B and B2C?
To make it clear I can say that in the Generation Phase QR code is mandatory only for B2C invoices with the 5 TLV fields and they are 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. In the integration phase the QR code is one of the required details, 8 TLV fields for standard and 9 TLV fields for simplified invoices. Those additional mandatory fields are a hash of the XML invoice, a signature of the XML hash, public key extracted from the signing private key.
3. Are both Standard Tax Invoices (B2B) and Simplified Tax Invoices (B2C) signed by ZATCA?
No, there are different signing processes for the B2B and B2C invoices. The Standard Tax Invoice is an example of the clearance model because it’s signed by ZATCA before being sent to the buyer. But B2C invoices are signed by taxpayers and sent to ZATCA within 24 hours and is an example of a reporting model.
4. I would like to ask also purchase invoice processes. Is there any obligation to process inbound e-Invoices?
The e-Invoicing regulations are obligatory for the Supplies of taxable goods and services, Export of goods and services from the KSA, So ZATCA is not announcing anything for the inbound electronic invoices in the time-being.
5. What is the format and technical requirements of the electronic invoices going to be?
The format is XML for both simplified and standard invoices, and for the technical details I can say There should be an UUID, QR and Electronic signature (cryptographic stamp), IRN, and integration with the ZATCA Portal
6. Is an electronic signature requested before the transmission of the invoices? What are the main controls performed by KSA Tax Authorities upon receipt of the e-Invoices?
There is an electronic signature for both invoices but before the transmission is only required for the simplified invoices, standard invoices signing process is going to be performed by ZATCA. Regarding the controls, The ZATCA is checking its schema and the format of the invoices.
7. Well, we’re more on the tech side of this business and generally don’t give legal advice, but according to legislation, what are the legal penalties for not complying with the regulation of electronic invoicing?
Firstly, I can say not issuing and storing e-Invoices in required format companies should pay 5.000 SAR but also same penalties are applied for; those invoices which do not include the QR code or include the functionless QR code even if the taxpayer issues, stores and submits the invoices to the ZATCA portal. And additionally, ZATCA is strict for Modifying or deleting e-Invoices after generation, if a company makes these kinds of changes, then the company should pay 10.000 SAR.
8. Is it mandatory to archive the electronic invoices?
Yes, it is mandatory, electronic invoices issued or received by public sector entities should store the invoices in local or cloud servers within 6 years.
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