Invoicing and Tax regulation in Saudi Arabia

Saudi Arabia has mandated that all businesses and entities registered for VAT comply with e-invoicing regulations, marking a significant shift in transaction processes. Beyond compliance, companies are embracing e-invoicing to achieve substantial cost savings compared to traditional paper-based methods. This transition has also enhanced overall company efficiency by significantly reducing manual errors, particularly in tax reporting. Given Saudi Arabia's corporate tax rate of 20%, minimizing these errors is crucial to avoid increased financial liabilities and penalties. For comprehensive guidance on e-invoicing, tax regulations, and digital reporting in Saudi Arabia, explore our detailed guide.

We are going to cover:

Electronic Invoicing Regulations

Tax Regulations

GST/HST Payments and Returns

E-invoice Requirements

Digital Reporting Regulations in Saudi Arabia

Penalties

Streamline Global Invoicing and Tax Compliance with Space Invoices

 

Electronic Invoicing Regulations

In 2020, Saudi Arabia implemented mandatory B2G e-invoicing, which proved to be a success and expanded to mandatory B2B and B2C e-invoicing in 2021 with an addition in 2023 for mandatory cross-border e-invoicing.

Saudi e-invoicing regulations align with the Zakat, Tax and Customs Authority (ZATCA) standards. This initiative is part of Saudi Arabia's Vision 2030 to enhance the business environment through digital transformation, promoting interoperability within the country and supporting economic growth. Furthermore, Saudi Arabia participates in the GCC e-invoicing network, enhancing standardized cross-border e-invoicing within the Gulf Cooperation Council. To support these requirements, the Saudi government utilizes the FATOORA system, a centralized platform designed for the receipt and processing of e-invoices in dealings with both public and private sector entities.

Governmental Body Responsible for E-invoicing

The governmental body responsible for e-invoicing in Saudi Arabia is the Zakat, Tax and Customs Authority (ZATCA).

E-invoicing Formats

Saudi e-invoicing formats align with the international standard XML and the specific requirements set by Zakat, Tax and Customs Authority (ZATCA). The system for e-invoicing is managed through ZATCA, with collaboration from the Ministry of Finance (MOF) for procurement-related aspects.

E-invoicing formats commonly used in Saudi Arabia:

UBL (Universal Business Language)	Internationally recognized standard that includes a suite of XML-based business documents specifications.
ZATCA XML Standard	A specific XML-based standard tailored for electronic invoicing processes in Saudi Arabia, ensuring compliance with local tax and regulatory requirements.
SA e-Invoice	Adapted framework that includes XML-based specifications tailored for electronic invoicing processes in Saudi Arabia, aligning with ZATCA guidelines.

E-invoices Validating

Ensure that your e-invoices adhere to ZATCA standards. Ensure that each eInvoice is digitally signed. This signature verifies the authenticity and integrity of the invoice. The eInvoicing software should handle the digital signing process. Also it’s important to Include a QR code on the simplified invoices, but is optional for B2B transactions. The QR code should contain essential invoice information.

The validation of e-invoices is automatically managed through the FATOORA platform, eliminating the need for additional validation or digital certificates for the sender, streamlining the e-invoicing procedure in Saudi Arabia.

E-invoice Archiving

In Saudi Arabia, you must archive e-invoices for a minimum period of 6 years. The archiving period starts from the end of the fiscal year during which the documents were prepared.

 

Tax Regulations

The Value Added Tax, known as VAT, is a federal tax applied at a standard rate of 15% across Saudi Arabia on most goods and services. There is a reduced rate of 0% for specific cases, like exports of goods or services outside the Council Territory.

Corporate Tax

The standard corporate tax rate in Saudi Arabia is 20%. Companies in Saudi Arabia are also subject to a religious levy known as Zakat, with a standard rate of 2.5% on the higher of the zakat base or the net adjusted profit, applicable to Saudi and GCC nationals and businesses.

VAT on Digital Products

In Saudi Arabia, the VAT rate applied to digital products, such as software, digital books, and online services, is generally subject to the standard VAT rate of 15%. Digital services provided to consumers in Saudi Arabia are subject to this standard rate regardless of whether the provider is located within Saudi Arabia or outside.

 

VAT Payments and Returns

In Saudi Arabia, businesses are required to file a VAT Return with the Zakat, Tax and Customs Authority (ZATCA) to declare the VAT they have collected and the VAT they have credited for business purchases. The VAT Return should detail:

VAT collected on sales,

VAT credits for VAT paid on business purchases.

The net VAT amount, which is the difference between the VAT collected on sales and the VAT credits on purchases, is indicated on the VAT Return and must be paid to the Zakat, Tax and Customs Authority (ZATCA). If the VAT credits exceed the VAT collected, the business can claim a refund.

The reporting frequencies are:

Monthly: Reports must be submitted by the end of the month following the reporting period. This is mandatory for businesses with an annual revenue exceeding SAR 40 million.

Quarterly: Reports must be submitted by the end of the month following the quarter's end. This is applicable for businesses with an annual revenue of less than SAR 40 million.

ZATCA encourages the electronic filing of VAT Returns and Payments through its online portal.

VAT Registration Threshold

VAT registration threshold for domestic established sellers businesses is SAR 375,000 in the past 12 months,

For non-established sellers the is no registration threshold.

 

E-invoice Requirements

In Saudi Arabia, invoice requirements adhere to GAZT standards, demanding components such as:

Unique identification number;

Date of issuance;

Identification of the seller and the buyer: full name, address, and VAT registration number;

Information about goods or services provided: description, quantity, unit price;

VAT information: total amount excluding VAT, applicable VAT rate, total VAT amount;

Total amount including VAT;

Currency used;

Payment terms;

Reference number for tracking;

Electronic signature or other means of ensuring authenticity and integrity.

For businesses with repeating customers, setting up recurring invoices can streamline the billing process by automating regular, automatic payments.

Utilizing invoicing software can significantly benefit businesses in creating, sending, and managing e-invoices in compliance with Canadian regulations. These tools not only help in generating professional invoices but also in streamlining the invoicing process, improving cash flow, and ensuring that payments are received on time.

See how Space Invoices can help.

Simplified E-invoice Requirements

In Saudi Arabia, you can issue simplified e-invoices for Business-to-Consumer (B2C) transactions.

Simplified invoices include:

Date of Issue;

Unique Invoice Number;

Supplier Information: Name, address, and VAT registration number;

Customer Information: Only the name, if the consumer is not registered for VAT;

Description of Goods or Services;

Taxable Base;

VAT Rate and Amount;

Total Amount Due: Gross total, including VAT;

QR Code: Containing basic invoice information for easy verification by the consumer.

 

Digital Reporting R

In Saudi Arabia, digital reporting regulations are mandated across various sectors to enhance transparency and compliance. The framework includes electronic filing of tax returns, financial statements, and other regulatory documents through designated online portals managed by the Zakat, Tax and Customs Authority (ZATCA).

Businesses registered for VAT must file their VAT returns electronically via the ZATCA online portal. The return includes detailed information on VAT collected and paid, sales and purchase transactions, and other relevant financial data.

SAF-T

SAF-T is not yet mandatory in Saudi Arabia.

Data Breaches

If a data breach occurs in Saudi Arabia, you must notify the Saudi Data and Artificial Intelligence Authority (SDAIA) as soon as possible after becoming aware of the incident if the breach poses a risk to the rights and freedoms of individuals. Affected individuals must also be notified without undue delay if the breach poses such a risk. This requirement aligns with the standards set by the Personal Data Protection Law (PDPL) that applies to all organizations handling personal data in Saudi Arabia.

Under the PDPL, organizations must ensure:

To Authorities: Notification to the SDAIA should include details about the nature of the breach, the data involved, and the measures taken to address and mitigate the breach.

To Affected Individuals: The notification must inform individuals about the breach, its likely consequences, and the measures they can take to protect themselves.

 

Penalties

For non-issuance or non-archiving of e-invoices: you may receive a penalty ranging from SAR 5,000 to SAR 50,000.

Not including QR codes in simplified tax invoices: initial violations may receive a warning, with penalties up to SAR 50,000 for repeated violations.

Failure to notify ZATCA of malfunctions: for the first-time offense, you might receive a warning, escalating up to SAR 50,000 for subsequent offenses.

Not including buyer VAT registration number (when required): will result in penalties ranging from SAR 10,000 to SAR 50,000.

Unauthorized deletion or amendment of e-invoices: will result in fines between SAR 10,000 and SAR 50,000.

Digital Reporting and Tax Penalties

Failure to maintain books and records: can receive a general penalty of up to SAR 50,000.

Issuing tax invoices by non-registered persons: can result in a maximum penalty of SAR 100,000.

Failure to pay tax due: may result in a fine of 5% of the unpaid tax for each month or part thereof until the tax is paid.

 

Streamline Global Invoicing and Tax Compliance with Space Invoices

One way to comply with (e-)invoicing, tax and reporting regulations in Saudi Arabia is to use a provider like Space Invoices.

You will be able to:

Have one API for current and future worldwide compliance, including Saudi Arabia

Support and upsell your clients worldwide, including Saudi Arabia

Become the one-stop shop for current and future clients

Save time and money streamlining the process and eliminate manual errors

Rest assured all documents are archived and successfully reported to responsible institutions

Save time and money with less than a week-long integration

Having questions about how to achieve compliance in Saudi Arabia?

We are ready to help.

 

This guide is provided by Space Invoices and does not constitute professional tax advice or opinions tailored to the specifics of any particular business or situation. Space Invoices does not accept responsibility for the accuracy or applicability of the content within this guide. Tax regulations, e-invoicing requirements, and digital reporting standards are subject to frequent changes and complex interpretations that require validation by qualified tax professionals. It is the user's responsibility to evaluate the relevance and accuracy of the information provided and to consult appropriate professionals. Space Invoices does not offer professional tax opinions or advice through this publication.

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