The goal of electronic invoicing is to replace the customary practice of sending paper invoices with a digital procedure that allows buyers and sellers to exchange bills in a structured electronic format through a single process. E-invoicing also gives the government access to real-time billing information and aids in stopping revenue leaks.
Applicability of the mandate to generate e-Invoices
All natural or legal persons who engage in economic activity and are registered for VAT in the KSA or are required to be registered for VAT in the KSA are required by the e-Invoicing regulations to generate e-Invoices and abide by the e-Invoicing provisions. Therefore, the following taxpayer types would fall within the purview of electronic invoicing:
- A resident of the Kingdom who is a taxable person or company,
- The client or any other party that, in accordance with the VAT Implementing Regulation, issues a tax invoice on behalf of the taxable person and resides in KSA.
For the purposes of the VAT laws, taxpayers who are not KSA residents are not required to issue electronic invoices for supplies or sums received that are subject to KSA tax.
The documents covered under the scope of e-Invoicing
All transactions subject to VAT must create electronic invoices (tax invoices), and the following transactions must generate electronic (debit and credit) notes:
- Cancellation or partial or complete stoppage of the supply after its occurrence.
- If there is a material modification or alteration to the supply that affects the VAT amount,
- Modification of the supply value that the supplier and consumer have previously agreed upon,
- When returning goods or receiving a refund for services.
Types of e-Invoices
Depending on the recipient or purpose for which they are issued, the e-Invoices and any accompanying notes may be either the standard invoice or simplified, as described below:
Supplies covered under e-Invoicing in KSA
Except in a few limited circumstances, such as exempt supplies or the import of goods, all types of outward supplies as listed below will be subject to electronic invoicing:
- When valued at SAR 1,000 or more, supplies of goods and services are subject to either the standard VAT rate or the zero rate.
- Export of goods.
- Intra-GCC supplies.
- nominal supplies worth more than 200 SAR that are provided for free.
- Advance payments.
Transactions that do not require the issuance of e-Invoices
For the following types of transactions, tax-exempt individuals are exempt from generating electronic invoices and/or notes:
- Exempted supplies.
- payments made in advance for exempt goods.
- Supplies that fall under the Reverse Charge Mechanism's VAT rules.
- Import of goods.
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