Saudi Arabia: Draft VAT legislation proposes changes for e-invoicing

The Saudi Arabian tax authority (Zakat, Tax and Customs Authority (ZATCA)) published for public consultation, a draft of legislative amendments to make changes to the value added tax (VAT) implementing rules and specifically concerning the electronic invoicing (e-invoicing) requirements. The deadline for comments is 23 October 2021.

The following measures are included in the proposals:

• A requirement to issue a “full” tax invoice (subject to a “SAR 1,000 value” exemption when the simplified invoice could still be used) to a taxable person, non-taxable legal person, a one-person establishment or other entity incorporated in Saudi Arabia. The requirement would also apply to supplies to both Gulf Cooperative Council (GCC) and non-GCC countries (amending Art 53, Para 1).
• In terms of self-billing, both suppliers and customers would need to be VAT-registered (amending Art 53, Para 2).
• Summary tax invoices could only be issued for a period not exceeding one calendar month (amending Art 53, Para 4).
• Substantial changes to the simplified invoices regime have been proposed (amending Art 53, Para 7) as follows:
  • Simplified invoices could be issued to all customers/clients except a taxable person, non-taxable legal person, a one-person establishment or other entity incorporated in Saudi Arabia. Effectively, retail consumers would be issued with simplified invoices.
  • Simplified invoices could still be issued to non-retail customers if the value of the supply is below SAR 1,000.
  • Simplified invoices could be issued on the date of the supply or the date of receipt of payment, whichever is sooner.
  • An exemption from these rules would be made available for supplies made by Saudi Arabian financial services providers licensed by the competent authority and any other supplies designated by the ZATCA.  Such a simplified invoice would have to be issued within 15 days after the month of the supply and would have to include the customer’s details. For Saudi Arabian financial services providers, this would generally confirm that the bank statement could be used as a tax invoice under the e-invoicing provisions.

The proposed measures also include certain changes to the tax administration’s authority and processes, such as:

• The proposal provides authority for the ZATCA to change the invoice content requirements or introduce additional requirements for e-invoicing purposes. Effectively, in terms of tax invoice content, the VAT regulations would be read together with the e-invoicing regulations and the latter would prevail (amending Art 53, Para 9).
• The ZATCA would have the authority to suspend or cancel the obligation to apply the provisions of the e-invoicing regulations (either wholly or partially) for a category of taxpayers or specific taxpayers. (amending Art 53 to add Para 10);
• There would be changes to the circumstances when a credit/debit note would have to be issued when the tax charged on the invoice exceeds/is less than the “due tax of the supply” amending Art 54, Para 1 and 2).
• Debit/credit notes could be issued in instances of a mistake or any other event not related to a change in the value of supply or return of goods, subject to both the supplier and the customer retaining the tax invoice and the note (amending Art 54, Paras 3,4, and 5).
• When issuing a credit/debit note, there would no longer be a reference to the sequential number of the original invoice. The proposal would require that the note would “precisely” have to refer to the original invoice (amending Art 54, Paras 3 and 4).
• The proposal includes “suggested” changes to the storage of VAT-related data.

For more information, contact a KPMG tax professional:

Philippe Stephanny | +1 202 533 3082 | philippestephanny@kpmg.com