KSA Guide: What is VAT Invoicing and Records?
All suppliers who are registered for VAT in KSA must produce invoices showing details of revenue and tax information on all taxable sales.
When should a VAT invoice be issued?
VAT invoice must be issued by the 15th day of the succeeding month of the transaction.
Information required in a VAT invoice issued in KSA
A VAT invoice issued in KSA must include the following details related to the transaction in Arabic:
- Issue date of the invoice and the date of supply, where invoice is issued on a different date than date of supply.
- Invoice numbers should be in a chronological order i.e sequencing must be correct, to identify the document.
- Legal name, address, and tax identification number of the supplier.
- Legal name, address, and, when the customer is self-billing, tax identification number of the customer along with a statement that the customer and supplier have agreed to self-billing of VAT.
- Quantity of goods, type of goods and nature of services provided.
- Total amount of revenue eligible for VAT & total amount of revenue eligible for exemption, along with the VAT rates (5% or 0%).
- Unit price of the goods without any tax.
- Notes regarding any discounts or rebates that has not been included in the unit price.
- Total amount of tax payable in SAR.
- Notes regarding calculation of VAT on a zero-rate, exemption, or margin scheme of supply.
- Where Profit margin method is being used, mentioning the same.
- Total VAT payable.
KSA VAT invoice simplified
Where goods and services in KSA are valued at under SAR 1,000 and are not classified as export or internal supplies, simplified tax invoices can be used. Businesses can take advantage of these simplified invoices to have a better administration over issuing invoices. The simplified tax invoices must include the following:
- Invoice date
- Supplier’s full name, address, and tax identification number
- A detailed description of the goods or services supplied
- Total amount payable for the good or service referred to in the invoice
- Tax amount payable or an indication that the total payable mentioned includes VAT
Invoices in KSA should always be issued in base monetary sums in Saudi Riyals (SAR). Where the transactions took place in another currency, daily conversion rate should be used by the taxpayer on the date the tax becomes due in order to convert the sum to Saudi Riyals (SAR). The daily conversion rate will be provided by the Saudi Arabian Monetary Authority (SAMA).
Self-billing under VAT
When a customer produces an invoice to document the input tax paid to a supplier in KSA, it is known as the taxpayer. The customer produces the document in this case instead of the supplier providing that invoice. This is allowed in cases where the customer and supplier have agreed on it. The supplier should have specifically agreed that he will not invoice for VAT and both the customer and supplier must have fixed this as the preferred method of tax invoicing.
Records and Books of Accounts
- Time frame requirements for VAT records and documents: Taxpayers registered under VAT must maintain relevant records for a minimum of six years after each tax period for the purposes of audit. In case of capital assets, businesses must maintain records for the adjustment period. Adjustment period refers to six years for both tangible and intangible assets and ten years for immovable assets like real estate along with an additional five years from the date of purchase which adds up to a total of 11 to 15 years.
- Place of keeping VAT records and documents: Taxpayers registered under VAT in KSA are required to maintain their VAT records inside the Kingdom. The records can either be stored electronically or physical documents inside KSA. Where the records are stored electronically, the physical server should also be inside the Kingdom. This applies to non-resident taxpayers as well. In case of non-resident taxpayers, their designated tax representative is responsible for maintenance of records according to these principles. Multinational companies who have their record keeping in a centralized place outside KSA must have their KSA- related VAT records accessible in a terminal inside the Kingdom.
- Records needed in event of audit: Taxpayers registered under VAT in KSA must keep all records related to their calculation of taxfor the purposes of VAT. These records shall include VAT returns and invoices along with other potential transaction records as well.
- VAT accounts: The VAT account of a business is its on-going balance with GAZT showing all tax debts and credits paid, used, or accumulated across periods. Hence this is a very important record that has to be maintained.
Special Issues under VAT in KSA
- Self-supply of goods and services: Where a taxable business supplies goods or services to it, in such cases, these are not taxable. For instance, where one member of a VAT group provides services to another member of that group, it is known as self-supply and is not taxable. However, this principle does not apply in the case of nominal supplies.
- Self-supply within the GCC: Where a taxable business is registered in more than one GCC state and its Saudi business are supplied from an entity elsewhere in the GCC, the transaction is deemed to be self-supply and is not taxable. The Authority of VAT, GAZT does not view such transactions as self-supply and treats them as imports instead from the non-Saudi branch’s original supplier to the Saudi entity, making the transaction taxable. For instance, where a Saudi business supplies itself with a computer from its Kuwaiti branch, that transaction will be taxable. Let’s say the Kuwaiti branch originally bought that computer in a store located in Kuwait. In this case, GAZT will view that transaction only as the Saudi business importing the computer directly from the original store in Kuwait, therefore making it taxable as an import.