VAT Invoice Format in Saudi Arabia

Tally Solutions | Updated on: December 17, 2024

VAT (Value Added Tax) invoices are vital documents for corporations in Saudi Arabia, detailing the VAT charged on income and paid on purchases. They encompass important statistics like dealer and customer data, invoice dates, and portions. Compliance with the Zakat, Tax and Customs Authority (ZATCA) regulations guarantees VAT invoices meet criminal requirements, facilitating accurate tax reporting and auditing. Failure to hassle compliant invoices can result in effects and tax audit complications.

VAT Invoices in Saudi Arabia: Main Requirements

Saudi Arabia has specified certain requirements for VAT invoices in implementing its e-invoicing under the Zakat, Tax and Customs Authority, to promote tax compliance and to facilitate business processes. Below are the main requirements for VAT invoices by ZATCA regulations:

Key Requirements for VAT Invoices

Each VAT invoice should contain the following details among others:
Name and address of the seller as well as his VAT registration number.
Buyer's name and address (for B2B).
Date of issue and consecutive sequential invoice number.
Description of goods or services supplied.
Amount excluding VAT, the rate of VAT and the total amount including VAT.
A QR code with relevant tax details (compulsory for B2C and for B2B for Phase 2)

VAT Invoice Types

VAT is classed into 3 most important sorts depending on the character of goods and services. These categories are very crucial for corporations to recognize so that you can observe the policies set by the Zakat, Tax and Customs Authority (ZATCA). Here are the types of VAT:

Standard Rate (15%): The standard VAT rate is 15% for most goods and services sold in the Kingdom. It was hiked from 5% on July 1, 2020, through economic measures taken due to the COVID-19 pandemic. Common items in this category are:

Food and drinks
Local transportation services
Most retail products and services

Zero-Rated Supplies (0%): Zero-rated supplies are taxable but charged at a rate of 0%. This means that while VAT is technically applicable, no tax is collected on these transactions. Businesses can reclaim input VAT on these supplies. Examples include:

Exports of goods and services
International transportation services
Certain medical supplies and investment metals (e.g., gold, silver)

Exempt Supplies: Exempt supplies are not subject to VAT at all, meaning no VAT is charged, and businesses cannot reclaim input VAT on these transactions. Common exempt categories include:

Residential real estate rental
Financial services (e.g., loans, mortgages)
Certain educational and healthcare services
Case-Specific Details to be Given in a Tax Invoice

Case-Specific Details to Be Specified in a Tax Invoice

The date on which the supply took place if it is different from the date of issue of the tax invoice

In case the tax is not charged at the basic rate, a narration explaining the tax treatment applied to the supply

In cases where the customer is required to self-account for tax on the supply, the customer’s Tax Identification Number and a statement that the customer must account for the tax

In case the supply is of used goods, a reference to the fact that VAT is charged on the profit margin on the supply should be given and the invoice should not show the amount of tax charged

VAT registrants must issue fully and VAT compliant tax invoices, specifying all necessary information under VAT law. Suppliers must also issue valid tax invoices, ensuring they are present in purchases. This template can help businesses design automated invoicing systems for VAT compliant invoices, reducing manual effort.

On Nov 1, 2024, ZATCA announced that wave 17 of phase 2 covers those entities registered under KSA VAT, whose 2022 or 2023 turnover is more than SAR 2.5 million. Hence relevant companies shall link their ERP/POS by July 31, 2025.

Common mistakes to avoid

Businesses regularly face numerous errors while making prepared VAT invoices. Compliance can lead to monetary results because of the ones errors. This list will provide some of the most common mistakes, which might be avoided with the aid of following such commands:

Incorrect Information: Either lacking or incorrect facts relating to the vendor's or customer's names, addresses, or VAT registration variety.
Omitting Mandatory Components: Lack of bill variety, date, or supply date.
Incorrect VAT Rate: The application of a wrong VAT price (e.g., using the same vintage price in place of zero-rated for sure gadgets).
Calculation Errors: Calculation mistakes on well-known portions, VAT amounts, or line object totals.
Invalid or Missing VAT Numbers: Providing an invalid VAT amount or not imparting it in any respect.
Incorrect Payment Information: Giving incorrect monetary institution account facts or fee commands.
Failure to Include a Billing Reference for Credit/Debit Notes: Failure to embody a connection with the actual bill while issuing credit score or debit notes.
Poor Record Keeping: Failure to keep right records of issued invoices can motive problems at some stage in audits.
Failure to Comply with ZATCA Regulations: Failure to conform with unique necessities stipulated with the aid of ZATCA, which includes e-invoicing protocols.
Use of Manual Systems: The use of paper invoices results in delays and errors because of human oversight.