According to new mandates issued by ZATCA of Saudi Arabia, the onus lies with the company that receives and processes invoices from suppliers to ensure that all tax information is accurate. One key aspect of this compliance process is ensuring that all tax information is verified, including the legitimacy of VAT numbers. Spotting fake or invalid VAT numbers in KSA is crucial for accounting teams to maintain uninterrupted business operations.
Processing invoices with fake or invalid VAT numbers can lead to serious financial and legal consequences. If a business unknowingly accepts and processes an invoice with a fake VAT number, it may face rejected VAT claims, penalties, or compliance violations during tax audits. This makes it all the more important for companies to identify suspicious or invalid VAT numbers before processing invoices or making payments.
There are many ways a company can check VAT number KSA and verify whether it is fake or invalid. This article enumerates the different ways to identify a fake VAT number on a supplier invoice and take the necessary steps.
1. Check the length of the VAT number
VAT numbers issued by ZATCA are 15-digit. If the VAT number presented to you has:
- More than 15 digits
- Less than 15 digits
- Includes letters or symbols
It can automatically be considered invalid. This is a simple manual check which can eliminate invalid VAT numbers before actual verification.
2. Review the VAT number structure
VAT numbers typically start with ‘3’, as 3 is the GCC code for Saudi Arabia. VAT numbers in Saudi Arabia follow a clear structure. Some of the indicators which may be considered suspicious include:
- Incorrect placement of validation digits
- Numbers that do not match the standard format
This method cannot, by itself, detect an invalid VAT number, although it can detect unusual and fabricated numbers.
3. Verify the number on the ZATCA tool
The best way to check whether a VAT number is valid is to verify it using the official ZATCA verification tool. Companies can use the VAT Taxable Person Lookup tool available on the ZATCA portal. Given below are the steps to verify a VAT number:
- Visit the official ZATCA portal
- Navigate to E-Services
- Click on Verification Services
- Click VAT Taxable Person Lookup
- Enter the VAT number, CR number or VAT Certificate number
- Submit the verification request
The ZATCA portal displays whether the VAT number is registered and provides details about the entity under consideration. If the system returns no results, the VAT number may be invalid. Otherwise, the system will clearly indicate that the VAT number provided is invalid.
4. Confirm the supplier’s legal name
After verifying a VAT number through the ZATCA portal, the company should compare the legal name shown by the portal and compare it with the entity name on the invoice. If both names do not match, it may indicate:
- Incorrect supplier documentation
- Outdated company records
- Fraudulent invoices
In cases such as these, it is best for the company to contact the vendor or supplier directly and request clarification.
5. Check the VAT registration status
Even though a supplier’s VAT number may appear valid, companies should verify the supplier's VAT registration status. The ZATCA portal shows whether any given supplier’s VAT registration is active, inactive or cancelled.
Only suppliers with a valid tax registration status are allowed to issue invoices in Saudi Arabia. Invoices from suppliers with inactive or cancelled VAT registration statuses do not qualify for VAT deductions.
6. Verify the Commercial Registration number
The Commercial Registration number shared by the supplier must also match the details returned by the ZATCA portal. The CR number confirms that the business is registered with the Ministry of Commerce. Companies will have to check:
- CR number accuracy
- Legal business name
- Registered business activity
Cross-verifying both the VAT number and the CR number helps confirm whether the business is legitimate.
7. Review the supplier’s Tax Invoice
Saudi Arabia’s invoice mandate requires certain mandatory fields to be included in all invoices. Before your company accepts an invoice, ensure that every invoice has
- Supplier’s legal business name
- VAT registration number
- Invoice number
- Invoice date
- Description of goods or services
- VAT rate and VAT amount
Invoices missing any of these details may be considered invalid and treated with suspicion.
8. Check for inconsistencies in supplier documents
It is common to see fake VAT numbers accompanying other inconsistencies with illegitimate suppliers. Here are some things to look out for:
- VAT numbers that vary between invoices
- Incorrect business names
- Missing VAT certificates
- Unofficial invoice formats
If many of these discrepancies arise, it is better for the company to investigate further.
9. Automate VAT number verification
Manual verification of VAT number is impractical for companies processing thousands or even hundreds of invoices every month. Companies can automate VAT number verification by integrating their ERPs with the ZATCA portal. Many ERPs, such as TallyPrime, offer an API that connects directly to the ZATCA portal to automate bulk verification of tax numbers.
Automation of VAT number verification offers benefits such as:
- Real-time VAT validation
- Faster invoice approvals
- Reduced manual errors
- Improved compliance monitoring
Automated systems like TallyPrime can flag VAT numbers as being invalid while processing invoices.
The process of detecting invalid or fake VAT numbers is an important compliance responsibility for accounting teams at businesses operating in Saudi Arabia. Since ZATCA is enforcing strict mandates on e-invoicing and VAT, all companies in Saudi Arabia must ensure that all supplier tax information is verified, accurate, and legitimate before processing any invoices and making payments.
By checking the VAT number's format, verifying tax information details through the ZATCA portal, validating supplier information, and maintaining documentation of the verification from ZATCA, companies can easily reduce the risk of fraudulent invoices and compliance violations.
