Consequences and Impact of Non-Compliance with e-Invoicing

 | Updated on: March 21, 2024

Governments all over the world have been focusing on digitising transactions for better control and administration of finances. Middle East and North African (MENA) governments are no exception. In the last two years, they have introduced many regulations with respect to electronic invoices, tax compliance, and accounting practices, with consequences for not complying with them.

This blog sheds light on the regulations that are currently in practice in the MENA countries, along with the consequences and impact of non-compliance with electronic invoicing. We recommend that readers visit the official websites of their respective governments from time to time for updates to these rules, if any.

e-Invoicing and consequence of non-compliance in the Middle East

Over the recent past, the Gulf Cooperation Countries (GCC) have been implementing various measures to digitise their transactions. While all the countries under its mandate have been getting used to the new electronic invoicing and receipt systems, one country that stood out as a clear leader is Saudi Arabia.

Here are some e-invoicing and non-compliance regulations in Saudi Arabia:

• The Saudi Arabia Zakat, Tax and Customs Authority (ZATCA) introduced e-invoicing regulations in the country in December 2020.
• All resident taxpayers had to mandatorily implement the system of electronic invoices, wherein they could issue, save and modify these invoices by 4th December 2021.
• Arabic should be the language in which these e-invoices are issued, though the ZATCA permitted additional languages along with Arabic.
• On 24th June 2022, the ZATCA introduced Phase 2, also known as the Integration Phase, and this was effective from 1st January 2023.
• Many waves of this phase would soon be announced on the official portal of ZATCA. All resident businesses in the Kingdom of Saudi Arabia (KSA) with an annual taxable turnover of over SAR3 billion in the year 2021 had to comply with the regulations introduced in this first wave of Phase 2.
• If these businesses don’t comply with the e-invoicing regulations of ZATCA, they would be penalised according to the terms in the VAT legislation of KSA.
• Some of the common e-invoicing violations in this country are not issuing electronic invoices, not having appropriate QR codes, not informing ZATCA about problems in issuing e-invoices and making deletions or modifications to the e-invoices after they have been issued.

• Non-compliance with the regulations will attract different types of penalties. First-time offenders will be let off with a warning, but after that the penalty amount ranges from SAR 1000 (second-time offenders) to SAR 40000 (non-compliance up to 4 times and more).
• Eight waves have already been decided, with each wave including taxpayers in various brackets, to eventually include all taxpayers in the country by March 2024, the time when the 8th wave is expected to be concluded.

e-invoicing and compliance regulations in other countries in the Middle East

• In the UAE, electronic invoicing regulations have been introduced in two phases, with the first phase expected to begin only by July 2025.
• In Oman, mandatory implementation of electronic invoices is expected to happen between April and September 2024.
• In the Kingdom of Bahrain, the National Bureau of Revenue submitted the  Request for Proposal for creating and maintaining a centralised system for electronic invoices. The project is expected to be implemented in the country towards the end of 2024 only.

e-Invoicing and compliance regulations in North Africa

In North Africa, only Tunisia and Egypt have implemented or proposed to implement e-invoicing systems. They were one of the first countries in the Middle East and North Africa region to propose e-invoicing systems as soon as these systems were launched globally. 

• In Egypt, the implementation of e-invoicing and related regulations is expected to get in full swing by the end of 2024. The Egyptian Tax Authority has made it mandatory for all public and private companies in the country to implement this system in different phases. Egypt is expected to mirror the e-invoicing system popularly used in countries like Latin America.
• In 2016, Tunisia was the first African country to implement mandatory e-invoicing for all B2G and a few B2B transactions. It follows the regulations prescribed by the Continuous Transaction Controls (CTC).

Bottom line

By the end of this year, most countries in the Middle East and North Africa are expected to have made considerable progress with implementing e-invoicing systems in their administration. Once the systems are up and running, it would become easier for the governments to standardise tax compliance and calculate penalty charges for non-compliance. Not adhering to the new invoicing and tax compliance would mean a penalty for businesses in these countries.