Phase 1 of e-Invoicing was implemented on 4th December 2021, followed by Phase 2, which was introduced on 1st January 2023. In the second phase, taxpayers were classified into different target groups to implement e-Invoicing regulations in waves.
Check out the timeline for Phase 2 e-Invoicing Implementation: Click Here.
In this blog, we will discuss what are the exempted supplies for which e-Invoices/ CDNs are not required to be issued.
What are Exempted Supplies?
- Financial services, where Consideration is charged as an implicit margin.
- The issue or transfer of a debt security or equity security.
- The issue of life insurance policy (refer to Financial Services guideline for details).
- Rental of qualifying residential Real Estate (refer to Real Estate guidelines for more details).
As per ZATCA regulations, the taxpayers are not required to generate e-Invoices or related Credit/ Debit Notes for the domestic supply of goods and services. For example, such as exempt financial services or residential rentals which qualify for VAT exemption.
At the time of generating e-invoices for exempted supplies, the category code needs to be mentioned.
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VAT Category Code
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Standard Rate
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S
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Zero Rate
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Z
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Exempted from VAT
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E
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Not Subject to VAT
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O
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Payments related to exempted supplies,
ZATCA exempted the below transactions from SA e-invoicing:
- Payments related to exempted supplies
- The amount received for making exempted supplies
Reverse Charge Mechanism Supplies under VAT
As per The VAT regulations in The Kingdom of Saudi Arabia, a taxpayer who is receiving the supply of services from a non-resident, in such a case it is required to charge VAT under the Reverse Charge Mechanism (RCM).
Here, in the case of RCM supplies, the non-resident supplier shall not generate e-invoices or CDNs for making supplies to resident taxpayers. Moreover, the recipient of supplies or the resident taxpayer is also not required to generate an e-invoice to record the supplies under RCM.
Import of goods to KSA
VAT is chargeable on the import of goods into the KSA. The VAT charged on import is a separate imposition of tax to any VAT charged on a supply of those same goods.
Import VAT is charged by the Customs Department at the point of entry into the KSA. The Common Customs Law requires that a customs declaration shall be produced by the importer for any goods entering or leaving the country.
In these cases, an e-invoice or related CDN is not required to be generated either by the importer or the supplier.