E-invoicing in the Middle East

July 28, 2021

Although transactions and payment processes in the Middle East are still mostly paper-based in many countries, local governments are preparing to introduce e-invoicing procedures in the near future. Saudi Arabia is the first country to introduce e-invoicing in the region in the end of 2021. 

In this article, we’ll look into the reasons the Middle East is working towards implementing e-invoicing solutions, the impact such measures are expected to have, as well as outlining simple steps on how businesses can prepare. 

The COVID-19 pandemic has speeded up the process of digitalization of businesses in the Middle East, as well as everywhere else, and invoicing is among the business processes that are affected. Many governments are looking to improve invoicing procedures and make them more efficient, transparent and secure. 

Why are Middle Eastern countries looking to introduce e-invoicing? 

In 2016, the six member states of the Gulf Cooperation Council (GCC), namely, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE, have agreed to implement a VAT system and collect 5% VAT on sales transactions. So far, Bahrain, Saudi Arabia, Oman and the United Arab Emirates have introduced their own VAT system, and Kuwait and Qatar are expected to follow suit. 

Similarly to other countries, Middle Eastern countries are now looking to close their VAT gap (i.e. the difference between the expected and the real VAT revenue in a year), facilitate tax collection, increase transparency and minimize tax evasion and fraud. E-invoicing would allow them to address all of those issues. Governments in the Middle East are looking into ways  to reduce the size and impact of the shadow economy, and harmonize business processes with the rest of the world. 

The Kingdom of Saudi Arabia (KSA) has already introduced an e-invoicing system that will become mandatory for resident taxpayers in December 2021. The General Authority of Zakat and Tax (GAZT) is responsible for the introduction of e-invoicing in Saudi Arabia, and will introduce a system that’ll allow all taxpayers to exchange documents and information electronically.

How can businesses prepare for e-invoicing in the Middle East? 

Wherever in the world your business is based, chances are, you are already impacted by e-invoicing regulations, or will be in the next few years. If you’re operating in the Middle East, here’s how you can prepare:

  • Stay informed on new tax laws and regulations that might impact your business. Make sure you’re receiving timely and up-to-date information on new developments in tax law in each country where you’re operating.
  • Adopt e-invoicing as soon as it’s introduced in a given country. This gives you an edge over your competitors and allows you to transition to e-invoicing well within official deadlines. 
  • Use an automated invoicing solution that is compliant with local tax laws. Use a trusted partner to automate your invoicing processes and modernize your business, while also staying compliant with local tax regulations. 

Fonoa Automated Real-time Invoice Reporting Solution

