Impact of e-Invoicing on KSA’s Banking System

 From December 4, 2021, the General Authority of Zakat and Tax (GAZT) of the Kingdom of Saudi Arabia made e-invoicing mandatory. This mandate aims to decrease the shadow economy, improve tax compliance, and encourage ethical business practices.

E-invoicing must be implemented in two stages, according to GAZT. For starters, firms must be able to create and keep tax invoices and notes in a structured electronic format without having to deal with the tax authority directly. Second, the taxpayer's e-invoicing software must be able to interact with GAZT systems and shift to a clearance-based compliance model that allows GAZT systems to transmit real-time data. This rule applies to all businesses who are liable to pay taxes in the Kingdom of Saudi Arabia, as well as third parties who issue tax invoices on behalf of residents. Companies, especially banks must be prepared for a variety of situations, including the likelihood that real-time permission for individual invoices and transactions.

Scanned or photocopied invoices are not considered e-invoices or digital tax invoices. e-Invoices may be shared electronically, which eliminates the need for printed invoices. They must be securely communicated and kept without jeopardizing the electronic data's validity or integrity. Electronic invoicing may improve transaction efficiency by making them more frictionless, cost-effective, and transparent. The government will have better and quicker insights into market circumstances, be able to ensure tax compliance, and provide greater transparency in business transactions through a system where e-invoicing is the standard. E-invoicing, from a regulatory standpoint, may aid in the detection and reduction of the shadow economy, as well as enable real-time surveillance of the flow of products, services, and money. It has the potential to promote cost reduction and rationalization throughout the banking supply chain, including printing, postal costs, storage, and processing costs. It has the potential to increase banking transparency and client financial reporting. It can also provide a head start on working capital requirements for company treasurers. It also aids in data-driven corporate supply chain finance decision-making, as well as acts as a tool to enhance cash flow and shorten the order-to-cash cycle. The flexibility of e-invoicing models can aid in the automation of data flows into the treasury system, which will simplify and speed up account reconciliation. There will be fewer transaction mistakes if e-invoicing becomes the standard since it provides faster integrity checks.

It goes without saying that there are security and privacy problems, as well as a lack of uniformity in invoicing forms. The good news is that e-invoicing service providers are increasingly investing in a common architecture to enable smooth interoperability, format compatibility, and data integrity across all invoicing systems.

Banking clients are being forced to adopt steps that will provide an effective working capital ecosystem to meet their financial demands due to a hard business climate. Banks are also being compelled to investigate new transaction models in order to save expenses. Clients dealing with these requirements will need a smooth and quick movement of billing data between different organizations. Banks can expedite working capital management in the financial supply chain by exploiting e-invoicing requirements. This will assist them in reducing expenses for customers.

E-invoicing solutions can be developed in-house by banks. However, partnering with a third-party solution provider is a preferable alternative and can help create, manage, and administer a comprehensive and future-proof e-invoicing solution. Working with an outside service provider on a revenue-sharing basis makes more sense right now than investing in a proprietary platform. Given the short implementation timescales in the KSA, banks must swiftly find a reliable and skilled partner to administer the new system. Banks in KSA must look for partners with banking experience, such as VAT solution providers with an e-invoicing solution that can be smoothly linked into their systems. To comply with KSA requirements, they must additionally focus on data security, privacy, online access, and data encryption. Banks must assess the tax environment and needs before investing in a solution that can manage tax data while also interacting effectively with regulatory systems. Any solution that a bank implements must enable them to give open APIs for authorization, accounts, and transaction data such as payments.

Business activities are being transformed digitally. E-invoicing is not only a legal necessity but also a practical means of improving the financial supply chain. The current technological landscape provides banks with a great potential to better serve their clients and markets. They must examine their systems to find gaps and possibilities, and then collaborate with solution partners who have the necessary skills and experience to assist them to take advantage of the e-invoicing potential. Banks can offer efficient services with the solution, improving their performance and strengthening their competitive position.