The General Authority of Zakat and Tax (GAZT) of the Kingdom of Saudi Arabia (KSA) announced the mandatory roll out e-invoicing from December 2021. This initiative will help the country to reduce errors, ensure tax compliance and minimize the shadow economy. But the transition to the new system can be challenging for banks as they also try to ensure uninterrupted operations and a seamless customer experience. This is a big change for them, and they will need comprehensive technology platforms and a well thought out strategy to ensure the least amount of disruption and maximum compliance.

To be honest, the move to e-invoicing was inevitable. Across the world, there is a renewed push towards a digital economic foundation as countries try to modernize their taxation and invoicing laws, ensure better regulatory compliance, and address loopholes in their legacy frameworks. This will help KSA to simplify and streamline reporting standards between taxpayers and the authorities, prevent tax evasion and ensure transparent and fair business practices. It is a win-win for all parties in the market and will substantially boost the economy.

Listen to our experts discuss the impact of e-invoicing on banking in KSA

Banks in KSA are not new to this move to digitization and transparent taxation structures. The VAT compliance regulations that were affected a couple of years ago required a similar kind of change management and adaptation. When it comes to compliance with a new framework, the biggest challenge that banks face is that of their outdated systems. Most banks today have complex infrastructures with multiple ‌legacy‌ ‌systems‌ ‌or‌ ‌multiple‌ ‌core‌ ‌systems, ‌product‌ ‌processes,‌ ‌DRP‌ ‌systems‌ ‌and‌ ‌other‌ support ‌systems‌.  The complexity coupled with lack of flexibility and scalability make it difficult for them to quickly implement a new regimen or process. But from my experience, I can say that this is a challenge that is easily resolved.

Banks must begin with a thorough assessment of what their existing systems can deliver and map it against the requirements. In the case of the e-invoicing mandate, banks will have to integrate their systems with that of the GAZT.  The important thing to keep in mind here is that the change is not a one-time occurrence. Digitization and reform are an ongoing process and new laws & regulations will continue to emerge over a period of time. Banks must gauge if their systems can handle ongoing regular disruptions. After this exercise, most banks will conclude that existing frameworks are not up to the task. They will need an enterprise level solution that can automatically streamline the invoicing process, integrate with the GAZT, and align invoices with the regulators.

At this juncture, it is crucial for third party solution providers to work closely with banks to make them aware of the middleware and over the top solutions in the market that can help them meet mandatory regulations without disrupting the legacy core systems. These solutions typically sit over the core and ensure the agility and scalability they need to quickly address changing regulations. Banks must partner with third party vendors whose solutions can enable end-to-end e-invoicing management, compliance and help prep customers for the new digital invoicing regime. A solution that has been designed specifically for the financial services sector and can be deployed quickly is a good investment.  And identifying partners who have extensive experience of helping banks adjust to the previous VAT regulations is vital. They are familiar with the market, with the regulations being rolled out. And thanks to their in-depth expertise, they have a wealth of best practices to draw upon to standardize deployment and management processes. On going dialogue between the vendor and bank will ensure clarity on issues like integration, product capabilities and ROI.

‌The e-invoicing regulations announced by KSA is a futuristic move that will help transform how business is done and avoid revenue leakages. And of course, such a significant transition can seem overwhelming. Fortunately, today there are not only comprehensive, best in class solutions but also experienced third party vendors who can help banks make this giant leap painlessly and efficiently.

Learn more about SunTec’s KSA e-Invoicing Solution here