Export invoices: the zero rate and the right classification

Exporting goods out of the Kingdom is subject to VAT at the zero rate, but the invoice that records it is not a regular invoice priced at zero. It is an export invoice, with its own classification, its own reason code and a buyer outside the Kingdom, and any mismatch between the three makes the document contradict itself. The Zakat, Tax and Customs Authority has pointed to two recurring mistakes here: an export code on an invoice not classified as an export, and an export code on a supply made inside the Kingdom.

Three things that must agree

A sound export invoice brings together three elements that say the same thing:

1. The line: VAT category Z (zero rate) with reason code VATEX-SA-32 — export of goods.
2. The invoice: classified as an export invoice. The invoice type flag string has seven positions (BR-KSA-06), and the fifth is the export flag: 1 on an export invoice, not 0.
3. The buyer: addressed outside Saudi Arabia.

With the export code but no export flag, the invoice claims to be an export and denies it at the same time. With the flag, the code and a buyer addressed inside the Kingdom, the supply is most likely domestic and should have carried 15%.

An export invoice is a tax invoice, not a simplified one

A foreign buyer is usually not registered for Saudi VAT, so some systems wrongly issue a simplified invoice as if to a consumer. An export invoice is a tax (standard) invoice carrying the buyer's full details, and the export flag is not used on a simplified invoice. Nor can the export flag sit with the self-billing flag on the same document (BR-KSA-07). The difference between the two types is explained in tax invoice vs simplified invoice.

The buyer's VAT number is not required when they are not registered in the Kingdom, but their name and address in their own country must be complete, and another identifier such as a passport or other ID number can be given — see national address and buyer ID.

Currency

An export invoice may be issued in the buyer's currency, but an invoice not in riyals states the Saudi riyal as its tax currency (BR-KSA-EN16931-02), so the VAT amount — zero here — also appears in riyals.

Where do exports go on the return?

The VAT return separates domestic zero-rated sales from exports, each with its own box. If exports are not classified as exports on the invoices, they can end up added to domestic zero-rated sales, producing a return that matches neither your actual activity nor the e-invoicing data. That is one of the differences between Fatoora and the return the Authority watches for.

Keep proof of export

Zero-rating an export depends on the goods actually leaving the Kingdom. Keep proof with the invoice, such as the customs export declaration and shipping documents, because the invoice alone does not prove departure. How and how long to keep records is covered in invoice storage and audit readiness.

And exported services?

Exported services have their own code, VATEX-SA-33, and their own conditions in the VAT Implementing Regulations, concerning the recipient and where the service is used. Don't assume every service to a foreign customer is an export; check the conditions with your tax adviser before applying the zero rate.

Common mistakes

• The export code as the default for every zero-rated line, so a domestic sale of medicines or education goes out labelled an export. Each zero-rated case has its own code — see VAT category and exemption reason codes.
• A simplified invoice to a foreign buyer because they have no VAT number.
• The export flag at zero despite the export code.
• A buyer addressed in the Kingdom on an export invoice, such as a local branch of a foreign company.

If an invoice with one of these mistakes has been issued and accepted, it is not edited: it is corrected by a credit note and then a correct invoice.

How this looks in alFatora

In the alFatora app, and through alFatora Connect:

• The export code classifies the invoice: choosing VATEX-SA-32 sets the export flag in the fifth position automatically.
• A buyer outside the Kingdom = a tax invoice: a buyer whose details carry a country other than Saudi Arabia always receives a tax invoice, never a simplified one.
• Refused before submission: an export code for a buyer addressed in the Kingdom, or on a simplified invoice, is refused and never sealed.
• No default reason for the zero rate, so no domestic sale goes out labelled an export.
• The VAT return puts exports in their own box, apart from domestic zero-rated sales.