Retention in contracting is an amount without VAT, that the client will keep on hold until the end of the project, how to address this amount in the E-Invoice?
The retention amount should be mentioned on the human readable invoice to reduce the final payable amount. It will not be included in the XML, and it will not reduce the Tax amount. This means that you will collect from the customer a lesser amount but pay the VAT based on the full amount.
At the end of the project you will issue a Commercial Invoice to collect the Retention amount(s), and at that point there is no VAT to be paid (as this has been paid already).
is this proposal confirmed by ZATCA ?
If we send the retention amount(s) invoice again to ZATCA, the receivables at ZATCA and our billing system will not match.
I have created a tax invoice for 1000 SAR with a VAT of 150.
The total invoice with VAT is 1150 SAR. The ZATCA receivable is 1150 SAR.
Retaining 10% of the invoice value, excluding VAT, is 100 SAR (the retaining amount without VAT).
My billing system shows 1050 receivables.
After creating an invoice to collect the retention amount (100 SAR), the receivable at ZATCA will be 1150 + 100 = 1250. In my system, it will be 1150.
Is there a way to handle this? Your suggestions would be greatly appreciated.
Thank you.
Please clarify what is human readable invoice? When I raise invoice I will have line with negative amount for Retention which will reduce my invoicing amount by that amount. For example my progress billing completion certificate SAR: 100,000, Retention amount SAF: (10,000). My total tax invoice amount is: 90,000+13,500=103,500.
My next invoice for retention (at the end of contract will be) 10,000+1,500= 11,500.
As per the new VAT rule, please suggest is the above illustration correct?
@Asrarshaik human readable form of invoice means the PDF/A-3(with embedded XML) for B2B invoices. For B2C invoices this could be a hard copy of Simplified Invoice issued to customers or or a soft copy in any format.
Regarding Retention amount, first you need to determine the tax position whether the retention amount will reduce taxable amount or not. There are no changes in VAT regulations regarding retention amount, tax position depends on contractual terms
If you take a tax position that retention amount will not reduce taxable amount, then you have two options for handling retention amount:
Option 1: Do not include any value towards retention amount and display this directly on the human readable form.
Option 2: Include retention amount as "Document Level Allowance (BT-92) with indicator ‘false’ and select VAT Category Code as Out of scope. Then in the tax subtotals, you have to include one more sub total for Out of scope category and enter retention amount as negative value (-10,000 in above example). As a result, VAT will be calculated on full invoice value (100,000 in above example) and Amount due for payment (BT-115) will be 105,000.
@S.Quadri if you have already paid VAT on full amount (1000 SAR) then final invoice for release of retention amount will not be a tax invoice, you don’t have to send it to ZATCA.