E-Commerce Requirements in Saudi Arabia

What is E-Commerce According to Saudi Law?

According to the Saudi E-Commerce Law issued in 2019, e-commerce is defined as any commercial activity conducted through electronic means, whether through websites, applications, or social media platforms. This definition includes selling goods and services, advertising them, marketing them, and any commercial transaction conducted entirely or partially over the internet.

The legal definition is broad enough to include all forms of digital commercial activity, from major online stores to individual sellers on social media platforms. It's not limited to dedicated sales websites, but extends to include any person or entity that offers products or services for sale online regularly, even if social media channels are the only means.

Basic Requirements for Opening an Online Store

To start an e-commerce business in the Kingdom, there are a set of legal and regulatory requirements that must be met to ensure full compliance with Saudi regulations:

1. Commercial Registration

You must obtain a commercial registration from the Ministry of Commerce that includes e-commerce activity. The registration can be issued for individuals or companies, and "e-commerce" activity must be clearly listed among the licensed activities in the registration.

2. Freelance Document (for Individuals)

For individuals who wish to practice e-commerce without establishing a company, they can obtain a freelance document from the Freelance Work Platform affiliated with the Ministry of Human Resources and Social Development. This document allows them to practice the activity legally and issue invoices.

3. Municipal License (if necessary)

In some cases, especially if the activity requires a physical location for storing goods or managing operations, a municipal license may be required. Many e-commerce activities that operate entirely online may not need this.

4. Registration on the Business Platform

E-commerce store owners are currently required to register on the Business Platform operated by the Saudi Business Center. This update aims to improve e-commerce reliability and ensure financial transaction security by linking stores to verified commercial bank accounts.

5. Commercial Bank Account

Opening a commercial bank account in the name of the establishment to separate commercial transactions from personal ones, which is a necessary condition for obtaining electronic payment gateways.

ZATCA Requirements

This is the part that many overlook and causes them financial violations:

1. Tax Registration

• If your annual sales exceed 375,000 riyals, you must register for Value Added Tax.
• If your sales are between 187,500 and 375,000 riyals, registration is optional.

2. Electronic Invoicing (E-Invoicing)

• Any electronic sales transaction must have an electronic invoice issued immediately.
• Requirements: Your technical system (online store or accounting system) must be capable of issuing electronic invoices compliant with Phase 1 requirements (simplified invoice) and Phase 2 (integration and connectivity) according to ZATCA guidelines. Manual invoices or PDF files are no longer acceptable.

Technical Store Requirements (What Must Appear on Your Website)

After meeting the legal requirements, there are a set of mandatory elements that must appear clearly on your website according to the Saudi E-Commerce Law:

• Complete Contact Information: Contact information must be displayed clearly on every page of the store, including mobile number, email, and physical address if available.

• Commercial Registration Number: The commercial registration number must be displayed prominently, usually in the website footer or "About Us" page.

• Tax Number: If your store is registered for Value Added Tax, the tax number must be displayed clearly, especially on invoices and payment pages.

• Privacy Policy: A detailed page explaining how user data is collected, used, protected, and shared. It must be clear and easily accessible from any page on the site.

• Terms and Conditions: Includes usage rules, sales terms, shipping policy, and legal responsibilities. The user must agree to them before completing any purchase.

• Return and Exchange Policy: Clear explanation of the consumer's right to return products within 7 days (according to Saudi law), conditions, exceptions, and return procedures.

• Detailed Product Information: Each product must contain an accurate description, clear images, price including tax, expected delivery time, and any necessary technical information or warnings.

• Available Payment Methods: Display all supported payment methods clearly, with payment gateway logos to reassure customers about transaction security.

Frequently Asked Questions

1. Can I start e-commerce without a commercial registration?

No, commercial registration or a freelance document is mandatory to legally practice e-commerce in the Kingdom. Selling without a license exposes you to fines and legal violations.

2. How long does the registration and licensing process take?

The process of obtaining a commercial registration may take one to three business days. Registration on the Business Platform and obtaining a bank account may take one to two weeks depending on the bank and document readiness.

3. Does selling through social media accounts require a license?

Yes, if you regularly sell through Instagram, Twitter, or any other platform, you are required to obtain a license and register your activity according to the e-commerce law.

4. What is the penalty for not complying with e-invoicing requirements?

Non-compliance with e-invoicing exposes you to fines of up to 50,000 riyals depending on the type and size of the violation. Repetition may lead to suspension of commercial activity.

5. Do I need a lawyer or legal consultant to start my online store?

It's not mandatory, but it's recommended to consult an advisor or accountant to help you with tax procedures and ensure your full compliance with regulations, especially if you're new to the field.

Conclusion

E-commerce in Saudi Arabia is a promising opportunity, but it requires full compliance with a set of legal and technical requirements. From obtaining commercial registration and registering on the Business Platform, to complying with ZATCA requirements and electronic invoicing, every step is necessary to protect your business and avoid fines. Make sure your website contains all required elements such as privacy policies, return policies, and terms and conditions. Compliance with these requirements is not only a legal obligation, but also builds trust with your customers and ensures the continuity and success of your e-commerce business.

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