Treatment of Advance Payments under Saudi Arabia e-Invoicing

Zakat, Tax and Customs Authority (ZATCA) is the tax authority in Saudi Arabia that intended to implement e-invoicing in two phases. Saudi e-Invoicing includes all resident taxpayers except non-residents (for VAT purposes).

Accordingly, ZATCA implemented phase 1 of e-invoicing in Saudi w.e.f 4 December 2021. Also, ZATCA notified below waves under phase 2 of Saudi Arabia e-invoicing as follows:

1. Wave 1 under phase 2: The VAT-registered businesses with more than 3 billion turnover in 2021 fall under wave 1 of phase 2 and must implement phase 2 beginning from 1 January 2023.
2. Wave 2 under phase 2: Businesses registered under KSA VAT with more than 500 million turnover in 2021 fall under wave 2 of phase 2, and they shall begin phase 2 implementation from 1 July 2023.
3. Wave 3 under phase 2: VAT registered business in Saudi having more than SAR 250 million and less than SAR 500 million turnover in 2021 or 2022 fall under Wave 3 w.e.f 1 October 2023.
4. Wave 4 under phase 2: KSA VAT-registered businesses whose turnover is more than SAR 150 million and less than SAR 250 million in 2021 or 2022 fall under wave 4 w.e.f 1 November 2023.
5. Wave 5 under phase 2: Saudi business with more than SAR 100 million and less than SAR 150 million turnover in 2021 or 2022 shall fall under wave 5 from 1 December 2023.
6. Wave 6 under phase 2: KSA taxpayers with more than SAR 70 million and less than SAR 100 million turnover in 2021 or 2022 falls under wave 6 w.e.f 1 January 2024.
7. Wave 7 under phase 2: Business in KSA with more than SAR 50 million and less than SAR 70 million turnover shall fall under wave 7 w.e.f 1 February 2024. 
8. Wave 8 under phase 2: Saudi businesses registered under KSA with more than SAR 40 million and less than SAR 50 million turnover falls under wave 8 w.e.f 1 March 2024.
9. Wave 9 under phase 2: KSA businesses registered under VAT whose turnover is more than SAR 30 million and less than SAR 40 million falls under wave 9 w.e.f 1 June 2024. 
10. Wave 10 under phase 2: KSA businesses registered under VAT whose turnover is more than SAR 25 million and less than SAR 30 million will fall under wave 10 effective 1 October 2024.
11. Wave 11 under phase 2: KSA businesses registered under VAT whose turnover is more than SAR 15 million and less than SAR 25 million will fall under wave 11, effective 1 November 2024.
12. Wave 12 under phase 2: KSA businesses registered under VAT whose turnover is more than SAR 10 million and less than SAR 15 million will fall under wave 12, effective 1 December 2024.
13. Wave 13 under phase 2: KSA businesses registered under VAT whose turnover is more than SAR 7 million and less than SAR 10 million will fall under wave 13, effective 1 January 2025.
14. Wave 14 under phase 2: KSA businesses registered under VAT whose turnover is more than SAR 5 million and less than SAR 7 million will fall under wave 14, effective 1st February 2025.\
15. Wave 15 under phase 2: KSA businesses registered under VAT whose turnover is more than SAR 4 million and less than SAR 5 million will fall under wave 15, effective 1st March 2025.
16. Wave 16 under phase 2: KSA businesses registered under VAT whose turnover is more than SAR 3 million and less than SAR 4 million will fall under wave 16, effective 1st April 2025.
17. Wave 17 under phase 2: KSA businesses registered under VAT whose turnover is more than SAR 2.5 million and less than SAR 3 million will fall under wave 17 and must integrate their e-invoicing solution with the Fatoorah Portal by 31st July 2025.
18. Wave 18 under phase 2: KSA businesses registered under VAT whose turnover is more than SAR 2 million and less than SAR 2.5 million will fall under wave 18 and must integrate their e-invoicing solution with the Fatoorah Portal by 31st August 2025.
19. Wave 19 under phase 2: KSA businesses registered under VAT whose turnover is more than SAR 1.75 million and less than SAR 2 million will fall under wave 19 and must integrate their e-invoicing solution with the Fatoorah Portal by 30th September 2025.
20. Wave 20 under phase 2: KSA businesses registered under VAT whose turnover is more than SAR 1.5 million and less than SAR 1.75 million will fall under wave 20 and must integrate their e-invoicing solution with the Fatoorah Portal by 31st October 2025.
21. Wave 21 under phase 2: KSA businesses registered under VAT whose turnover is more than SAR 1.25 million and less than SAR 1.5 million will fall under wave 21 and must integrate their e-invoicing solution with the Fatoorah Portal by 30th November 2025.
22. Wave 22 under phase 2: KSA businesses registered under VAT whose turnover is more than SAR 1 million and less than SAR 1.25 million will fall under wave 22 and must integrate their e-invoicing solution with the Fatoorah Portal by 31st December 2025.

Hence, the e-invoicing applicable taxpayers must understand and comply with the phase 2 requirements. The businesses must integrate their ERP/accounting/POS systems with the Fatoora portal. Businesses must ‘Clear’ the standard tax invoices and related Credit and Debit Notes (CDNs) in real-time; and ‘report’ the simplified tax invoices and related CDNs within 24 hours from the time of generation to comply with phase 2.

Businesses shall generate e-invoices for advance payments as well using a compliant e-invoicing software in Saudi Arabia. This article explains various scenarios of the advance payment and how to generate e-invoices in such scenarios.

e-Invoices for advance payments in KSA

Advance payments attract Value Added Tax (VAT) in Saudi Arabia, and businesses must generate e-invoices for the same. Also, under the KSA VAT invoicing, you must issue an invoice within 15 days from the end of the month in which the advance is received.

Suppose you received an advance of 1000 riyals on 10 January 2023; you must issue a tax invoice before 15 February 2023.

Let’s take a look at different scenarios in advance payments:

Scenario 1: When received 100% advance

In cases when you receive 100% advance for the supply of goods or services, you must issue a tax invoice mentioning the advance received and VAT on it.

Once you provide goods or services, you shall adjust the advance against the total invoice value and issue the final tax invoice.

Scenario 2: When received part of the advance

You must issue the invoice even if you received part of the advance. So, after providing goods or services, you must adjust the part advance against the total invoice value and issue the tax invoice accordingly.