Changes Required in Business Processes To Comply with Phase 2 of ZATCA e-Invoicing

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08 min read.

Zakat, Tax and Customs Authority (ZATCA) of the Kingdom of Saudi Arabia (KSA) implemented phase 1 of e-invoicing w.e.f 4th December 2021. Also, ZATCA intends to implement phase 2 of e-invoicing in waves. Accordingly, it notified that the taxpayers whose turnover was more than SAR 3 billion in 2021 shall implement phase 2 of e-invoicing from 1st January 2023.

In the e-invoicing initiative, the authority included all resident taxpayers, customers and third parties issuing tax invoices on behalf of the resident taxable persons. However, the authority excluded non-residents for VAT purposes from the e-invoicing initiative.

This article explains the changes to be made by taxpayers in their business process to comply with the ZATCA e-invoicing phase 2 requirements.

23rd December 2022
ZATCA announced that the businesses in KSA with greater than SAR 500 million turnover fall under the second targeted group under phase 2 of e-invoicing, and they must integrate their ERP/POS by 1st July 2023.

The taxpayers ideally would have to make minimum changes to their existing business process to implement e-invoicing according to the phase 2 requirements. Let’s take a look at the changes that would be required to comply with e-Invoicing regulations:

  1. Invoicing process: To start with, you can continue with your existing invoicing process; however, minor changes would be required to the invoice data capturing process as per the ZATCA requirements to convert regular invoices into e-Invoices.
  2. Device registration: You should add the devices and register them with ZATCA as per your business structure so that the business continues to function smoothly and seamlessly.
  3. Invoice fields: Currently, you might be following your own invoice format and capturing the fields as per your business requirement. However, to comply with e-invoicing, you should map your invoice fields with the UBL 2.1 schema. Accordingly, you should add the missing fields to your invoice format as per ZATCA requirements.
  4. Data sharing with ZATCA: You must ensure that all invoices generated using accounting software/POS/ERPs are shared with ZATCA, and no invoices should be missed out. The invoices include standard tax invoices (B2B invoices), simplified tax invoices (B2C invoices), Credit and Debit Notes (CDNs) and even failed invoices.
  5. Printing of invoices: You may have to modify and upgrade the existing invoice printing capabilities to include the mandatory fields to be printed on the ZATCA complaint e-invoice. 
  6. Invoice sharing with customers: You may have to upgrade your invoice-sharing process based on the e-invoice issued. You must share a soft copy of a valid standard tax e-invoice in PDF/A-3 format in the case of B2B transactions. However, in the case of B2C transactions, you shall share a physical copy of the simplified tax e-invoice with a valid QR code.
  7. Archival of invoice data: You must implement the archival facility to store the invoices for a minimum of 6 years as specified by the ZATCA for any audit or reconciliation requirements.
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