KSA e-invoicing FAQs are easily understandable for all the relevant persons looking at implementing the e-invoicing system in Saudi Arabia. You can search for any FAQ on e-invoicing in this article and get the latest answers.
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The e-invoicing or Fatoorah applies to VAT-registered residents of Saudi Arabia, including persons who issue tax invoices on behalf of VAT-registered persons. However, non-resident taxable persons are kept outside the scope of the e-invoicing system.
The e-invoicing system will be rolled out in two phases in the KSA, as follows:
Phase 1: Generation Phase – This phase applies from 4th December 2021 to 31st December 2022 to all the VAT registered residents and notified persons under the e-Invoicing Regulations. These notified persons should generate the e-invoices or Fatoorah from a compliant e-invoicing solution with specified fields.
Phase 2: Integration Phase – This phase begins from 1st January 2023 onwards and involves targeted taxpayer groups to integrate with the ZATCA’s system for clearance and reporting of e-invoices or Fatoorah in a transitional manner. It is in addition to requirements in phase 1. Additional fields will be specified for e-invoice for compliance. The system requirements and the integration date via API will be informed at least six months in advance.
The first phase is known as the generation phase. The taxpayers registered under the VAT law in Saudi Arabia and specified under the e-Invoicing Regulations must implement e-invoicing or Fatoorah. All electronic invoices and notes must be generated and stored using compliant electronic systems. ZATCA started the Phase I implementation on 4th December 2021.
The technical requirements are required for the e-invoicing solution providers such as the ECR or software vendors to refer and develop systems. Alternatively, these technical requirements are for in-house tech teams who build internal solutions for the use of the business organisation.
The taxpayers only have to approach such service providers or their IT teams to ensure the readiness of compliant e-invoice solutions before 4th December 2021.
The minimum additional fields will turn a standard invoice into an e-invoice. On the other hand, a simplified e-invoice used for Business-to-Consumers (B2C) transactions will compulsorily have a QR code and its associated debit and credit notes. Moreover, a tax invoice and related notes for Business-to-Business (B2B) transactions must contain the VAT number compulsorily, whereas the QR code is optional.
The laws and regulations prescribe no specific file format for the first phase. However, the e-invoices should be issued and stored on the electronic e-invoice system per ZATCA’s requirements.
Export invoices must be generated as standard tax invoices, and e-invoicing is mandatory for such invoices.
Please refer to the definition of nominal supply below:
A nominal supply does not result from an actual supply of goods or services to another person but is instead deemed for VAT purposes to be a taxable supply – as a result of an event where a taxable person uses or provides goods or services in a certain way (for example, supplying goods or services for no consideration)
An e-Invoice must be generated for nominal supplies and retained with the business records for audit purposes. However, the taxable person receiving goods or services under a nominal supply arrangement (if any) will not be able to deduct input VAT related to that nominal supply. The e-Invoice should therefore not be provided to the customer.
Nominal supply means deemed supply which means – A nominal supply does not result from an actual supply of goods or services to another person but is instead deemed for VAT purposes to be a taxable supply – as a result of an event where a taxable person uses or provides goods or services in a certain way (for example, supplying goods or services for no consideration)
Treatment of bad debt under e-invoice has not been defined by ZATCA Guidelines separately. We need to wait for further clarification from the ZATCA authority.
Yes. As an exception, the e-invoicing system does not apply to non-resident taxable persons defined by the VAT law.
A Standard Tax invoice is issued for most B2B and B2G transactions and is used for claiming input VAT deduction by buyers.
Simplified e-invoices are issued for B2C transactions. The standard e-invoices must be issued when a buyer has the VAT registration number in the case of B2B and B2G transactions. However, the transactions related to exempt supplies, imports of goods, and supplies on which VAT is paid on a reverse charge basis do not require e-invoice generation.
Simplified Tax Invoices are issued for most instant B2C transactions. The buyer does not need to use the invoice for input VAT deduction. In Simplified Tax Invoice, Buyer details like Buyer Name, Address and VAT TIN are not mandatory. Line level discounts may not be provided in simplified Tax Invoices. However, in the case of Simplified Invoice issued to Private education and Private healthcare to citizen name would be required.
Suppose you are issuing an invoice to a Non-taxable Natural Person (other than the export of goods). In that case, you can issue a simplified invoice. If you are issuing an invoice to a Non-Taxable Legal person, you may issue the Standard Tax Invoice.
The following are the changes from 4th December 2021:
The first phase of e-invoicing in KSA requires taxpayers to use electronic solutions or systems to generate e-invoices or Fatoorah. With this, they should no longer issue manual invoices. Further, the first phase needs invoices to contain the buyer’s QR code and VAT number on tax invoices if such buyer is registered under the VAT law.
The QR code is not compulsory for standard e-invoices in the first phase, whereas it is compulsory for simplified e-invoices. In the first phase, generating invoices in XML, anti-tampering features, UUID, and integration with the ZATCA system is optional. The second phase makes all of the above features mandatory for taxpayers.
No. Integrating the e-invoice solution with the ZATCA system is not required on 4th December 2021. It is needed on or after 1st January 2023.
The QR code is compulsory for simplified e-invoices for B2C transactions. At the same time, it is optional for standard e-invoices for B2B and B2G transactions. Such a QR code is generated by the e-invoice solution itself and not by the ZATCA system.
Hence, businesses must upgrade their existing invoicing solutions to accommodate the feature of generating and printing QR codes on e-invoices, starting from 4th December 2021.
Information to be displayed are the name of the seller, their VAT registration number, timestamp of electronic invoice or electronic credit note or debit note, total VAT amount, and the total invoice amount due.
No. During the first phase, the taxpayers do not have to take approval, get clearance or report e-invoices to ZATCA.
The following are the prohibited activities under phase 1:
No. ZATCA may enforce certification requirements for e-invoicing solutions at a later stage.
The ZATCA authority has not mandated any specific format for Phase I. However, XML Format or PDF-A3 format with embedded XML has been mandated from Phase II.
Arabic is the primary language used in an invoice, and any other language can be used in addition. Using only the English language will not be in compliance with ZATCA guidelines.
The ZATCA authority has not mandated any specific format for Phase I. However, XML Format or PDF-A3 format with embedded XML has been mandated from Phase II.
Even though there is no specific format provided in Phase I, each Invoice and its associated Notes should contain all the mandatory fields as per VAT and ZATCA guidelines. Sample invoices have been provided by ZATCA in this document: https://zatca.gov.sa/en/E-Invoicing/Introduction/Guidelines/Documents/E-invoicing_Simplified%20GL.pdf.
QR Code is a matrix barcode with a pattern of black and white squares. It is machine-readable by a QR code scanner or the camera of smart devices to enable basic validation of electronic invoices and electronic notes.
QR Code must contain 5 mandatory fields as specified by ZATCA in Phase I.
As per Article 53(5)(f) of the VAT Implementing Regulation, goods or service description is a mandatory requirement in the invoice; it should be in Arabic, which is a mandatory requirement. However, English can be used as a secondary language in addition to Arabic.
Sample invoices have been provided by ZATCA in this document: https://zatca.gov.sa/en/E-Invoicing/Introduction/Guidelines/Documents/E-invoicing_Simplified%20GL.pdf.
As per ZATCA authority :
The human-readable format can be presented if it is in Arabic (in addition to any other language). Arabic or Hindi numerals can be used (either of which will be considered as Arabic in the invoices). This means Arabic is a must, irrespective of the type of invoice.
Line level allowance is calculated when allowance is given at the line level items. Whereas document-level allowances are calculated at the overall document level.
E.g., if you are selling 10 different products with a price being SAR 100 for each one. For each line item, you gave a line-level allowance of SAR 10. Effectively the total amount is SAR 90 (SAR 90 – SAR 10) at each line and making the total for all 10 lines together SAR 900. You have to calculate VAT and the total amount (including VAT) on each line.
Now, if you provide an over and above discount of 10% at the invoice level hence invoice level Taxable amount (without VAT) would be SAR 810 [SAR 900 – SAR 90 (10%)]. On SAR 810, you have to calculate VAT and Total Amount (including VAT).
A tax invoice must be issued at the time of receiving an advance, and the same should be adjusted accordingly while raising the final e-invoice.
For Electronic Tax Invoices, it is mandatory to generate and print QR codes encoded in Base64 format with up to 500 characters. It must contain the fields specified in the below table as per Annex (2) of the Controls, Requirements, Technical Specifications and Procedural Rules for Implementing the Provisions of the E-Invoicing Regulation.
The following information should be present in QR Code during Phase I of KSA e-invoicing (from 4th December 2021):
Invoice can neither be cancelled nor modified or deleted. Once the invoice is generated and if there is any issue, you would be required to issue either a Credit Note or Debit Note suitably.
Mandatory for the tax invoice and conditional for the simplified tax invoice. However, we suggest providing the VAT amount.
Yes, it does not specify whether it is a seller or buyer Tax registration number. Still, as per our understanding, this is a Seller Tax registration number because both B2B and B2C invoices need to be stored.
Yes, Sequential numbering for invoices is applicable for B2B Invoices also. From 4th December 2021, sequential invoice numbering needs to be maintained irrespective of the underlying system. The ability to generate more than one Invoice sequence in one specific e-invoicing solution unit at any given time is barred by ZATCA and kept under prohibited functionalities.
The ability to generate more than one Invoice sequence in one specific e-invoicing solution unit at any given time is barred by ZATCA and kept under prohibited functionalities. As per ZATCA detailed guidelines, “the e-Invoice Solution Unit” is defined as follows:
It is recommended to follow the requirement from Phase I so that there is no issue with respect to ZATCA compliance.
As per ZATCA detailed guidelines, “the e-Invoice Solution Unit” is defined as follows:
The principle behind such a requirement is that the ZATCA authority mandates absolute transparency and clean invoice sequence generation. Hence, if you have multiple e-Invoice Solution units, each solution unit should generate a single invoice sequence.
Suppose a taxpayer generates invoices in separate locations on separate units. In that case, each unit should generate a single invoice sequence. The units do not need to coordinate invoice creation to order the invoices in the sequence.
The ZATCA authority has not provided specific guidance to provide different sequencing for B2B or B2C transactions. The mandatory requirement is to generate a single sequence number from each e-invoice solution unit.
From 4th December 2021, sequential invoice numbering needs to be maintained irrespective of the underlying system. You can also start an afresh sequence from 4th December 2021 if the system or ERP allows for the same.
The ZATCA authority has not provided any specific clarity based on the sub-division in the business and its link with the sequence. ZATCA has stressed more on Sequence numbers being maintained based on the e-Invoice Solution Unit.
Suppose your ERP is a single e-invoicing solution unit. In that case, it is recommended to use a single sequence number across all subdivisions for all invoices and their associated notes.
No, e-invoices are not required to be sent to ZATCA in Phase I. Integration with the ZATCA Platform is required from Phase II.
However, from 4th December 2021, your e-invoicing solution should be capable of retrieving historical invoices if requested by ZATCA.
Sequencing is dependent on the e-invoice solution unit. If you have multiple e-invoice solution units, you can generate a sequence based on the e-invoice solution unit.
The invoice number should be chronological, and the sequence should be maintained. If you use 21000001 and all subsequent invoices in the same sequence as 21000002, 21000003.
Sequencing is dependent on the e-invoice solution unit. If you have multiple e-invoice solution units, you can generate a sequence based on the e-invoice solution unit.
As per the current e-invoice guidelines, there is nowhere mentioned that the Invoice sequence is allowed to break based on change of the year. Hence, as of now, to the best of our understanding, the sequence should not break and should continue irrespective of change in a year. We should wait for further guidelines &/or clarification from ZATCA in this regard.
It would be better if you could map a specific sequence, especially for KSA, in your Global EMR system since sequencing is a must in KSA.
All log entries of the e-invoice solution must be timestamped and linked by placing the hash of the previous invoice in the associated field of the next invoice in a sequence so that their order cannot be changed. Time is not mandatory on the face of the invoice; however, the same is required at the time of e-invoice generation.
The second phase is known as the integration phase. Subjective taxpayers have to generate e-invoices or Fatoorah using compliant e-invoicing solutions as per the technical requirements and integrate with ZATCA’s system. Phase 2 applies from 1st January 2023 to the targeted taxpayer groups in waves. These groups will be informed of the new system’s requirements at least six months before implementation.
Phase 2 shall begin on 1st January 2023 for the first target taxpayer group, who will be notified at least six months before implementation.
The authority will implement phase 2 from 1st January 2023 in waves for targeted taxpayer groups. It needs the taxpayers to follow additional compliance requirements. They must ensure that tech teams and service providers re-configure the e-invoicing solutions for some additional technical requirements. Further, such compliant e-invoicing solutions must be integrated with the system of ZATCA to generate e-invoices in a standard format.
In addition to the prohibited activities given for phase 1, export of the stamping key and time change are also not allowed in phase 2.
Persons subject to the e-Invoicing Regulation may store their electronic invoices in a server on-premises in KSA or in the cloud as per their solution requirements and storage requirements and according to the provisions in VAT Law, VAT Implementing Regulation, e-Invoicing Regulation and resolutions and all other relevant Laws in KSA.
Phase II of e-invoicing in KSA will start from 1st January 2023.
ZATCA has not yet released the implementation timelines and process of implementation. If they release the guidelines by July 2022 and give a 6 months notice to comply with the requirement. In that case, the implementation has to be completed before Jan 2023.
The ZATCA authority will provide further details of operations in Phase II by June 2022.
e-invoices need to be uploaded with the ZATCA Platform in Phase II
For Standard Tax invoices:
For Simplified Tax invoices:
Sharing the invoice electronically with customers via Email or mobile number is not a mandatory requirement. You can generate a print copy and share it with them. But the invoice needs to be stored in your system electronically.
Integration with ZATCA is required in Phase II. However, in phase I, you need to ensure that all the requirements of the ZATCA are well-taken care of for the purpose of e-invoice generation
Yes, you can use your existing e-invoicing solution to maintain Archival as per ZATCA Guidelines. If your e-invoicing solution is not compliant, you can contact us.
A Tax Invoice should include a sequential number which uniquely identifies it. Unique No generated from an e-invoice solution provider can be considered invoice No if it fulfils the above requirement of Sequential numbers.
ClearTax solution can be integrated with any in-house ERP or POS system. Please reach out to us at ME-Sales@ClearTax.in if you need further details.
As per ZATCA Guidelines, e-invoices generated should not be deleted or altered by any user. The existing invoices can be cancelled by generating a Credit note and then generating it again through ClearTax software.
Phase 2 is an Integration Phase. The applicable taxpayers must use e-invoicing solutions to integrate their systems with ZATCA’s system. Each invoice has to be approved by ZATCA. This will impact your entire invoice generating process on Printing invoices, Presentment, Reporting, Auditing and VAT filing. This will require significant process-wise change if your existing e-invoicing system is not Phase II ready. Both business and IT teams have to sit together and implement it.
Each e-invoice generated electronically must be cleared by the authority as a prerequisite for sharing them with the buyers. Such an electronic invoice must be regarded as legal and valid. Clearance is a real-time transaction integration model of e-invoices. After integration, the taxpayer directly sends the electronic invoice before sharing it with the buyer.
B2B Invoices need to be cleared on a real-time basis, and B2C invoices need to be reported within 24 hours. You should integrate with ZATCA as per the transaction type, either B2B or B2C.
Registration with ZATCA is mandatory for Phase 2 is mandatory for any business. Cleartax will act as an e-invoice solution provider in the integration phase.
ZATCA data dictionary can be downloaded from the below link:
https://zatca.gov.sa/en/E-Invoicing/SystemsDevelopers/Pages/E-Invoice-specifications.aspx
A tax invoice needs to be created for the balance amount after adjusting advances. Also, a tax invoice should be created when receiving the advance payment.
Persons subject to the e-Invoicing Regulations will be informed of the integration procedures with the authority׳s and systems at least six months before the date set for integration with the target group or groups. We are yet to receive the documentation to start the integration with ZATCA.
As per ZATCA e-Invoice Resolution document, Tax Invoice should contain details of VAT Rate and VAT amount at the line item level.
As per the e-Invoicing Implementation standard document, An Invoice shall contain the buyer’s postal address. This does not apply to simplified tax invoices, associated credit notes, and debit notes. National address details are available in the VAT Registration Certificate.
Each e-invoice generated electronically must be cleared by the authority as a prerequisite for sharing them with the buyers. Such an electronic invoice must be regarded as legal and valid.
Clearance is a real-time transaction integration model of e-invoices. After integration, the taxpayer directly sends the electronic invoice before sharing it with the buyer.
Electronic invoices are then validated across several categories of varying levels. If approved, they are stamped by the authority and returned to the taxpayer.
ZATCA requires all invoice fields to be mandatorily in Arabic. Thus, the exchange can be only in Arabic or both English and Arabic.
ZATCA toolkit is not allowing invoices with zero values.
Yes, the ClearTax solution can help you comply with Phase I and Phase II. Please reach out to us at ME-Sales@ClearTax.in in case you need further details.
ClearTax solution can help you generate invoices in sequence and comply with ZATCA. Please reach out to us at ME-Sales@ClearTax.in in case you need further details.
The electronic systems or electronic e-invoicing solutions must comply with the specifications listed by the ZATCA. Solution or service providers must note those requirements, and taxpayers must ensure that tech teams and service providers comply.
Popular examples of e-invoicing systems include the following-
No. Any e-invoicing system or solution can be used to comply with the e-Invoicing Regulations of the KSA.
ClearTax servers are hosted in KSA. You will not need to subscribe to any servers if you subscribe to Cleartax e-Invoicing Solution.
VAT Assessment and VAT Compliance are not part of the current ClearTax e-Invoice Solution. However, we will launch such a product in a few months.
Yes, We can integrate with SAP ECC 6.0. ClearTax solution can be integrated with any ERP or POS system. Please reach out to us at ME-Sales@ClearTax.in in case you need further details.
ClearTax solution can be integrated with any ERP or POS system. Please reach out to us at ME-Sales@ClearTax.in in case you need further details.
ClearTax solution can be integrated with any ERP or POS system. Please reach out to us at ME-Sales@ClearTax.in in case you need further details.
Yes, the ClearTax solution integrates with your existing ERP or POS solution. You can continue to use your existing systems. Please reach out to us at ME-Sales@ClearTax.in in case you need further details.
You may start using the ClearTax Platform for e-invoice generation with ClearTax Excel templates for the interest of time. However, at the same time, you should have the right ERP which understands the prohibitory functions of the ZATCA. Modification and cancellation of the invoice should not be allowed or done. Please connect with the ClearTax team by emailing us at ME-sales@cleartax.in for our experts’ complete guidance on understanding prohibitory functions.
You can connect with the ClearTax team by writing an email to ME-sales@cleartax.in. Our team will connect with you and guide you through the process of API Integration with SAP.