How to Solve Failed Invoices in Phase II of KSA e-Invoicing?

Zakat, Tax and Customs Authority (ZATCA), has announced that phase II of e-invoicing in Saudi Arabia (SA) begins on 1st January 2023. Also, it clarified that it divides the taxpayers into targeted taxpayer groups and notifies them six months before their wave.

Accordingly, on 24th June 2022, ZATCA announced that the first wave of phase 2 of e-invoicing applies to Value Added Tax (VAT) registered taxpayers whose revenue exceeded 3 billion SAR for the year ending 2021.

Hence, the applicable taxpayers have started preparing for phase II of e-invoicing and might face failures while generating e-Invoices. This article lists possible reasons for such failures and explains how to resolve them.

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Reasons for Failures While Generating the e-Invoices

Initially, there is a chance for the failure of e-Invoices while generating them. Below are a few possible reasons for failures while generating the e-Invoices:

• Selecting the wrong invoice type, such as B2C instead of B2B
• Not mentioning all mandatory fields such as invoice date, UUID etc.
• Inputs given are not as per ZATCA validations
• Mentioning the wrong type of supply, such as exempted instead of taxable
• Incorrect calculation of the total VAT amount
• Incorrect calculation of total invoice amount
• Not quoting or mentioning a wrong taxable value under VAT breakdown
• Mentioning the wrong tax amount under the VAT breakdown, such as zero-rated instead of taxable

The Process to Solve the Failed Invoices in Phase II

When ZATCA sends back a failed invoice, it will provide the reason for the failure. Accordingly, you must correct the errors and re-generate the e-invoice. Solving the failed invoices varies based on the type of invoices, such as a B2B or B2C invoice.

Resolving a Failed B2B Invoice

You will have below two options based on ERP functionality to solve a failed B2B invoice:

Option 1: When your ERP doesn’t allow to edit the failed invoice

You’ve to identify the reasons for failure and issue a credit note to nullify the invoice in your books. Then you should generate a new invoice with the correct details.

Option 2: When your ERP allows you to edit the failed invoice

In this case, you can correct the errors in the same invoice and re-submit it on the ZATCA portal.

Resolving a Failed B2C Invoice

It is to be noted that you should have shared the invoice immediately with your customer once it is raised. However, there’s a chance that the ZATCA found errors when you reported the same invoice within 24 hours from the time of generation.

In such a case, you must correct the errors and re-submit the same to the ZATCA portal. Also, it is your choice whether to share the corrected invoice with the customer or not. However, practically, it is extremely difficult to share the physical copy of the corrected B2C invoice with your customer. Thus, you can only share the corrected invoice with your customer through electronic means such as email, WhatsApp, etc. 

Also, in both B2B and B2C transactions, Previous Invoice Hash (PIH) and Invoice Counter Value (ICV) should be maintained correctly either for corrected or new invoices.