Zakat, Tax and Customs Authority (ZATCA) is the tax implementation authority in Saudi Arabia, and it planned to implement e-invoicing in phases. ZATCA implemented phase 1 w.e.f 4th December 2021 and phase 2 in waves w.e.f 1st January 2023. Also, ZATCA clarified that it categorises the taxpayers for phase 2 and notifies them six months before their wave.
Accordingly, it announced the following waves:
- Wave 1 under phase 2: Taxpayers having more than 3 billion SAR turnover for the year ending 2021 fall under wave 2 w.e.f 1st January 2023.
- Wave 2 under phase 2: Businesses registered under Saudi Value Added Tax (VAT) with more than SAR 500 million and less than SAR 3 billion in 2021 fall under wave 2 w.e.f 1st July 2023.
- Wave 3 under phase 2: Taxpayers with a turnover of more than SAR 250 million and less than SAR 500 million in 2021 or 2022 fall under Wave 3 w.e.f 1st October 2023.
- Wave 4 under phase 2: VAT-registered businesses in Saudi having a turnover of more than SAR 150 million and less than SAR 250 million in 2021 or 2022 fall under wave 4 w.e.f 1st November 2023.
Hence, the applicable businesses shall integrate their ERP/POS with ZATCA within specified timelines and generate phase 2 compliant invoices.
How to integrate Microsoft D365 FnO with ZATCA?
Microsoft D365 FnO comes with inbuilt features to integrate with ZATCA. However, you must complete the below prerequisites:
- You must get familiar with Saudi Arabic e-invoicing laws and regulations.
- Sign up for Regulatory Configuration Service (RCS) in D365FnO and set up e-invoicing.
- Integrate your finance app and the e-invoicing service.
- Understand creating Azure Key Vault certificates and secrets and set up the key vault.
- Configure virtual entities for Finance and Supply Chain Management (FSCM) in Microsoft Dataverse.
- Enable the Customer Payment Method Entity.
- Add the Dataverse endpoint as a connected application in the RCS instance.
- Import the Saudi Arabian ZATCA submission (SA) electronic invoicing feature into RCS.
It is to be noted that a few parameters of the Microsoft D365 FnO e-invoicing feature are published with default values. Hence, you are responsible for reviewing and updating the default values according to your business operations before implementing e-invoicing.
e-Invoice generation workflow in Microsoft D365 FnO
Here’s the e-invoice generation workflow in Microsoft D365 FnO:
- The entire e-invoicing workflow can be performed within Microsoft D365 FnO ERP, including invoice generation, XML conversion, PDF A/3 generation, and emailing of invoices.
- You don’t need to log in to any other platform and can seamlessly complete the actions in Microsoft D365 FnO.
- Your invoicing activities won’t be delayed as end-to-end e-invoice generation and ZATCA approval flow happen immediately.
- You can generate e-invoices in two ways in Microsoft D365 FnO:
- In the first one, you must manually select one or more pending invoices and click “Generate E-Invoice”.
- The second one, the e-invoice, will automatically generate once the user creates or approves the invoice in D365 FnO ERP.
Role of middleware in ZATCA integration
Middleware is software that connects an operating system and applications, particularly in a network. From the Saudi e-invoicing perspective, middleware software comes with APIs to integrate with ZATCA and perform various e-invoicing activities.
The e-invoicing middleware comes with the following features:
- Easy integration with any ERP/ POS via Plug-n-play APIs
- Integration without major changes to ERP/POS
- One API to support all e-invoicing requirements
- Ensures seamless connection with ZATCA
- Faster generation of e-invoices
- Invoice generation in PDF/ A3 format with XML
How can ClearTax help you easily integrate Microsoft D365 FnO with ZATCA?
ClearTax provides APIs that act as middleware connecting the ERP/POS with the ZATCA system. We ensure 100% e-invoicing compliance and can automatically register hundreds of ERP/POS in a single click with ZATCA to receive cryptographic stamps for each device.
It comes with below features:
- 150+ smart data validations ensure invoice data is as per ZATCA regulations to ensure invoices are error-free.
- Generation of key mandatory fields such as invoice hash, invoice counter value, UUID, and QR code.
- Converts the invoice data into ZATCA notified UBL 2.1 XML format
- Automatically send invoice data to the ClearTax cloud platform for conversion to ZATCA e-invoice.
- Adds phase 2 QR code & certified XML into the existing invoice to generate the final PDF A/3 invoice.
- e-Invoice data archival on SLA-based cloud servers for up to six years.