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How to Prepare for e-Invoicing in Saudi?

Updated on: Apr 24th, 2023


5 min read

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The Kingdom of Saudi Arabia (KSA) started e-invoicing as one of the initiatives to move the economy towards digitalisation. The Zakat, Tax and Customs Authority (ZATCA) in the KSA implemented phase-1 of e-invoicing on 4th December 2021.

The first phase of the e-invoicing system applies to all resident taxpayers. It also covers the customers or third-party persons who issue a tax invoice on behalf of the resident taxable person. However, ZATCA excluded non-residents for VAT purposes from e-invoicing.

Also, ZATCA plans to implement phase 2 of e-invoicing in waves in Saudi Arabia. Accordingly, on 24th June 2022, it notified the businesses having turnover of more than SAR 3 billion in 2021 to implement phase 2 from 1st January 2023.

This article explains actions to be taken by the taxpayers and e-invoicing readiness steps.

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Actions to be taken by the taxpayers

The following are the actions to be taken by taxpayers for phase 1 of Saudi e-invoicing:

  1. Avoid manual invoices: The e-Invoicing Regulations mandated to issue e-invoices from phase 1. Hence, the taxpayer should stop issuing handwritten invoices and invoices written using text editing tools.
  2. Adapt a compliant e-invoicing solution: The e-invoicing applicable taxpayer should adopt an e-invoicing solution that complies with the requirements and specifications mentioned in e-Invoicing Regulations. The e-invoicing solution should generate e-invoices with the mandatory fields with QR codes and timestamp the e-invoice copies archived in the solution. Also, the e-invoicing solution should not contain the following  prohibited functionalities:
    • Uncontrolled access
    • Software time change
    • Tampering with e-invoices or logs
    • Multiple invoice sequences​
  3. Mention additional fields in invoices: The taxpayer should mention the invoice type as a title in both standard and simplified tax invoices. However, the following additional details are to be mentioned mandatorily:
    • In a standard tax invoice: the VAT registration number of the buyer if the buyer is a registered VAT taxpayer.
    • In a simplified tax invoice: Mandatory QR code generated by the taxpayer’s e-invoicing solution.

In addition to the above, the taxpayers should take the following actions to comply with phase 2 of Saudi e-invoicing:

  1. Integrate the e-invoicing solution with the Fatoora portal.
  2. Ensure the e-invoicing solution complies with the e-invoicing requirements, including the ability to connect to the internet.
  3. Use a compliant e-invoicing solution that generates and stores e-invoices in XML or PDF/A3 with embedded XML format.
  4. Ensure all phase 2 required additional fields are fulfilled.

e-Invoicing readiness steps

The taxpayers are suggested to follow the below four steps to ensure timely readiness for e-invoicing:

  1. The taxpayers should understand the e-invoicing requirements and familiarise themselves with the e-invoicing process by reading the materials available on the ZATCA website or other reliable websites.
  2. Businesses should approach e-invoicing software providers or internal technical teams to adopt a solution compliant with e-Invoicing Regulations.
  3. The businesses should test their e-invoicing solution before 1st January 2023 to check the correctness of e-invoices and ensure smooth implementation of e-invoicing.
  4. Businesses should create awareness amongst employees who have to work around e-invoicing. Businesses should conduct workshops with employees at regular intervals to train them through the e-invoicing process.

How can you easily prepare for e-invoicing with ClearTax?

ClearTax’s restful APIs integrate your ERP or POS with ZATCA with minimal changes. Also, we register hundreds of ERP/POS automatically in a single click with ZATCA and receive a cryptographic stamp for each device.

ClearTax e-invoicing software comes with below unique features:

  • 150+ smart data validations to ensure invoice data is as per regulations, thus generating error-free invoices.
  • Generates invoice hash, UUID, invoice counter value, and QR code & converts invoices into XML format.
  • Integrate with ZATCA to get clearance/report XML invoices & receive certified XML back from ZATCA.
  • Adds phase 2 QR code & certified XML into the existing invoice to generate the final PDF A/3 invoice.
  • e-Invoice data archival for up to six years on SLA-based cloud servers.

Click here to book a demo of ClearTax e-invoicing software.