Get 100% ZATCA Phase II compliant with ClearTaxGet 100% ZATCA Phase II compliant with ClearTax
Seamless integration
with any ERP/POS
Seamless integration with any ERP/POS
E-invoice generation in
a fraction of a second
E-invoice generation in a fraction of a second
PDF/A3 E-invoices with
XML embedded
PDF/A3 E-invoices with XML embedded

e-Invoicing in Saudi Arabia: A Complete Guide For Your Business

Updated on: May 22nd, 2024

|

19 min read

social iconssocial iconssocial iconssocial icons

The Kingdom of Saudi Arabia (KSA) started focusing on several initiatives for the digitalisation of the economy. The General Authority of Zakat and Tax (GAZT), merged with Zakat, Tax and Customs Authority (ZATCA), introduced e-invoicing in Saudi Arabia and published a draft amendment on 17th September 2020 in line with Value Added Tax Implementing Regulations. The draft covered aspects of e-invoicing rules.

This article explains all about KSA e-invoicing including applicability, types of e-invoices, phases, guidelines, process flow, case studies and benefits of Saudi e-invoicing.

Latest Updates

26th April 2024
ZATCA notified that KSA businesses registered in KSA with more than SAR 15 million turnover during 2022 or 2023 fall under wave 11 of phase 2. Hence, applicable businesses shall integrate their ERP/POS with the Fatoora portal by 1st November 2024.

Here's the official announcement.

29th March 2024
ZATCA notified that KSA VAT-registered businesses whose turnover was more than SAR 25 million during 2022 or 2023 falls under wave 10 of phase 2. Accordingly, applicable taxpayers shall integrate their ERP/POS with the Fatoora portal by 1st October 2024.

Click here to know more.

17th November 2023
ZATCA announced that Saudi businesses registered under VAT with more than SAR 30 million turnover during 2021 or 2022 fall under wave 9 of phase 2. Hence, applicable businesses shall integrate their ERP/POS with the Fatoora portal by 1st June 2024. 

Here's the official announcement.

What is e-invoicing in Saudi Arabia?

e-Invoice is an invoice issued and saved in an electronic format generated through an electronic system. e-Invoice can be generated for tax invoice, simplified tax invoice and respective Credit & Debit Notes (CDNs). It is clarified that a handwritten or scanned invoice will not be considered an electronic invoice.

The people of KSA refer to e-invoicing widely as Fatoorah, and e-invoicing software is called Fatoorah software. e-Invoicing is a procedure that aims to convert issuing invoices from paper into electronic mode. The e-invoicing process allows exchanging and processing of invoices, credit notes, and debit notes in a structured electronic format between buyer and seller using an integrated electronic solution.

All the provisions related to a tax invoice in the Value Added Tax (VAT) legislation will apply to an e-invoice, and any non-compliance will result in penalties from ZATCA. Apart from this, the provisions related to proof of electronic transactions and electronic signatures in the Electronic Transactions Law of KSA shall apply to e-invoices and electronic notes issued.

Why is e-invoicing being introduced in KSA?

The Saudi government intends to phase out hand-written invoices and move towards a paperless digital environment. Accordingly, it rolled out e-invoicing in Saudi Arabia so businesses can work more efficiently and securely.

Under e-invoicing, businesses must integrate their systems with ZATCA to make trade more transparent. With this move, the government can standardise how invoices are reported to the system with a common, machine-readable format, as taxpayers shall push all transactions to the Fatoora portal.

Accordingly, ZATCA can easily detect fraudulent activities. Also, e-invoicing creates a common database for audits. Hence, tax authorities can track the transaction in real time and reduce the frequency of audits.

Who implements e-invoicing in Saudi Arabia?

The Zakat, Tax and Customs Authority (ZATCA) is the authority for e-invoicing in Saudi Arabia. GAZT, now known as ZATCA, issued the draft e-Invoicing Regulations in KSA in March 2021. The authority allowed the public and stakeholders to provide feedback on the e-Invoicing Regulations on or before 17th April 2021. The e-Invoicing Regulations were finally published on 28th May 2021.

The regulations stated all resident taxpayers should mandatorily be fully equipped to issue, save and modify e-invoices by 4th December 2021. These regulations specify the terms, requirements, and conditions of electronic invoices and electronic credit and debit notes. Also, ZATCA has released detailed guidelines on e-invoicing for smooth implementation.

Types of e-invoices in Saudi Arabia

ZATCA clarified that e-invoices should be issued for all types of tax invoices under VAT. There are different types of e-invoices, and below are the frequently used tax invoices:

  • Standard tax invoice: It is the invoice issued by a Business to another Business (B2B), containing all the elements of a tax invoice, especially the VAT registration number of the buyer and seller. Below is the sample format of an standard e-invoice:

Standard tax invoice

  • Simplified tax invoice: An invoice often issued by a Business to consumer (B2C) containing the main elements of a simplified tax invoice. Below is the sample  format of a simplified tax invoice:

Simplified tax invoice

The e-invoices should be issued in the Arabic language. However, additional languages are permitted apart from the Arabic language.

Click here to know other types of e-invoices.

Further, ZATCA explained in the guidelines that the e-invoice to be issued varies based on the type of supply. Here’s the table explaining the type of e-invoice to be issued:

Type of SupplyNature of BuyerInvoice ValueType of e-invoice to be issued
Taxable salesTaxable personSAR 1000 or moreStandard tax e-invoice
Taxable personLess than SAR 1000Standard or simplified tax e-invoice*
Non-taxable legal person^SAR 1000 or moreStandard tax e-invoice
Non-taxable legal person^Less than SAR 1000Standard or simplified tax e-invoice*
Zero-rated salesTaxable personSAR 1000 or moreStandard tax e-invoice
Taxable personLess than SAR 1000Standard or simplified tax e-invoice*
Non-taxable legal personSAR 1000 or moreStandard tax e-invoice
Non-taxable legal personLess than SAR 1000Standard or simplified tax e-invoice*
Intra-GCC sales or exportsAny amountStandard tax e-invoice
Nominal salesAny amountStandard tax e-invoice
B2C sales 
(Buyer details must be recorded in case of educational or private medical services)
Any amountSimplified tax e-invoice
ImportsAny amountNot Applicable
Exempted salesAny amountNot Applicable
Sales under Reverse Charge Mechanism (RCM)Any amountNot Applicable
Sales outside the VAT scopeAny amountNot Applicable

*When selling taxable or zero-rated supplies to a taxable or non-taxable legal person of less than SAR 1000, the seller might issue simplified tax invoices. However, if the buyer wants to claim input VAT, they can request the seller to issue a standard tax invoice.

^Non-taxable legal person means a business in Saudi Arabia but not registered under VAT due to the registration threshold.

Applicability of e-invoicing in Saudi Arabia

All entities registered under KSA VAT, the customers and the third parties who issue invoices on behalf of any taxable individuals must use the electronic invoices. All VAT regulations applicable to tax invoices, credit notes and debit notes continue to apply to e-invoices as well. However, non-resident taxpayers under VAT are excluded from the scope of e-invoicing.

Phases of e-invoicing in Saudi Arabia

The ZATCA is implementing e-invoicing in two phases:

Phase 1: Generation

This phase is known as the ‘Generation Phase’, in which taxpayers have to generate and store tax invoices, simplified tax invoices and respective CDNs through a complaint e-invoicing solution. ZATCA implemented this phase on 4th December 2021. It is to be compiled by all taxpayers (excluding non-resident taxpayers) and any other parties issuing tax invoices on behalf of suppliers subject to VAT.

The procedures of issuing e-invoices will be similar to issuing invoices at present but through a compatible electronic billing system. The e-invoice shall include all the required items based on the type of invoice.

Phase 2: Integration

This phase is known as the ‘Integration Phase’ and is rolled out in waves by the targeted taxpayer group. Phase 2 will begin on 1st January 2023. Accordingly, ZATCA notified the below waves till now:

S. NoName of the WaveVAT TurnoverTurnover of which year? Effective date
1Wave 1 under phase 2Above SAR 3 billion20211st January 2023
2Wave 2 under phase 2Above SAR 500 million and below SAR 3 billion 20211st July 2023
3Wave 3 under phase 2Above SAR 250 million and below SAR 500 million2021 or 20221st October 2023
4Wave 4 under phase 2Above SAR 150 million and below SAR 250 million2021 or 20221st November 2023
5Wave 5 under phase 2Above SAR 100 million and below SAR 150 million2021 or 20221st December 2023
6Wave 6 under phase 2Above SAR 70 million and below SAR 100 million2021 or 20221st January 2024
7Wave 7 under phase 2Above SAR 50 million and below 70 million2021 or 20221st February 2024
8Wave 8 under phase 2Above SAR 40 million and below 50 million2021 or 20221st March 2024
9Wave 9 under phase 2Above SAR 30 million and below 40 million2021 or 20221st June 2024
10Wave 10 under phase 2Above SAR 25 million and below 30 million2022 or 20231st October 2024
11Wave 11 under phase 2Above SAR 15 million and below 25 million2022 or 20231st November 2024

This phase involves introducing technical and business requirements for electronic invoices and electronic solutions and integrating with ZATCA’s systems. In this phase, taxpayers must integrate their systems of issuing electronic invoices and debit and credit notes with ZATCA’s systems to share data and information.

The seller has to ‘clear’ the Tax Invoice from ZATCA in real-time and then share it with the buyers as a legally valid e-invoice. However, the seller is required to report simplified invoices to ZATCA within 24 hours from the time of generation.

ZATCA e-invoicing guidelines in Saudi Arabia

ZATCA has implemented phase 1 e-invoicing from 4th December 2021 and announced two waves under phase 2 of ZATCA e-invoicing. Also, ZATCA issued e-invoicing guidelines to provide more understanding to taxpayers and smoothly implement e-invoicing in Saudi Arabia.

Click here to know more about ZATCA e-invoicing guidelines.

What is the process flow of e-invoicing in Saudi Arabia?

The process flow for generating an e-invoice in Saudi Arabia differs based on the type of invoice. With the phase 2 implementation date approaching, it is important to understand the process of generating electronic invoices.

Let’s go through them one by one.

Here’s the step-by-step process flow of standard tax invoices in phase II:

process flow of standard tax invoices in phase II

Here’s the step-by-step process flow of simplified tax invoices in phase II:

process flow of simplified tax invoices in phase II

Benefits of e-invoicing in Saudi Arabia

The following are a few reasons for introducing e-invoicing or Fatoorah in KSA:

  • Transparency in commercial transactions helps the government ensure better tax compliance.
  • Electronically generated invoices help maintain better accuracy and effortless transactions with customers.
  • e-Invoicing implementation increases efficiency in transactions for both businesses and governments owing to data standardisation, seamless trade, speedy communication, faster payments and reduced costs.
  • The generation of invoices electronically will reduce the usage of paper invoices and is environmentally friendly.
  • e-Invoicing in Saudi Arabia allows the tax authorities to detect fake invoices or related malpractices and keep a check on the shadow economy.

ClearTax provides ZATCA-compliant e-invoicing software that easily integrates any ERP/POS and generates PDF/A3 e-invoices. ClearTax is trusted by over 4,000 enterprises across the globe; our prowess lies in ensuring 100% compliance, end-to-end integration and process optimisation.

Case studies

Case study 1: How is a leading retail giant in Saudi Arabia easily generating millions of ZATCA Phase II-compliant e-invoices with us?

The client has concerns such as:

  • How to generate millions of invoices per month seamlessly?
  • How can we ensure real-time response times and seamless integration to ZATCA?
  • How will we connect hundreds of stores and all other systems with ZATCA? 
  • We have multiple ERP/POS systems across B2B, E-commerce, and retail businesses. Can we get one solution which can work across all systems?

The client has chosen ClearTax as a single solution provider for all its requirements. We provided the below:

  • Our solution ensured the generation of e-invoices in a fraction of a second for thousands of concurrent transactions per minute.
  • We provided them with an e-invoicing solution to connect all their ERP/POS systems (both online and offline) with ZATCA.
  • Our robust infrastructure ensured seamless performance during peak demand (in festive seasons) with 99.9% availability.
  • Our solution provided connectors to generate required fields across all systems, like UUID, ICV, PIH, Cryptographic Stamp, XML, PDF A/3, etc.

Click here to know more about this case study.

Case study 2: How have we enabled a large Saudi Arabian conglomerate to generate over 200 million e-invoices annually?

The client has below concerns:

  • Will e-invoicing result in any business process changes? 
  • How will we connect hundreds of stores and all other systems with ZATCA? 
  • How to integrate the retail stores in remote areas with limited internet connectivity with ZATCA?
  • Can we get reports and dashboards in a single place?

The client has chosen ClearTax as the preferred e-invoicing solution provider. We provided the below to the client:

  • We engaged with the conglomerate’s multiple ERP/ POS partners and vendors to enable a successful ZATCA integration.
  • We designed an architecture with 10+ concurrent connections to ZATCA to report 600K invoices daily.
  • We scaled up our cloud infrastructure to handle 100 TPS (transactions per second) to ensure 24-hour reporting SLA.
  • ClearTax provided a hybrid solution where Phase 2 QR code and XML are generated inside the POS system (without an internet connection).
  • ClearTax cloud platform provided dashboards and reports to view each invoice’s success/failure reporting status.

Click here to get more details on this case study.

How can ClearTax help you generate ZATCA-compliant e-invoices?

ClearTax APIs will act as middleware connecting the ERP/POS and ZATCA system, ensuring 100% e-invoicing compliance. It automatically registers hundreds of ERP/POS in a single click with ZATCA and receives a cryptographic stamp for each device.

It comes with below features:

  • 150+ smart data validations to ensure invoice data is as per ZATCA regulations, therefore, generating error-free invoices.
  • ClearTax generates UUID, invoice hash, invoice counter value, QR code & converts invoices into UBL 2.1 XML format.
  • Our API automatically sends invoice data to the ClearTax cloud platform for conversion to ZATCA e-invoice.
  • ClearTax adds Phase II QR code & certified XML into the existing invoice to generate the final PDF A/3 invoice.
  • We provide e-invoice data archival for up to six years on SLA-based cloud servers.

Click here to explore ClearTax e-invoicing software.

Frequently Asked Questions

What is e-invoicing in Saudi?

e-Invoicing, widely known as Fatoorah in Saudi, is a procedure that aims to convert issuing invoices from paper into electronic mode. The e-invoicing process allows exchanging invoices, related Credit, and Debit Notes (CDNs) in a structured electronic format between buyer and seller using an integrated electronic solution.

What are the different waves in Phase 2?

ZATCA announced that they would implement phase 2 in waves based on the turnover of the taxpayers:

Wave 1 from 1st January 2023: Taxpayers whose annual turnover exceeds SAR 3 billion in 2021.
Wave 2 from 1st July 2023: Businesses with more than SAR 500 million turnover in 2021.
Wave 3 from 1st October 2023: Taxpayers with a turnover of more than SAR 250 million in 2021 or 2022. 
Wave 4 from 1st November 2023: Businesses having more than SAR 150 million turnover in 2021 or 2022.
Wave 5 from 1st December 2023: Taxpayers with more than SAR 100 million turnover in 2021 or 2022.
Wave 6  from 1st January 2024: Taxpayers with more than SAR 70 million turnover in 2021 or 2022.
Wave 7 from 1st February 2024: VAT registered businesses with more than SAR 50 million turnover in 2021 or 2022.
Wave 8 from 1st March 2024: KSA VAT registered businesses having more than SAR 40 million turnover in 2021 or 2022.
Wave 9 from 1st June 2024: Businesses registered under KSA VAT with more than SAR 30 million turnover in 2021 or 2022.
Wave 10 from 1st October 2024: KSA VAT registered businesses with more than SAR 25 million turnover in 2022 or 2023.
Wave 11 from 1st November 2024: Taxpayers registered under Saudi VAT with more than SAR 15 million turnover in 2022 or 2023.
 

What is phase 2 of e-invoicing in Saudi Arabia?

In this phase, taxpayers must integrate their ERP/accounting/ POS systems with ZATCA’s Fatoora portal to report the B2B e-invoices in real-time and report B2C e-invoices within 24 hours of generation.

When will the second wave of the e-invoicing integration phase be announced?

ZATCA already announced that the businesses in KSA with more than SAR 500 million and less than SAR 3 billion turnover fall under wave 2 under phase 2. They must integrate with ZATCA’s Fatoora portal starting 1st July 2023.

What is the best e-invoicing solution for Saudi Arabia?

ClearTax cloud-based e-invoicing software is best for e-invoicing in Saudi Arabia. ClearTax provides ZATCA phase 2-compliant e-invoicing software that easily integrates and generates PDF/A3 e-invoices.

Who is liable to issue e-invoices in Saudi Arabia?

Businesses registered under KSA VAT selling goods or providing services and the third parties (who issue invoices on behalf of any taxable individuals) must issue the e-invoices.

What is API in e-invoicing?

API stands for Application Programme Interface. It facilitates the communication and exchange of data between taxpayers or e-invoicing solution providers and the ZATCA’s Fatoora portal.

Is e-invoicing mandatory for Business to Government (B2G), i.e., public sector transactions?

Yes, e-invoicing applies to Business to Business (B2B), Business to Consumer (B2C) and B2G transactions. However, ZATCA exempted e-invoicing for exempt supplies, supplies under reverse charge, and imports.

Is there also an obligation to process inbound e-invoices?

ZATCA did not specify any regulation to process inbound e-invoices. The e-invoicing initiative states that the applicable taxpayers must issue electronic invoices and keep the same in records as per the law.

Will I be fined for non-compliance with ZATCA?

Yes, ZATCA can impose a penalty of SAR 1,000-40,000 for non-compliances:

Non-issuance and saving of invoices and notes electronically

Not including the QR (Quick Response) code in the e-invoice

Non-compliance with storing e-invoices and notes according to the stipulated format

Using prohibited functions in the e-invoicing system to issue and save invoices electronically

Deleting or adjusting invoices or electronic notes after issuance

Violation of any other provision of the e-Invoicing Law

Is e-invoicing mandatory for export?

Yes, e-invoicing is applicable to export transactions.

Is there VAT in Saudi Arabia?

Yes, the Saudi Arabia government introduced VAT effective from 1st January 2018.

How can I check e-invoicing wave eligibility in Saudi Arabia?

You can use ClearTax's 'e-Invoicing Wave Eligibility Checker' to know the wave you are falling and from which date you must generate e-invoices in KSA.

What is required for e-invoicing in Saudi Arabia?

  1. Understand the ZATCA requirements for e-invoicing and familiarise themselves with the e-invoicing process.
  2. Approach ZATCA-compliant e-invoicing software provider
  3. Test checks on their e-invoicing solution before the deadlines
  4. Conduct regular employee workshops for a smoother e-invoicing process.
Index