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), intended to introduce 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.
23rd August 2023
ZATCA notified the eighth wave under phase 2 of Saudi e-invoicing. Accordingly, KSA businesses registered under VAT having more than SAR 40 million during 2021 or 2022 fall under wave 8 under phase 2. They must integrate their ERP/POS with ZATCA's Fatoora portal starting 1st March 2024.
28th July 2023
ZATCA notified the seventh wave under phase 2 of Saudi e-invoicing. It stated that VAT-registered businesses with more than SAR 50 million during 2021 or 2022 fall under wave 7 under phase 2. They must integrate their ERP/POS with ZATCA's Fatoora portal starting 1st February 2024.
Click here to know more.
16th June 2023
ZATCA notified the sixth wave under phase 2 of Saudi e-invoicing. It stated that businesses registered under KSA VAT with more than SAR 70 million during 2021 or 2022 fall under wave 6 under phase 2 of e-invoicing. They must integrate their ERP/POS with ZATCA's Fatoora portal starting 1st January 2024.
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26th May 2023
ZATCA announced wave 5 under phase 2 of e-invoicing in Saudi Arabia. It stated that businesses registered under KSA VAT having a turnover of more than SAR 100 million during 2021 or 2022 fall under wave 5 under the integration phase of e-invoicing. The applicable businesses must integrate their ERP/POS with the Fatoora portal starting 1st December 2023.
Click here to learn more about this update.
28th April 2023
ZATCA announced the fourth wave under phase 2 of Saudi Arabia e-invoicing. It stated that KSA VAT-registered businesses whose turnover is more than SAR 150 million and less than SAR 250 million during 2021 or 2022 fall under wave 4 under phase 2 of e-invoicing. They must integrate their ERP/POS with ZATCA's Fatoora portal starting 1st November 2023.
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24th March 2023
ZATCA announced the third wave under phase 2 of Saudi Arabia e-invoicing. It stated that businesses whose VAT tunrover is more than SAR 250 million and less than SAR 500 million during 2021 or 2022 fall under wave 3 under phase 2 of e-invoicing. They must integrate their ERP/POS with ZATCA's Fatoora portal starting 1st October 2023.
Click here for more information.
23rd December 2022
ZATCA announced that the businesses in KSA with more than SAR 500 million and less than SAR 3 billion turnover fall under the second targeted group/ wave 2 under phase 2 of e-invoicing. They must integrate their ERP/POS with ZATCA's Fatoora portal starting 1st July 2023.
Visit the ZATCA portal for more information.
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.
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.
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.
It is an invoice issued and saved in an electronic format generated through an electronic system and contains the 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.
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:
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 Supply||Nature of Buyer||Invoice Value||Type of e-invoice to be issued|
|Taxable sales||Taxable person||SAR 1000 or more||Standard tax e-invoice|
|Taxable person||Less than SAR 1000||Standard or simplified tax e-invoice*|
|Non-taxable legal person^||SAR 1000 or more||Standard tax e-invoice|
|Non-taxable legal person^||Less than SAR 1000||Standard or simplified tax e-invoice*|
|Zero-rated sales||Taxable person||SAR 1000 or more||Standard tax e-invoice|
|Taxable person||Less than SAR 1000||Standard or simplified tax e-invoice*|
|Non-taxable legal person||SAR 1000 or more||Standard tax e-invoice|
|Non-taxable legal person||Less than SAR 1000||Standard or simplified tax e-invoice*|
|Intra-GCC sales or exports||Any amount||Standard tax e-invoice|
|Nominal sales||Any amount||Standard tax e-invoice|
|B2C sales |
(Buyer details must be recorded in case of educational or private medical services)
|Any amount||Simplified tax e-invoice|
|Imports||Any amount||Not Applicable|
|Exempted sales||Any amount||Not Applicable|
|Sales under Reverse Charge Mechanism (RCM)||Any amount||Not Applicable|
|Sales outside the VAT scope||Any amount||Not 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.
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.
The ZATCA is implementing e-invoicing in two phases:
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.
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. No||Name of the Wave||VAT Turnover||Turnover of which year?||Effective date|
|1||Wave 1 under phase 2||Above SAR 3 billion||2021||1st January 2023|
|2||Wave 2 under phase 2||Above SAR 500 million and below SAR 3 billion||2021||1st July 2023|
|3||Wave 3 under phase 2||Above SAR 250 million and below SAR 500 million||2021 or 2022||1st October 2023|
|4||Wave 4 under phase 2||Above SAR 150 million and below SAR 250 million||2021 or 2022||1st November 2023|
|5||Wave 5 under phase 2||Above SAR 100 million and below SAR 150 million||2021 or 2022||1st December 2023|
|6||Wave 6 under phase 2||Above SAR 70 million and below SAR 100 million||2021 or 2022||1st January 2024|
|7||Wave 7 under phase 2||Above SAR 50 million and below 70 million||2021 or 2022||1st February 2024|
|8||Wave 8 under phase 2||Above SAR 40 million and below 50 million||2021 or 2022||1st March 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 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.
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:
Here’s the step-by-step process flow of simplified tax invoices in phase II:
The following are a few reasons for introducing e-invoicing or Fatoorah in KSA:
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The client has chosen ClearTax as the preferred e-invoicing solution provider. We provided the below to the client:
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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:
Click here to explore ClearTax e-invoicing software.
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.
ZATCA announced that they would implement phase 2 in waves based on the turnover of the taxpayers:
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.
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.
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.
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.
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.
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.
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.
Yes, ZATCA can impose a penalty of SAR 1,000-40,000 for non-compliances:
Yes, e-invoicing is applicable to export transactions.
Yes, the Saudi Arabia government introduced VAT effective from 1st January 2018.