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All About e-Invoicing in the Kingdom of Saudi Arabia (KSA)

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08 min read

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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.

What is e-invoicing (Fatoorah) in Saudi Arabia?

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.

What is an e-invoice in KSA?

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. There are two types of 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.
  • Simplified tax invoice: An invoice often issued by a Business to consumer (B2C) containing the main elements of a simplified tax invoice.

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

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 KSA

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 that the VAT taxpayers with more than SAR 3 billion turnover in 2021 must implement phase 2 from 1st January 2023.

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.

What is the process flow of e-invoicing in KSA?

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:

Benefits of e-invoicing for KSA

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.

FAQs

Is e-invoicing mandatory for export?

Yes, e-invoicing is applicable to export transactions.

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 there VAT in Saudi Arabia?

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

All Articles

  1. This article explains the VAT category code in KSA and lists the VAT exemption reason codes to be mentioned in invoices in case of exempt sales.
  2. This article explains the changes to be made by taxpayers in their business processes to comply with the ZATCA e-invoicing phase 2 requirements.
  3. This article explains how to generate e-invoices in Saudi Arabia when your ERP doesn’t allow interaction with external systems.
  4. This article explains the problems that large B2C retailers could face while generating e-invoices and how they can seamlessly generate B2C e-invoices.
  5. VAT implementing Countries in GCC are moving forward by introducing e-invoicing to streamline economic activity & check tax evasion.
  6. This article explains the need for VAT number verification, a step-by-step process, bulk VAT numbers verification and benefits.
  7. This article explains the concept of device registration to register your ERP/PoS with the Fatoora portal under phase 2 of KSA e-invoicing.
  8. Under phase 2 of e-invoicing in Saudi Arabia, taxpayers must integrate with the Fatoora portal to generate complaint e-invoices from 1st January 2023.
  9. This article explains the impact of e-invoicing on business and how it creates opportunities for taxpayers in Saudi Arabia.
  10. ZATCA make announcements on e-invoicing implementation, regulations, waves etc. This article provides the latest ZATCA updates on fatoorah/ e-invoicing.
  11. ZATCA e-Invoicing Phase 2: This article explains all about ZATCA e-invoicing phase 2, including applicability, rules, regulations, key amendments and impact on businesses in Saudi Arabia.
  12. e-Invoicing in Saudi Arabia: Standard or Simplified Tax Invoice - Which e-Invoice do you need to issue? Sellers have to issue either standard or simplified tax invoices in KSA. This article lists the type of e-invoice to be issued in different circumstances.
  13. Check out the FAQs on Phase 2 of e-Invoicing in Saudi Arabia. ZATCA announced the first targeted taxpayer group for phase 2 of e-invoicing. This article provides a few phase 2 FAQs to give more clarity for taxpayers.
  14. e-Invoicing Guidelines: This article provides all e-invoicing detailed guidelines issued by ZATCA for the smooth implementation of e-invoicing in Saudi Arabia.
  15. ZATCA exempted a few transactions from SA e-invoicing. This article lists transactions for which you don’t have to generate e-invoices or related CDNs.
  16. As per ZATCA guidelines, the EGS shall enrich the XML file with ICV and PIH values. This article explains the role of XML data enrichment in SA e-invoicing.
  17. Phase II of e-invoicing in Saudi requires taxpayers to onboard their EGS with the fatoora portal. This article explains all about the fatoora portal.
  18. This article lists reasons for failures while generating the e-invoices in phase II of KSA e-invoicing and also explains how to solve failed invoices.
  19. This article explains the process flow for generating e-invoices in phase II of Saudi Arabia's e-invoicing.
  20. This article provides a gist of Phase I QR Code vs Phase II QR Code in KSA e-invoicing.
  21. ZATCA notified the e-invoice fields & specifications. This article lists all the mandatory fields to be printed in ZATCA-compliant e-invoices.
  22. A certificate Signing Request is mandatory for onboarding a compliant EGS unit in phase II of e-invoicing. This article explains all about CSR.
  23. You can revoke the CSID whenever needed, and ZATCA might also automatically revocate your CSIDs. This article explains all about the revocation of CSIDs.
  24. ZATCA has mandated to renew the CSIDs once every five years. This article explains how to renew the existing CSID under KSA e-invoicing.
  25. This article explains all about Cryptographic Stamp Identifier (CSID), including, who needs it, how to obtain it, and the steps for receiving it.
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  27. This article explains the step-by-step process of finding the ClearTax e-invoicing solution from complaint e-invoice solutions on the ZATCA portal.
  28. This article explains penalties for VAT & e-invoicing offences in KSA, including the latest reclassification made by ZATCA.
  29. This article explains the concept of proportional input VAT credit, when you can claim it and how to claim such tax credit under the KSA VAT law.
  30. ZATCA Contact Details: This article explains the way to contact the ZATCA helpline number, headquarters address and email. Also, it describes how to report tax evasion, share opinion, and give feedback on the portal.
  31. This article answers most of the FAQs in KSA VAT including, general queries, registration, return filing, refund, payment and ZATCA portal.
  32. This article explains all about credit notes, debit notes and vouchers under KSA VAT, including meaning, due date, contents and comparison.
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  35. This article explains all about Reverse Charge Mechanism (RCM) in KSA, including applicability, tax payment, reporting, input tax deduction.
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  37. VAT Rate in Saudi Arabia 2022: The basic VAT rate was increased from 5% to 15% w.e.f 1st July 2020. This article explains all about VAT rates, including transitional provisions.
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  42. This article lists down all the important technical terms used in KSA for e-invoicing and explains them in a very simple manner.
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  44. This article will explain the SDK toolkit, how it does e-invoicing compliance in KSA and who must use the Compliance and Enablement Toolbox.
  45. A simplified e-invoice is applicable only for retail (B2C) transactions. This article lists down the mandatory fields in a simplified e-invoice.
  46. Standard e-invoice is mandatory from 4th December 2021 in KSA. This article explains the mandatory fields that need to be filled in an e-invoice.
  47. This video explains all about UUID, including uses, e-invoicing regulations, who must generate, format, validity, and how to obtain it.
  48. This article explains all about VAT registration in KSA, including who should register, special cases, steps to register, VAT deregistration.
  49. This article explains all anti-tampering measures in a KSA e-invoicing solution applicable from generation and integration phases.
  50. An ideal e-invoicing solution in KSA should not have some prohibited functionalities. This article explains the phase-wise prohibited functionalities.
  51. Data storage and archival requirements are separately listed down in the e-Invoicing Regulations defined by the ZATCA in Saudi Arabia. Know more.
  52. This article explains all the e-invoicing requirements in KSA, including format, content, integration and mandatory security requirements.
  53. This article explains all about VAT return filing in KSA, including who has to file, types, how to file, amendments, changing filing period.
  54. This article explains the basics of KSA VAT law, including registration, types of supplies, input tax deduction, records, returns, appeals and penalties.
  55. This article explains the obligations that all VAT-registered taxpayers need to adhere to under the e-invoicing regime in the KSA.
  56. This article explains all about the ZATCA portal (earlier known as the GAZT), including e-services, rules and regulations, e-invoicing, etc.
  57. This article explains the mandatory technical functionalities for 1st phase of e-invoicing in KSA, such as format, structure, data processing, security etc.
  58. This article explains all about QR codes on e-invoices in KSA, including purpose, applicability, contents, and generation.
  59. This article explains the impact of e-invoicing on third-party billing in KSA, including how it works, requirements, liability and examples.
  60. All taxpayers must adopt ZATCA defined compliant e-invoice solution in KSA. This article includes types, examples and features.
  61. Phase 2 of e-invoicing starts on 1st January 2023 in KSA. This article explains the actions to be taken and how to prepare for e-invoicing in Saudi Arabia.
  62. This article explains the mandatory fields in e-invoices such as UUID, cryptographic stamp, identifier, invoice hash, QR code and invoice counter.
  63. This article explains all aspects of simplified e-invoices in KSA including, who is liable, how to issue, current vs proposed process, key fields etc.
  64. e-Invoice has to be generated for self-billing cases in KSA. This article details the procedures, examples and benefits of self-billing under e-invoicing.
  65. The e-Invoicing solution should comply with KSA VAT Regulations. This article explains the key considerations while choosing an e-invoicing solution in KSA.
  66. This article explains the clearance of tax e-invoices and reporting of simplified e-invoices under Saudi Arabia e-invoicing.
  67. The adoption of the e-invoicing system is picking up pace in the Gulf countries. With the Kingdom of Saudi Arabia (KSA) issuing the regulations and announcing the timelines for implementation, the United Arab Emirates (UAE) has also indicated its plans to mandate the system.
  68. KSA Banks can implement the e-Invoicing system by following a step-by-step process. This article gives out Tips for a smooth transition for banks in Saudi.
  69. Scope and applicability of e-invoicing in Saudi Arabia is of importance to know whether or not e-invoicing system applies to a person and a transaction.
  70. KSA e-invoicing FAQ are issued by the ZATCA of the Kingdom of the Saudi Arabia. It is comprehensive and details several scenarios. Read to know more.
  71. As per VAT law in KSA, there are different types of invoices, and the taxpayers have to generate the same type of e-invoices even under e-invoicing.
  72. e-Invoicing phases are divided broadly into two in the Kingdom of Saudi Arabia. The generation phase applies from 4th December 2021. Read more.
  73. e-Invoicing Regulations are released in the Kingdom of Saudi Arabia or KSA for all the resident VAT taxpayers. Read the article to know what's given in law.
  74. E-Invoicing in Saudi Arabia

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