e-Invoicing Solutions in Saudi Arabia: On-Premises vs Cloud-Based Solutions
The tax authority in Saudi Arabia, Zakat, Tax and Customs Authority (ZATCA), intends to implement e-invoicing in two phases across the country. The e-Invoicing initiative in Saudi Arabia covers all resident taxpayers registered under VAT except non-residents (for VAT purposes).
Accordingly, ZATCA implemented phase 1 of e-invoicing in Saudi Arabia from 4th December 2021. Also, till now, ZATCA notified two waves under phase 2 of Saudi Arabia e-invoicing as follows:
- Wave 1 under phase 2: VAT-registered businesses in KSA having more than SAR 3 billion turnover in 2021 fall under wave 1 of phase 2 and must implement phase 2 beginning from 1st January 2023.
- Wave 2 under phase 2: VAT-registered businesses in KSA with more than SAR 500 million turnover in 2021 fall under wave 2 of phase 2, and they shall begin phase 2 implementation starting from 1st July 2023.
Hence, the e-invoicing applicable taxpayers should understand and comply with the phase 2 requirements. The businesses must integrate their ERP/POS/accounting systems with the Fatoora portal using compliant e-invoicing software in Saudi Arabia. Two types of e-invoicing solutions are available for taxpayers; one is on-premises, and the other is cloud-based.
Let’s go through both types of e-invoicing solutions in this article.
What is an on-premises e-invoicing solution in Saudi Arabia?
An e-invoicing solution completely built in-house of an organisation is called as an on-premises (on-prem) e-invoicing solution. So, the e-invoicing solution's infrastructure will be managed by you and in your control. In this type of e-invoicing solution, you must:
- Understand the ZATCA rules and regulations
- Acquire the required infrastructure for both processing and storage
- Develop e-invoicing solution on their own for different types of business cases while taking into account the rules and regulations
- Run trials to check the ability of the solution to handle all types of transactions and the expected volumes
- Register the e-Invoice Generating Solutions (EGS) or devices with ZATCA
- Integrate with API endpoints of Fatoora portal
- Arrange the archival facility to store e-invoices for a period of 6 years
- Update the processes impacted by e-invoicing
- Training the staff on how to use the e-Invoicing solution
- Handle errors and maintain the solution
- Update the solution as per ZATCA updates
- Upgrade the solution as per business requirements
Also, you shall assign dedicated resources to perform the above tasks, which requires greater coordination between the finance and IT teams.
What is a cloud-based e-invoicing solution in Saudi Arabia?
In a cloud-based e-invoicing solution, businesses can log in to a cloud platform and perform all e-invoicing functions. These solutions work on shared infrastructure, and the solution provider handles the different requirements. Hence, you don’t have to acquire or maintain any infrastructure. All you’ve to do is choose a compliant e-invoicing software provider and onboard with them.
Your cloud-based e-invoicing solution provider shall assist you in all aspects, including:
- Device registration of EGS
- Integration with Fatoora portal
- Archival of e-invoices for a period of 6 years in PDF-A3
- Updating solution as per ZATCA updates
- Auto-scaling of solution as per business requirements
- Training & 24*7 support to concerned staff who work day-in day-out with e-Invoicing
- Service-Level Agreement (SLA) for quick error resolution
When you opt for the cloud-based e-invoicing software in Saudi Arabia, you don’t have to go through the rigorous process of developing the solution and maintenance of it.
On-premises vs cloud-based e-invoicing solution in Saudi
The following are the major differences between on-premises and cloud-based e-invoicing solutions:
Particulars | On-premises e-invoicing solution | Cloud-based e-invoicing solution |
| Knowledge of ZATCA rules and regulations | Mandatory | Not mandatory and will be explained by the solution provider |
| Infrastructure to be acquired by | Businesses on their own | Solution provider manages the required infrastructure and is cost effective |
| Dedication of resources | Need dedicated resources from IT and finance teams | No need of dedicated resources and requirement is only at the starting of the e-Invoicing project |
| Efforts required | Very High | Minimal |
| Cost involved | Very High | Moderate compared to the on-premises solution |
| Maintenance of the infrastructure | Self-management | Solution provider maintains the shared-infra |
| Auto-scaling of the solution | Hight cost and efforts are involved | Comes as an in-built feature |
| Updation of solution as per ZATCA updates | Need to update solution on own | Solution provider takes care of updates time-to-time |
| Chances of downtime | High | Very minimal |
| Error handling | Need to train staff to understand the technical aspects and handle errors | 24*7 support will be available from solution provider; comes with SLA |
| Data security | Secured | Secured as data will be stored in encrypted form |
| Data recovery | Need to build the own backup systems | Comes as a default feature with cloud-based e-invoicing solution |
| Invoice archival facility | Need to maintain a own archival facility | Solution comes with invoice archival facility |
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