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e-Invoicing Solutions in Saudi Arabia: On-Premises vs Cloud-Based Solutions

Updated on: Apr 25th, 2023

11 min read

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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