Updated on: Apr 25th, 2023
11 min read
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:
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.
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:
Also, you shall assign dedicated resources to perform the above tasks, which requires greater coordination between the finance and IT teams.
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:
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.
The following are the major differences between on-premises and cloud-based e-invoicing solutions:
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|