ZATCA has announced the final requirements for Implementing the Provisions of the E-Invoicing Regulation in Saudi Arabia. This Fatoorah endeavor will significantly reduce VAT leakage, help to adapt to cashless economy, and reduce shadow economy. The transition process from paper-based to electronic invoices shall reduce fraud, and tax evasion. It means that Saudi Arabia will adopt international practice and increase compliance with tax obligations through the new e-invoicing regulations.

We welcome you to CSE. Based on your current business model, we are happy to give you options on complying with the ZATCA’s E-invoicing endeavour.

What is E-Invoicing?

Electronic Invoicing is a digital process of exchanging – issuing and receiving – invoices in electronic forms between a buyer and a seller. Following the new ZA- TCA’s requirements all invoices have to be processed and stored in a structured electronic format through an electronic system, which includes all the requirements of a tax invoice. This means that suppliers will no longer be allowed to generate or store paper or PDF invoices.

The new regulation applies to B2G, B2B, and B2C transactions and will affect all residents, taxable persons in Saudi Arabia. It will also affect third parties issuing invoices on behalf of a taxpayer subject to VAT. 

E- Invoices are broadly classified as:

  • Tax Invoices – For B2B – Both the Seller’s and Buyer’s VAT IDs are mentioned in the Invoice
  • Simplified Invoices – For B2C –  Buyer’s VAT ID not available.
  • Credit and Debit Notes – Electronic Credit / Debit notes are issued for an E-invoices(after an e- invoice has been issued), wherein the transaction is adjusted subject to Article 54 and Article 40 (1), VAT Implementing Regulations. Credit and Debit notes must be issued with a reference to the original invoice(s) to which they are issued.

Implementation of E-invoicing

E-Invoicing implementation is planned in 2 main phases.

Phase – 1: (Generation Phase – start date 4th December 2021) focused on generation and archiving, will be effective from December 4th, 2021. The suppliers are required to generate e-invoices (both tax invoices and simplified tax invoices) in the electronic and structured format. It is also required to store e-invoices electronically. Electronic invoices must include all mandatory fields in accordance with the VAT regulations in addition to the VAT identification number of the buyer (if the buyer is a registered VAT taxpayer) and a QR code.

Points to consider for Phase – 1 Compliance: 

  • An Invoicing System – a Must. If already have one, update it to comply with ZATCA. 
  • Obliged to add QR code – in case of Simplified Invoices
  • For Standard Invoice, obligation to add buyer’s Tax ID. System cleansing is needed 
  • Invoices must contain all the fields required 
  • Compulsory Archival of Issued Invoices / ability to freeze for editing after issuance. 

Phase – 2: (Integration Phase – effective 1st January 2023) includes the transmission of e-invoices with the ZATCA system by using an application programming interface. All electronic invoices have to be generated in XML or PDF/A-3 format. Additionally, the suppliers’ e-invoicing software is required to be able to generate a universally unique identifier (UUID), cryptographic stamp, a hash, and a QR code.

Points to consider for Phase – 2 Compliance: 

  • Issuing invoices in XML, or PDF/A-3 formats
  • Implementing anti-tampering features 
  • Implementing other technical features such as a universally unique identifier (UUID)
  • Integrating with the ZATCA’s platform