The Zakat, Tax, and Customs Authority (ZATCA) has made e-invoicing in the Kingdom of Saudi Arabia (KSA) mandatory from 4th December 2021 for all taxpayers. The non-compliance with the KSA e-invoicing regulations will result in penalties.
Hence, every taxpayer must understand the requirements of the regulation. This article explains seven key points you should know about e-invoicing in Saudi Arabia.
Table of contents
- KSA E-Invoicing Solution
- Purpose Of E-Invoicing Regulation In Saudi Arabia
- How to comply with the KSA e-invoicing regulations?
- Understanding’ Understanding’ offline archiving on local soil’‘
- What will be in phase 2 of KSA e-invoicing?
- Key mandatory fields of an e-invoice
Mandatory Issuance Of E-Invoices In Saudi Arabia
Every taxpayer needs to issue their tax invoices electronically and comply with the KSA e-invoicing regulations.
The regulations provide instructions to issue the e-invoices in Arabic, with additional languages permitted.
The e-invoicing regulation applies to all taxable supplies (standard and zero-rated). E-Invoicing in Saudi Arabia is effected in a phased manner wherein the taxpayers must issue tax invoices electronically in the first phase.
The details, guidelines, and requirements for the subsequent phases should be provided within 180 days of the first phase’s publication date.
KSA E-Invoicing Solution
The e-invoicing in Saudi Arabia must be done using ZATCA-compliant e-invoicing solutions. E-Invoicing solutions in Saudi Arabia are e-invoicing software that enables smooth compliance with e-invoicing regulations.
These e-invoicing solutions help taxpayers comply with the rules by providing a convenient and user-friendly experience.
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These are prepared in a manner that will show an error message before issuing an invoice if you forget to comply with any of the critical requirements.
Purpose Of E-Invoicing Regulation In Saudi Arabia
The e-invoicing regulation aims to increase efficiency, transparency, and security while issuing tax invoices.
- Efficiency: While the manual process requires a lot of time, energy, and human effort, e-invoicing solutions help increase productivity and save time in preparing and issuing e-invoices.
- Transparency: The KSA e-invoicing mechanism enables transparency by making the entire process of issuing tax invoices electronically. It helps in maintaining proper records of the invoices issued.
- Security: Electronic invoices allow the government to closely monitor taxable transactions in real time, enabling better tax compliance.
How to comply with the KSA e-invoicing regulations?
The basic requirement to comply with these regulations is obtaining an e-invoicing solution to help you smoothly generate electronic invoices. You may consider the following points while preparing for e-invoicing compliance.
- Identification of transactions for which e-invoices are required (all taxable supplies).
- Understanding the existing processes (billing, accounting, procurement) that will be impacted due to e-invoicing regulations
- Analyzing the software capabilities of your current billing system or software provider to integrate the e-invoicing solutions. You may also evaluate some of the best e-invoicing solutions in Saudi Arabia and decide which one is more reliable.
- Evaluate how different software solutions integrate with the ZATCA’s system and the Arabic language capabilities.
Understanding’ Understanding’ offline archiving on local soil”
The ZATCA requires the e-invoices to be saved digitally on the server. Offline archiving means the e-invoices must be archived electronically on a Saudi Arabia server.
The archive must follow the technical specifications of naming convention, non-tampering invoices, and nonrepudiation of the structured data files, i.e., e-invoices.
What will be in phase 2 of KSA e-invoicing?
Phase 2 of the e-invoicing regulations in KSA is called the integration phase (fatoorah), and it starts on 1st January 2023. The integration phase is compulsory for certain taxpayers mentioned in the e-invoicing regulations.
The authority divides such taxpayers into target groups, requiring the target group to integrate their e-invoicing generating system into the ZATCA’s system.
ZATCA will notify these target groups of the integration six months in advance. The regulations include technical specifications, requirements, controls, and procedural rules.
Key mandatory fields of an e-invoice
The e-invoicing in the KSA requires specific areas to be mentioned carefully and mandatorily. The key mandatory fields of e-invoice are necessary for the integration phase (phase 2) except for the QR code.
The QR code field must be added in the generation phase (phase 1) itself in case of simplified e-invoices and associated notes.
The below list explains what the key mandatory fields of an e-invoice are.
|Key Mandatory Fields||Description|
|UUID||Internationally unique number to identify and track an invoice generated automatically by the compliant solutions.|
|Cryptographic stamp||Generated by the e-invoicing solution is submerged in the QR code.|
|Cryptographic stamp identifier||Linked to the cryptographic stamp helps connect the stamp with the e-invoicing solution.|
|Previous invoice hash||A digital invoice fingerprint is required by ZATCA to be mentioned in an e-invoice.|
|QR code||Quick response code embeds invoice details such as the seller’s name, VAT registration number, date and time, etc.|
|Invoice counter||A number that keeps increasing as new invoices are issued.|
It is crucial to remain up to date with the e-invoicing requirements in Saudi Arabia to avoid any non-compliance.
You should carefully select the e-invoicing solution to increase your efficiency, transparency, and security while issuing the e-invoices.