e-Invoicing in Saudi Arabia
KSA’s administration for tax, customs and other related affairs, ZATCA, published the final e-invoicing legislation on 28 May 2021. ZATCA will implement eInvoicing in two stages in accordance with its legislation.
The e-invoice requirement in Saudi Arabia covers standard (tax) invoices and simplified (tax) invoices and the debit or credit notes associated with each of these two invoice types. For example, credit note and debit note.
Standard tax invoices are used for B2B and B2G (debit note and credit note) transactions in KSA, while simplified tax invoices are used for B2C transactions. KSA legislation stipulates that anyone residing in Saudi Arabia for VAT purposes must generate an electronic invoice for domestic transactions. The exact requirements for format, content, security measures and CTC system vary by phase and two invoice types.
In this context, the obligation dates for B2B, B2G and B2C transactions are as follows:
eInvoicing Types in KSA
1. Electronic Invoice (Standard Invoice)
An electronic invoice is an invoice issued for most B2B and B2G transactions. This type of document is used by the buyers with the fields defined in Article 53/5 of the VAT Implementation Regulation to request input VAT deduction. The fields required for the production to be included in the e-invoice are included in the annex of the e-invoice decree. Standard eInvoices are shared by sellers with buyers in an agreed format. Standard invoices will be issued to recipients in the future after being cryptographically stamped and “transferred” by ZATCA (integration with the ZATCA portal is effective after the Integration Phase is implemented from January 2023).
Standard Electronic invoices include fields containing seller and buyer information, transaction and goods/service details, and other technical fields to be created by the electronic invoice solution, as required by VAT legislation.
2. Simplified Invoice
Simplified eInvoices are designed for most B2C transactions that are instant and where the buyer does not need to use the invoice for input VAT deduction. The required fields are defined in Article 53/8 VAT Implementing Regulations and in the appendix of the e-invoicing resolution. Simplified e-invoices are issued to the buyers/customers at the point of sale and are shared with the customers and a copy is subsequently archived and stored. During the Generation Phase, it is sufficient for Persons subject to the E-Invoicing Regulation to share the Simplified E-Invoices with customers, with no further action needed. During the Integration Phase, Simplified E-Invoices need to be reported to the Authority within 24 hours of issuance.
3. Credit Note and Debit Note
Credit / Debit notes are issued for an eInvoices / a simplified eInvoices (after an eInvoice 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. The reference fields can be used to indicate a date for reference, the invoice reference number, reference to all/multiple invoices in a period, and any other reference to the original sale. The credit/debit note types follow the type of invoice that they are issued against i.e., a standard electronic note is issued for a Standard eInvoice, and a simplified eNote is issued for a Simplified eInvoice.
KSA eInvoice Process
KSA eInvoicing Process comprises two phases.
According to Phase One: It included mandatory eInvoice generation and archiving as of 4 December 2021. The eInvoice software in Saudi Arabia should be able to create all invoices in electronic format. eInvoices must contain mandatory fields defined by ZATCA and comply with the legislation. In addition, tax invoices must include the buyer’s VAT registration number, if any. Finally, simplified tax invoices also provide convenience for users. Downloading ZATCA’s mobile application to a smart phone or tablet also allows for checking the validity of the invoice with a QR code.
In Phase 1, KSA expects VAT registered taxpayers to generate invoices in electronic format using a suitable e-invoice solution. This solution must be operable on-premises, in the cloud, or in hybrid mode. At the same time, the eInvoice must be stored and a copy sent to the seller. At this stage, there are no special requirements for the eInvoice format as long as the content complies with the standard invoice or simplified invoice requirements. As mentioned above, the invoice must contain a Quick Response code (QR code).
Phase 2: Integration with the ZATCA eInvoice portal of companies established in KSA and submission of eInvoice will start on 1 January 2023. According to regulations published by ZATCA, gradual integration will be mandatory for different company sizes and types. In this context, companies that fall under the eInvoice obligation are announced by ZATCA at the latest 6 months before the deadline.
During the integration phase, KSA requires that your eInvoice solution be integrated with ZATCA’s new, centralized e-invoicing platform for Continuous Transaction Controls (CTC). From the 2nd stage:
Invoices must be issued in one of the two prescribed formats:
1. Saudi Arabian UBL-XML invoice (Syntax validation) based on UBL 2.1 syntax and invoice definitions in ISO EN 16931(Content validation) but narrowed down to Saudi Arabian requirements
2. PDF/A-3 invoice file with an embedded Saudi Arabian XML invoice (similar to ZUGFeRD and Factur-X)
In addition, the eInvoice in KSA must contain a unique identifier (“UUID”) given by the machine that issued the document (unique message identifier for the interchange process). This value must contain only letters, digits, and dashes.
Melasoft eInvoice Solution for Saudi Arabia
Melasoft attaches importance to data validation to avoid the penalties stipulated by ZATCA. In this context, it performs intelligent data validation to ensure that the invoice data complies with ZATCA regulations, thus ensuring error-free invoices. Melasoft eInvoice Solution generates invoice XML to be compatible with ZATCA. Melasoft generates UUID, Invoice Hash, Invoice Counter Value, QR code and converts invoice to UBL 2.1 XML format.
Melasoft integrates with ZATCA to get customs clearance/report XML invoice and get certified XML from ZATCA. Melasoft adds a Phase II QR code and certified XML to the existing invoice to generate the final PDF A/3 invoice.