The Saudi Arabian Zakat, Tax and Customs Authority (ZATCA) has regulated the use of e-invoice (Fatoorah) in the Electronic Invoicing Regulation. Within the scope of the regulations in the ‘E-Invoice Regulation’ published by ZATCA, the use of B2B, B2C, and B2G e-invoices became mandatory throughout the country on December 4, 2021. Thus, the 1st Phase in the use of e-Invoice across the country completed.
KSA presents to taxpayers the e-Invoicing in two phases. In the first phase, the use of e-invoice became mandatory for all VAT taxpayers (excluding non-resident taxpayers) and suppliers from 4 December 2021.
The e-invoicing model in KSA can be summarized as follows:
1. The seller generates and stores the electronic invoice through a compliant e-invoicing system.
2. The e-invoice should include all the mandatory fields in the tax invoice.
3. The buyer receives a copy of the invoice.
Characteristics of the Integration Phase
After completing phase 1, ZATCA will move to phase 2 after January 1, 2023. The main purpose of the transition from the first phase, known as the Generation Phase, to the targeted 2nd phase, known as the Integration phase,
– Introducing technical requirements for electronic invoices and smart solutions
– It will include the integration of smart solutions with ZATCA systems.
The following requirements should be followed at this phase:
– All e-invoices and their associated documents, including simplified tax invoices, must be generated in an XML or PDF/A-3 format.
– The electronic invoicing solution must be able to connect to the internet and integrate with external systems via ZATCA’s API.
– A number of security mechanisms should be implemented for the integrity of invoices: digital signature, (UUID), QR code.
ZATCA will notify taxpayers of phase 2 at least six months in advance. In this respect, the implementation date for the first target group will be after January 1, 2023.
With the completion of the 1st phase and the implementation of the 2nd phase, the Saudi Arabian e-invoice system will be a control mechanism to prevent the informal economy and tax evasion in the country. In this context, the value of Saudi Arabia is expected to continue to increase in the context of the global market.