One of the most notable achievements in the recent years of the Kingdom of Saudi Arabia is the zatca approved e-invoicing in saudi arabia, and this case is one of the most significant ones. Introduced by Zakat, Tax and Customs Authority (ZATCA), e-invoicing has turned out to be a mandatory system of compliance among the VAT-registered business within the kingdom. This is a government-sponsored digital project, which is expected to boost transparency, increase tax collections, prevent commercial fraud, and streamline invoicing procedures in all areas. As a small business, a medium enterprise or a large organization, it is important to be aware of the structure of ZATCA e-invoicing to avoid any punishment and to maintain the undisturbed cycle of operations.
Due to the increasing number of companies shifting to digital invoicing, there is an increased demand of trusted and ZATCA certified e-invoicing in Saudi Arabia. Companies require a complete e-invoicing system that is fully compliant with regulations, can be integrated with the existing ERP systems, and provides the invoices with the correct format and free of any alterations. Systems such as QuickDice ERP have become potent systems that help organizations to address both technical and functional demands as well as streamlin operations. The present comprehensive guide will assist in giving a detailed description of the ZATCA e-invoicing stages, compliance regulations, invoice structure, technical requirements, and how companies may prepare to the changing regulatory environment. At the conclusion of this guide, you would have clear picture of all the requirements provided by ZATCA, and how you can keep your system within the requirements at all times.
What Is ZATCA E-Invoicing?
ZATCA e-invoicing can be defined as the procedure of creating, issuing, receiving, and storing invoices in electronic format with the structured digital format that complies with the tax regulations in Saudi Arabia. This is because these e-invoices are to be created in a secure and compliant system, and submitted to the ZATCA platform to be validated in real-time. The paper to digital invoice movement will seek to remove errors, manipulation and make the Saudi business environment more transparent.
The Reason why ZATCA Implemented E-Invoicing in KSA
E-invoicing was also adopted to digitize the financial ecosystem along with:
- Reduce tax evasion
- Enhance the quality of VAT returns.
- Track real time transactions.
- Establish a standardized manner of invoicing.
- Alignment with the Vision 2030 of Saudi Arabia in digital.
- Enhance productivity and minimize operating expenses to business.
The enforcement of ZATCA e-invoicing will help the authority modernize the entire business infrastructure and establish a modern controlled and transparent financial system.
Who Will Be under ZATCA E-Invoicing Requirements?
All the VAT registered companies that do their business within KSA are bound to obey the rules, such as:
- B2B, B2C, and B2G transactions
Professional service providers- Yes.
- Retail businesses
- Online platforms
Manufacturers/suppliers
: Manufacturers of handheld phones and their suppliers.
- Importers and distributors
Although a business may not be required to submit VAT returns, provided it has a VAT registration, ZATCA e-invoicing is in effect.
There are two stages of ZATCA E-Invoicing.
ZATCA has made it obligatory to implement e-invoicing in two significant stages:
1. Phase 1 -Generation Phase (FATOORAH)
2. Phase 2 – Integration Phase
It is broken down as below.
Phase 1: Generation Phase (Basic E-Invoicing)
This stage was implemented on December 4, 2021, and concerns businesses that produce digital invoices under compliant system.
Key Requirements of Phase 1
- Invoices should be created electronically (None of the invoices should be done manually or by hand).
- The invoices should include the necessary information including the details of the sellers and buyers, VAT number, the sum of the invoice, and tax summary.
QR codes are required in the case of B2C invoice.
- The system should eliminate tampering of invoices and proper timestamping.
- It must have secure digital storage.
At this stage, invoices are not required to be transmitted to ZATCA on a real-time basis, though they should be kept on a digital format in a form acceptable by ZATCA.
Phase 2: Phase of Integration (Advanced E-Invoicing)
Phase 2 is currently underway in business turnover category waves implementation. This step will involve installation of systems that will connect directly to the FATOORAH platform of ZATCA.
Key Requirements of Phase 2
- The invoices should be submitted to ZATCA real time to be verified.
- Invoice hash, cryptographic stamp, and UUID will have to be added.
- The system should produce XML or PDF/A-3 with XML embedded in it.
A solution that is approved by ZATCA to be used in e-invoicing has to be used.
- The solution should be of the standard of cybersecurity, as well as API standards of integration.
This will guarantee complete visibility and real time tracking of financial activities.
Types of E-Invoices in KSA
1. Standard Tax Invoices (B2B & B2G)
They are applied to business and government transactions and have to be provided to ZATCA in order to be validated.
Requirements include:
- XML or PDF/A-3 format
- Cryptographic stamp
- UUID and invoice hash
- Buyer VAT number
2. Simplified Tax Invoices (B2C)
Retail and consumer transactions.
Requirements include:
- QR code
- Seller information
- Tax amount
- Phase 2 business real-time reporting.
Fields that must be mandatory in invoices that comply with ZATCA.
The two types of invoices also have some fields that are compliant to the requirements of ZATCA e-invoicing and they include:
- Seller and buyer name
- VAT registration number
- Unique invoice number
- Timestamp
- Invoice total
- VAT amount (5% or zero-rated)
- Payment method
- Digital signature
- Cryptographic stamp (in Phase 2)
- Invoice hash
- XML file
These provide accuracy, transparency and archival to allow audit.
Conclusion
The introduction of e-invoicing into Saudi Arabia has radically changed the manner in which business organizations handle their financial records. With the constantly changing regulations, it is no longer a choice but a must as all the VAT-registered organizations are required to inquire and adhere to the requirements of ZATCA e-invoicing. E-invoicing not only enhances transparency but also makes the financial ecosystems more modern, more efficient, secure, and reliable in the kingdom. You are in the retail business, manufacturing business, professional service business, distribution business, or the e-commerce business, introducing digital invoices means that all transactions become accurate and tracked in real-time. This helps to have a better, more reliable business world that is in tandem with international standards of compliance.
In order to be able to comply successfully, the businesses need to implement a robust and secure system that will be able to support the advanced requirements of ZATCA. It is at this point that the selection of the appropriate platform is of essence. E-invoicing solutions such as EasyDice ERP and other solutions that are approved by ZATCA in Saudi Arabia will ensure that the company is not behind schedule, automate the procedures, and increase productivity. These systems make the whole process easier and minimize the likelihood of punishment because of creating the QR codes and XML files to checking the invoice in real-time. As the kingdom keeps putting on the digital innovation ladder, keeping up to the compliance regulations will guarantee long-term stability in the operations and continuous business development. By modernizing your system today, you are ensuring your compliance tomorrow, accuracy, and alignment of your activities to the transformation aspirations of Saudi Arabia.