The implementation of e-invoicing has become a major part of the country’s financial landscape as businesses in Saudi Arabia adapt to digital advancements. All VAT registered businesses are required to comply with the new regulations with the introduction of mandatory e-invoicing guidelines by ZATCA (Zakat, Tax, and Customs Authority). The shift towards digital invoicing not only makes tax compliance more transparent, but it also makes it much easier for the country to comply with the tax. If you want to ensure that your business is compliant, then choosing the right e-invoicing software Saudi Arabia is a must.
Businesses that want to avoid penalties they become subject to will adopt the right e-Invoicing solution to bypass the intricacies of ZATCA’s regulations. Given that Saudi Arabia is going through a digital transformation, all types of businesses need to know how to make use of the guidelines implemented in this way. This blog will take you through the important aspects of ZATCA’s e-invoicing rules, and how choosing the best e-invoicing software Saudi Arabia can save you time and help make your invoicing processes simple.
Here are the ZATCA guidelines for e-invoicing software in Saudi Arabia
1. What is E-Invoicing and why is it important?
FATOORA is also known as E-invoicing, a digital method for creating, storing and sending the invoices. Businesses are forced to issue and store electronic invoices in a structured format rather than use traditional paper invoices. The goal? To enhance transparency, reduce fraud and improve ease of compliance for all the stakeholders.
In December 2021, Saudi businesses have been mandated to adopt e-invoicing. This is even more important as the second phase will start rolling out in 2023.
2. Key Points to Remember about ZATCA’s E-Invoicing Guidelines
Clear guidelines have been laid down by ZATCA for businesses to follow in order to facilitate smooth and compliant e-invoicing. The important steps are:
1. Two Phases of Implementation
Phase 1: Generation Phase (December 2021)
In this phase, businesses have to stop using paper invoices and generate e-invoices in structured formats such as XML or PDF/A-3. Essential details must be included in the e-invoices such as VAT numbers, invoice dates and amounts.
Phase 2: Integration Phase (Started January 2023)
In the second phase, businesses need to integrate their e-invoicing system with ZATCA’s for real time validation. In this case, each invoice will have a different QR code for verification and businesses will need to use ZATCA approved e-invoicing software.
2. Types of E-Invoices
There are two main types of e-invoices classified by ZATCA.
- B2B (Business to Business) transactions in case of Tax Invoices, needs more details like VAT numbers.
- B2C (Business to Consumer) transactions can use Simplified Tax Invoices which need to include a QR code to make verification easy.
3. What You Can’t Do
To maintain the integrity of its e-invoicing system, ZATCA has made it clear that there are some actions that are prohibited.
- Manual data entry or modification of invoices.
- Making use of unsecured invoicing systems that allow for alterations.
- Using more than one invoice sequence without prior approval.
3. Choosing the Right E-Invoicing Software in Saudi Arabia
In order to remain compliant with ZATCA’s regulations, it is important to choose the right e-invoicing software in Saudi Arabia. What to look for in your software solution is as follows:
- It must comply with all the integration and security standards defined by ZATCA.
- The software should be able to validate your invoices with ZATCA in real time.
- Automated Invoice Generation: Goodbye Error! Accurate invoices should be automatically generated by the software.
- Security Features: Seek for software that cannot be tampered with and cannot be modified by unauthorized persons.
- If you have international clients, this feature can save your life.
You can comply with ZATCA’s regulations by choosing the right software, which will also make your invoicing process faster and more efficient.
4. How Can You Prepare for E-Invoicing Compliance?
There’s no reason for the transition to e-invoicing to be complicated. To get ready some simple steps are as follows:
- Assess Your Current System: Check what is in your existing invoicing process and then convert it to a ZATCA approved system.
- Build a scenario by which you’ll train your people: figure out what everyone involved in your invoicing process needs to know in order to use your new invoicing system.
- Be Updated: Always keep in mind ZATCA’s latest updates and regulations to prevent your business to be out of compliance.
Conclusion
Being in sync with the Saudi Arabia’s commitment to digital transformation, ZATCA’s e-invoicing guidelines are a big step towards improving tax compliance and reducing fraud. Although it is mandatory to implement e-invoicing software Saudi Arabia, it also makes your invoicing process easier and more efficient, reducing errors. If you want to avoid the unnecessary penalties which come with doing the wrong e invoicing, it is important to embrace the right e invoicing solution.
No matter if you are a small business or a large enterprise, it is important to make the switch to e-invoicing as soon as possible. Avoid waiting until the deadlines have come knocking on your door, start doing what you need to do now to establish an e-invoicing system consistent with the ZATCA. This will not only satisfy the regulations, but also make for a more orderly, secure and efficient process of invoicing.