E-invoicing in Saudi Arabia has changed the business operations, and in particular, the heavy regulatory environment created by the Zakat, Tax, and Customs Authority (ZATCA). Intended to increase levels of transparency, mitigate the tax evasion as well as optimise transactions, ZATCA regulations on e-invoicing have rendered it to be important that companies embrace software which completely meets technical, security and integration requirements. Nevertheless, most of the businesses are left wondering about one big question: How do you know whether your software is really compliant with e-invoicing ZATCA?
Since Phase 1 and Phase 2 of the ZATCA implementation are currently active, the anxiety on companies to make sure that their digital invoicing system is able to comply with all the requirements is more intense than ever before. Failure to do so may lead to fines, lack of integration, or invoice approvals. This is the reason why it is very important to select an efficient solution- a fully approved ERP solution like QuickDice ERP. However, the choice of software is just the beginning. The real difficulty will be to ensure that your solution is in compliance with the constantly changing ZATCA requirements of digital signatures, QR codes, XML formatting, security requirements, and integration with Fatoora portal.
What Is E-Invoicing that is ZATCA-Compliant?
To check compliance, it is necessary to know what ZATCA compliant e-invoicing is in the first place. ZATCA has set up stringent requirements in two stages:
Phase 1: Generation Phase
- Electronic invoicing and notes generation capability.
Mandatory fields were (buyer details, seller details, VAT amount, invoice type)
- B2C invoices generation with QR codes.
- The e-invoices in machine-readable formats like XML.
Phase 2: Integration Phase
- Connections with the Fatoora portal of ZATCA.
- Cryptographic stamping and digital signatures.
- UUID, PIH, and ICN identifiers
- Storage of invoices that is tamper proof.
- Standard Tax Invoices reporting in real time.
- Invoice-type clearance or reporting.
A system which meets ZATCA specifications will have to meet the requirements of all phases 1 and 2.
The importance of checking that the ZATCA is in compliance
There are numerous solutions that are purported to support E-invoicing in Saudi Arabia, but not all of them actually fit the security, integration and technical demands. Compliance should be checked as it is necessary since:
- There should be no punishment on using systems that are non-compliant.
- Ensuring that there is integration success with the Fatoora portal.
- Avoidance of rejection of invoices.
- Having tax transparency.
- Enhancing the continuity of operation in the long term.
- Not to disrupt the process of audits.
- Saving time and expenses on manual corrections.
Swift solutions such as QuickDice ERP are designed to cater to all the requirements of ZATCA, however, in either case, careful verification is required.
Stepwise Instructions: Checking the Compliance of E-Invoicing Software with ZATCA
1. Determine whether the Software is Approved by ZATCA
Prior to dealing with any software to e-invoice in Saudi Arabia, it should be known as a trusted solution provider. Although ZATCA does not release a public list of approval, they check the software standard on the integration tests. To verify compliance, your provider must comply with:
XML generation of invoices rules.
- Encryption and security measures.
- Standards of QR code generation.
Phase 2- readiness (clearance and reporting)
When your software such as QuickDice ERP offers certifications or proof of passing integration tests then it is also a good indicator of compliance.
2. Make sure that the Software produces XML and PDF/ A-3.
All invoices, which are issued by ZATCA, must be in:
- XML format (Machine-readable)
- PDF/A-3 (Human-readable + Embedded XML).
To verify this:
- Xiaofei invoice, and see whether XML is included.
- Ask your vendor to present XML reports of validation.
- Make sure the XML has such necessary elements as UUID, timestamps, and signatures.
3. Confirm QR Code Correctness (In Case of Simplified Tax Invoices)
All B2C invoices should have an authentic QR code.
An obeyed QR code should include:
• Seller name
• Seller VAT number
• Timestamp
• Invoice total
• VAT total
• Cryptographic stamp (Phase 2)
Scan the QR code. In case it shows legible data in Arabic and English, chances are high that it is up to date.
4. Digital Signature and Cryptographic Stamp
Phase 2 demands invoices to be closed with:
Digital Signature Certificate (DSC): A DSC is a computer program that includes and manages certificate keys along with other authorized components.<|human|>Digital Signature Certificate (DSC): DSC is a computer program which contains and maintains certificate keys and other authorized elements.
- Cryptographic Stamp (CSID)
- UUID for every invoice
Your application should automatically:
- Create digital signatures.
- Keep cryptographic stamp of each invoice.
- Use secure private keys
Ask your provider for:
- Cryptographic certificate information.
- Evidence of the embedding of digital signatures.
- XML signature invoices of samples.
Already solutions such as QuickDice ERP have these automated mechanisms.
5. Box Seamless Interacting with the Fatoora Portal of ZATCA
The greatest challenge is integration with the API of ZATCA.
Your software must:
- Authenticate yourself as a business.
- Identify with the CSID issued by ZATCA.
- nvoice on-the-fly or approximately on-the-fly.
- Before distributing to buyers, reasonable Standard Tax Invoices are clear.
Run these checks:
- Does your system submit a sample invoice to ZATCA successfully?
- Does the system indicate cleared and reported statuses?
- Does it have error logs in case of rejected invoice?
When all these functions are functioning, then it is a confirmation of Phase 2 compliance.
6. Check Invoice Tamper-Proofing & Audit Trail Logs
ZATCA requires:
- No subsequent invoice editing.
- Complete audit trail (created, edited, reported, approved timestamps)
- Version tracking
- Secure archiving
Ask your software provider:
- Is it possible to edit invoices by the user? (They should NOT)
- Does the system have an overall audit trail?
- Are the logs sensitive to deletion?
Tamper-proof system will provide high compliance.
7. Make sure that the Software supports various types of invoices
Your e-invoicing system should be able to generate properly:
- Standard Tax Invoices
- Simplified Tax Invoices
- Credit Notes
- Debit Notes
Each type must follow:
- Different XML rules
- Other rules of reporting/clearing.
- Various QR code requirements.
Make sure that your system enables you to generate all the types and that they are properly mapped.
8. Check Customer and Seller Data Requirements
It is essential to check whether your software writes mandatory fields.
Your system must capture:
Seller details:
- VAT registration number
- CR number
- Address
Buyer details:
- VAT number
- Address
- Name
- Contact
Test by creating a sample invoice and either verify that all fields are present in both PDF and XML.
9. Establish VAT Calculation Precision
ZATCA demands no round off errors in calculations of VAT.
Test your software by:
- Billing mixed rate invoices.
- Checking VAT rounding rules
- Validating tax fields in XML
A system such as QuickDice ERP which is compliant automatically calculates correct VAT.
10. Confirm Structure Billing Sequence Requirement
ZATCA mandates:
- A non-incremental invoice number system.
- Special sequential serial numbers.
- Various count of invoices.
Ask your provider:
• Does your software allow duplication of numbers?
• Does the system have invoice type-wise counters?
• Is the order safeguarded against hand manipulation?
This is essential in preventing audit punishments.
11. Test Data Security and Encryption Standard
Your system would have to comply with the advanced security rules:
- Secure invoice storage
- Invoices transmission- encrypted.
- Role-based access control
- Tamper-proof logs
- Safely stored encrypted keys.
Ask your provider to give you a security compliance report.
12. Request ZATCA Sandbox Test Report
All compliant software would have to be integrated successfully with the ZATCA sandbox environment and then be able to go live with it.
Ask your vendor for:
• API test logs
• Clearance and reporting success screen captures.
• Evidence or Proof of Compliance or validation certificate.
In case they are unable to offer it, the software may fail to be completely compliant.
Some of the typical indicators of non-compliance with ZATCA software
In the case that your invoicing system contains any of the following problems, then it is probably not compliant:
- No XML invoice generation
- No no QR code and wrong QR code.
- Failure to get connected to the Fatoora portal.
- It is possible to edit and delete invoices even after issuance.
- No audit trail
- Lacks no digital signature features.
- Clearance errors or rejection errors.
- Lack of required fields in PDF or XML.
Invoking non-compliant software may result in punishments, invoice rejection and business interruptions.
Why Select an ERP Solution that is ZATCA-Compliant such as QuickDice?
Most of the systems purport to be ZATCA compliant in e-invoicing, however very few are actually end-to-end compliant. QuickDice ERP will be specific to businesses in Saudi Arabia and will guarantee:
- Complete XML/ PDF/A generation.
- Auto-generation of QR code.
- Cryptographic stamping
- Connection with the Fatoora portal.
- Invoice clearance and reporting in real-time.
- Full audit trail and tamper proof store.
- Accurate VAT calculations
- Support of invoices of any kind.
- Phase 1 and Phase 2 seamless onboarding.
When an effective system is decided upon, compliance is minimized and operations are smooth.
Conclusion
Ensuring that your e-invoicing system is indeed compliant with ZATCA standards is not merely a compliance measure, it is a long-term affecting financial and operational soundness of your business. Since E-invoicing in Saudi Arabia is still developing, businesses are required to keep in pace with all technical, security and integration requirements provided by the authority. A careful assessment of your system capacity to produce compliant XML invoices, with digital signatures, to produce accurate QR codes, to maintain audit trails, and to function well with the Fatoora portal is the guarantee that your business will not pay any penalty and be audit-ready.
Compliance may be made much easier using a powerful solution such as QuickDice ERP. These systems can provide inbuilt controls, automatic checks, safe storage of invoices, and a smooth real time connection with ZATCA- this way your operations are within course to comply with the requirements both present and in the future. Nevertheless, despite having a state of art ERP system companies will still be required to be proactive in checking on the compliance frequently, since ZATCA keeps introducing new updates and performance standards.