The Kingdom of Saudi Arabia (KSA) started focusing on several initiatives for the digitalisation of the economy. The General Authority of Zakat and Tax (GAZT), merged with Zakat, Tax and Customs Authority (ZATCA), introduced e-invoicing in Saudi Arabia and published a draft amendment on 17th September 2020 in line with Value Added Tax Implementing Regulations. The draft covered aspects of e-invoicing rules.
This article explains all about KSA e-invoicing including applicability, types of e-invoices, phases, guidelines, process flow, case studies and benefits of Saudi e-invoicing.
Latest Updates
26th April 2024
ZATCA notified that KSA businesses registered in KSA with more than SAR 15 million turnover during 2022 or 2023 fall under wave 11 of phase 2. Hence, applicable businesses shall integrate their ERP/POS with the Fatoora portal by 1st November 2024.
Here's the official announcement.
29th March 2024
ZATCA notified that KSA VAT-registered businesses whose turnover was more than SAR 25 million during 2022 or 2023 falls under wave 10 of phase 2. Accordingly, applicable taxpayers shall integrate their ERP/POS with the Fatoora portal by 1st October 2024.
Click here to know more.
17th November 2023
ZATCA announced that Saudi businesses registered under VAT with more than SAR 30 million turnover during 2021 or 2022 fall under wave 9 of phase 2. Hence, applicable businesses shall integrate their ERP/POS with the Fatoora portal by 1st June 2024.
Here's the official announcement.
e-Invoice is an invoice issued and saved in an electronic format generated through an electronic system. e-Invoice can be generated for tax invoice, simplified tax invoice and respective Credit & Debit Notes (CDNs). It is clarified that a handwritten or scanned invoice will not be considered an electronic invoice.
The people of KSA refer to e-invoicing widely as Fatoorah, and e-invoicing software is called Fatoorah software. e-Invoicing is a procedure that aims to convert issuing invoices from paper into electronic mode. The e-invoicing process allows exchanging and processing of invoices, credit notes, and debit notes in a structured electronic format between buyer and seller using an integrated electronic solution.
All the provisions related to a tax invoice in the Value Added Tax (VAT) legislation will apply to an e-invoice, and any non-compliance will result in penalties from ZATCA. Apart from this, the provisions related to proof of electronic transactions and electronic signatures in the Electronic Transactions Law of KSA shall apply to e-invoices and electronic notes issued.
The Saudi government intends to phase out hand-written invoices and move towards a paperless digital environment. Accordingly, it rolled out e-invoicing in Saudi Arabia so businesses can work more efficiently and securely.
Under e-invoicing, businesses must integrate their systems with ZATCA to make trade more transparent. With this move, the government can standardise how invoices are reported to the system with a common, machine-readable format, as taxpayers shall push all transactions to the Fatoora portal.
Accordingly, ZATCA can easily detect fraudulent activities. Also, e-invoicing creates a common database for audits. Hence, tax authorities can track the transaction in real time and reduce the frequency of audits.
The Zakat, Tax and Customs Authority (ZATCA) is the authority for e-invoicing in Saudi Arabia. GAZT, now known as ZATCA, issued the draft e-Invoicing Regulations in KSA in March 2021. The authority allowed the public and stakeholders to provide feedback on the e-Invoicing Regulations on or before 17th April 2021. The e-Invoicing Regulations were finally published on 28th May 2021.
The regulations stated all resident taxpayers should mandatorily be fully equipped to issue, save and modify e-invoices by 4th December 2021. These regulations specify the terms, requirements, and conditions of electronic invoices and electronic credit and debit notes. Also, ZATCA has released detailed guidelines on e-invoicing for smooth implementation.
ZATCA clarified that e-invoices should be issued for all types of tax invoices under VAT. There are different types of e-invoices, and below are the frequently used tax invoices:
The e-invoices should be issued in the Arabic language. However, additional languages are permitted apart from the Arabic language.
Click here to know other types of e-invoices.
Further, ZATCA explained in the guidelines that the e-invoice to be issued varies based on the type of supply. Here’s the table explaining the type of e-invoice to be issued:
Type of Supply | Nature of Buyer | Invoice Value | Type of e-invoice to be issued |
Taxable sales | Taxable person | SAR 1000 or more | Standard tax e-invoice |
Taxable person | Less than SAR 1000 | Standard or simplified tax e-invoice* | |
Non-taxable legal person^ | SAR 1000 or more | Standard tax e-invoice | |
Non-taxable legal person^ | Less than SAR 1000 | Standard or simplified tax e-invoice* | |
Zero-rated sales | Taxable person | SAR 1000 or more | Standard tax e-invoice |
Taxable person | Less than SAR 1000 | Standard or simplified tax e-invoice* | |
Non-taxable legal person | SAR 1000 or more | Standard tax e-invoice | |
Non-taxable legal person | Less than SAR 1000 | Standard or simplified tax e-invoice* | |
Intra-GCC sales or exports | Any amount | Standard tax e-invoice | |
Nominal sales | Any amount | Standard tax e-invoice | |
B2C sales (Buyer details must be recorded in case of educational or private medical services) | Any amount | Simplified tax e-invoice | |
Imports | Any amount | Not Applicable | |
Exempted sales | Any amount | Not Applicable | |
Sales under Reverse Charge Mechanism (RCM) | Any amount | Not Applicable | |
Sales outside the VAT scope | Any amount | Not Applicable |
*When selling taxable or zero-rated supplies to a taxable or non-taxable legal person of less than SAR 1000, the seller might issue simplified tax invoices. However, if the buyer wants to claim input VAT, they can request the seller to issue a standard tax invoice.
^Non-taxable legal person means a business in Saudi Arabia but not registered under VAT due to the registration threshold.
All entities registered under KSA VAT, the customers and the third parties who issue invoices on behalf of any taxable individuals must use the electronic invoices. All VAT regulations applicable to tax invoices, credit notes and debit notes continue to apply to e-invoices as well. However, non-resident taxpayers under VAT are excluded from the scope of e-invoicing.
The ZATCA is implementing e-invoicing in two phases:
This phase is known as the ‘Generation Phase’, in which taxpayers have to generate and store tax invoices, simplified tax invoices and respective CDNs through a complaint e-invoicing solution. ZATCA implemented this phase on 4th December 2021. It is to be compiled by all taxpayers (excluding non-resident taxpayers) and any other parties issuing tax invoices on behalf of suppliers subject to VAT.
The procedures of issuing e-invoices will be similar to issuing invoices at present but through a compatible electronic billing system. The e-invoice shall include all the required items based on the type of invoice.
This phase is known as the ‘Integration Phase’ and is rolled out in waves by the targeted taxpayer group. Phase 2 will begin on 1st January 2023. Accordingly, ZATCA notified the below waves till now:
S. No | Name of the Wave | VAT Turnover | Turnover of which year? | Effective date |
1 | Wave 1 under phase 2 | Above SAR 3 billion | 2021 | 1st January 2023 |
2 | Wave 2 under phase 2 | Above SAR 500 million and below SAR 3 billion | 2021 | 1st July 2023 |
3 | Wave 3 under phase 2 | Above SAR 250 million and below SAR 500 million | 2021 or 2022 | 1st October 2023 |
4 | Wave 4 under phase 2 | Above SAR 150 million and below SAR 250 million | 2021 or 2022 | 1st November 2023 |
5 | Wave 5 under phase 2 | Above SAR 100 million and below SAR 150 million | 2021 or 2022 | 1st December 2023 |
6 | Wave 6 under phase 2 | Above SAR 70 million and below SAR 100 million | 2021 or 2022 | 1st January 2024 |
7 | Wave 7 under phase 2 | Above SAR 50 million and below 70 million | 2021 or 2022 | 1st February 2024 |
8 | Wave 8 under phase 2 | Above SAR 40 million and below 50 million | 2021 or 2022 | 1st March 2024 |
9 | Wave 9 under phase 2 | Above SAR 30 million and below 40 million | 2021 or 2022 | 1st June 2024 |
This phase involves introducing technical and business requirements for electronic invoices and electronic solutions and integrating with ZATCA’s systems. In this phase, taxpayers must integrate their systems of issuing electronic invoices and debit and credit notes with ZATCA’s systems to share data and information.
The seller has to ‘clear’ the Tax Invoice from ZATCA in real-time and then share it with the buyers as a legally valid e-invoice. However, the seller is required to report simplified invoices to ZATCA within 24 hours from the time of generation.
ZATCA has implemented phase 1 e-invoicing from 4th December 2021 and announced two waves under phase 2 of ZATCA e-invoicing. Also, ZATCA issued e-invoicing guidelines to provide more understanding to taxpayers and smoothly implement e-invoicing in Saudi Arabia.
Click here to know more about ZATCA e-invoicing guidelines.
The process flow for generating an e-invoice in Saudi Arabia differs based on the type of invoice. With the phase 2 implementation date approaching, it is important to understand the process of generating electronic invoices.
Let’s go through them one by one.
Here’s the step-by-step process flow of standard tax invoices in phase II:
Here’s the step-by-step process flow of simplified tax invoices in phase II:
The following are a few reasons for introducing e-invoicing or Fatoorah in KSA:
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The client has below concerns:
The client has chosen ClearTax as the preferred e-invoicing solution provider. We provided the below to the client:
Click here to get more details on this case study.
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