e-Invoicing Regulations in Saudi Arabia

e-Invoicing regulations are published by the Zakat, Tax and Customs Authority (ZATCA), erstwhile called the General Authority of Zakat and Tax (GAZT). These regulations were issued for implementing the e-invoicing in Saudi Arabia in a phased manner from 4th December 2021.

Overview of e-Invoicing Regulations in the KSA

ZATCA issued the draft e-Invoicing Regulations in KSA in March 2021. The authority allowed the public and stakeholders to provide their feedback on the e-Invoicing Regulations on or before 17th April 2021. The e-Invoicing Regulations were finally published on 28th May 2021.

Additionally, draft rules for requirements, controls, technical specifications, and procedures were published to effectively implement the e-invoicing in KSA. Further, Electronic Invoice XML Implementation Standard, Electronic Invoice Data Dictionary, and Electronic Invoice Security Implementation Standards have also been hosted on the ZATCA official portal.

The e-Invoicing Regulations in KSA have six articles ranging from Article Two to Article Seven. These Articles cover the scope, applicability, definitions, power to issue technical and procedural rules, and enforcement of e-Invoicing Regulations in KSA, explained in further sections.

The first phase of e-invoicing in the KSA (Fatoorah)

The first phase of the e-invoicing system has been implemented from 4th December 2021, covering all the resident taxpayers. During phase 1, taxpayers must generate, process and store the e-invoices and related Credit or Debit Notes (CDNs) as outlined in the e-Invoicing Regulations in KSA.

Even though no standard format is prescribed for electronic invoices and related CDNs during phase 1, certain invoice information must be mandatorily part of electronic invoices and related CDNs. Also, the e-invoice solution should adhere to specific parameters for the electronic invoice and related CDNs to be e-invoicing compliant in KSA.

The second phase of the e-invoicing system in the KSA

The second phase of the e-invoicing system begins on 1st January 2023. During this phase, certain resident taxpayers must integrate their invoicing or billing systems with the system of ZATCA’s Fatoora portal using the Application Programming Interface (API). 

Saudi taxpayers having Business to Consumer (B2C), Business-to-business (B2B) and Business-to-Government (B2G) transactions share the invoice data with the Fatoora portal for verification and approval. With this, the Saudi e-invoicing system will be labelled as a Continuous Transaction Controls (CTC) e-invoicing system from 1st January 2023 to authenticate every e-invoice.

Phase 2 of Fatoorah will be implemented group-wise, and the selected group of taxpayers will be notified six months in advance to get ready. Accordingly, ZATCA announced twelve waves till now:

• Wave 1 from 1st January 2023: Taxpayers whose annual turnover exceeds SAR 3 billion in 2021.
• Wave 2 from 1st July 2023: Businesses with more than SAR 500 million turnover in 2021.
• Wave 3 from 1st October 2023: Taxpayers with a turnover of more than SAR 250 million in 2021 or 2022. 
• Wave 4 from 1st November 2023: Businesses having more than SAR 150 million turnover in 2021 or 2022.
• Wave 5 from 1st December 2023: Taxpayers with more than SAR 100 million turnover in 2021 or 2022.
• Wave 6  from 1st January 2024: Taxpayers with more than SAR 70 million turnover in 2021 or 2022.
• Wave 7 from 1st February 2024: Businesses with more than SAR 50 million turnover in 2021 or 2022.
• Wave 8 from 1st March 2024: Businesses having more than SAR 40 million turnover in 2021 or 2022.
• Wave 9 from 1st June 2024: Businesses with more than SAR 30 million turnover in 2021 or 2022.
• Wave 10 from 1st October 2024: Saudi taxpayers with more than SAR 25 million turnover in 2022 or 2023.
• Wave 11 from 1st November 2024: Saudi taxpayers with more than SAR 15 million turnover in 2022 or 2023.
• Wave 12 from 1st December 2024: KSA businesses with more than SAR 10 million turnover in 2022 or 2023.

Article Two: Purpose and scope

The purpose of the e-Invoicing Regulations is to recognise the terms, conditions and requirements of the electronic invoices for Value Added Tax (VAT) purposes as per Article (53) of the VAT Implementing Regulation. 

e-Invoicing Regulation shall be a core part of the VAT Implementing Regulations and supports the objective of it.

Article Three: Persons subject to this regulation

The following persons are subject to the e-Invoicing Regulations in KSA: 

• The taxable person, being a resident in the Kingdom. 
• The customer or a third party person who issues tax invoice on behalf of the resident taxable person as per the VAT Implementing Regulations. 

Such persons must issue e-invoices for all their transactions requiring tax invoices. Further, it applies to electronic notes such as debit notes or credit notes, wherever required by the VAT law and VAT Implementing Regulation. 

The e-Invoicing Regulation in KSA also clarifies that persons not being residents in the KSA need not issue electronic invoices or CDNs for supplies or amounts received that are taxable in the Kingdom. In other words, invoicing for cross-border transactions or people non-resident for VAT purposes is not subject to this regulation.

Article Four: Provisions related to electronic invoices and electronic notes

The electronic invoices and related CDNs raised under this regulation are tax invoices and credit and debit notes in line with the VAT law and its implementing regulation. Therefore, all provisions that apply to tax invoices, credit, and debit notes shall also include electronic invoices and related CDNs.

Some of the specific provisions of VAT that apply to electronic invoices and related CDNs are as follows:

• Fines and penalties as per Chapter (16) of the VAT law.
• Contents of tax invoices and simplified tax invoices as per article (53) of the VAT Implementing Regulations.
• Manner of issuing debit and credit notes provided in article (54) of the VAT Implementing Regulations.
• Record keeping and invoice issue provisions as stated in article (66) of the VAT Implementing Regulations.

The rules regarding electronic signature and proof of electronic transactions as outlined in the Electronic Transactions Law of the KSA continue to apply here, subject to any exceptions given in these regulations.

The Governor may issue additional rules for defining the contents of the electronic invoices and related CDNs.

Article Five: Technical specifications and procedural rules

e-Invoicing solutions refer to the hardware, software, integration routes, networks, etc. The following are technical specifications regarding the e-invoicing solutions to be used by the applicable resident taxpayers for electronic invoicing in KSA.

• Such a technical solution or the e-invoicing solution should be able to connect to the internet.
• The e-invoicing solution must be tamper-proof and have a trail to detect any tampering by taxpayers or any other person.
• Such a technical solution or the e-invoicing solution should be able to connect with external systems using API.
• The e-invoicing solution should adhere to all the controls and specifications on data or information security applied in the KSA.

The Governor may issue additional technical rules for processing, transmission, and storing electronic invoices and related CDNs.

Article Six: General provisions

The Governor can define the time limits and targeted groups. It can also notify the essential decisions and instructions to implement the provisions of the e-Invoicing Regulation in the KSA. 

The Governor may issue the requirements, controls, and procedures for integrating the electronic invoicing systems within a maximum of 180 days from publishing the e-Invoicing Regulations in the Official Gazette, i.e., 28th May 2021. The Governor can also define the time limits that precede the obligation to perform the integration requirements.

Article Seven: Enforcement and obligation

These regulations shall come into effect from the publication date in the Official Gazette. All resident taxpayers are given 12 months (of a calendar) from its publication date in the Official Gazette to implement these provisions, i.e., 28th May 2021.