The e-Invoicing system shall soon be implemented in the Kingdom of Saudi Arabia (KSA). There are two phases in which the implementation takes place, which is explained in this article.
Phase 1: Phase of generation of e-invoices (Fatoorah)
The generation phase is the first phase of Fatoorah or e-invoicing in the KSA. The first phase begins to apply from 4th December 2021 and continues till 31st December 2022.
Applicable persons to whom the e-Invoicing Regulations apply must generate electronic invoices and associated electronic notes abiding by some specified control and technical aspects in Saudi Arabia.
The detailed guidelines lay down the rules for generation and compliant e-invoice solutions called the Resolution on the Controls, Requirements, Technical Specifications, and Procedural Rules. The authority may update through resolutions in the future.
The requirements set forth for generating e-invoices and simplified e-invoices from 4th December 2021 up to 31st December 2022 are listed as follows:
- For e-invoice generation purposes, all invoices must be raised and issued by electronic means.
- For Business-to-Business (B2B) and Business-to-Government (B2G) transactions, phase 1 requires the supplier to generate an invoice electronically, share it with the buyer or customer and store invoices.
- For all the Business-to-Customer (B2C) transactions, phase 1 requires the supplier to generate simplified e-invoices electronically, issue them to the customer, and store the Fatoorah. The customers can scan the QR code appearing on the invoice to verify the information.
- There is no standard format made mandatory for businesses. Further, the cryptographic stamp is not compulsory.
- The businesses must generate e-invoices (Fatoorah) with fields related to non-integration.
- e-Invoices must be stored following the VAT rules such that the authorities can access them anytime.
- QR code in e-invoice is not mandatory, whereas a QR code defining the basic invoice and taxpayer information is required in a simplified e-invoice.
- Concerning the e-invoice generating solution’s security and integrity measures, the device registration, Universally Unique Identifier (UUID), and Hash are not mandatory.
- The e-invoice generating solution should be able to connect to the internet.
- Clearance and reporting of Fatoorah or e-invoices are not compulsory or required during phase 1.
Phase 2: Phase of integration of e-invoices (Fatoorah)
The integration phase is the second phase of Fatoorah or e-invoicing in the KSA. The second phase shall apply to businesses starting from 1st January 2023.
The integration phase will be implemented in transitions and made mandatory to persons notified under the e-Invoicing Regulations. There is a particular set of criteria identified by the authority.
Under this phase, the applicable persons under the e-Invoicing Regulations have to integrate their e-invoice generating systems with the ZaTCA’s or GAZT’s system. They are known as target groups in Saudi Arabia.
The Resolution provides the rules for integration and necessary compliance on the Controls, Requirements, Technical Specifications, and Procedural Rules. The authority may update through resolutions in the future.
The target groups will get prior intimation about the integration procedures at least six months in advance from the implementation date set for integration in Saudi Arabia.
The following are the salient points on the second phase of e-invoicing or Fatoorah:
- After the integration phase goes live, all the electronic invoices have to be generated in a particular format with specific additional integration fields according to the e-Invoicing Resolution.
- Invoices or Fatoorah have to be generated in XML form or PDF/A3 with embedded XMP type to be shared with the ZaTCA or GAZT for clearance and reporting.
- Clearance is required for all the B2B and B2G e-invoices on a real-time basis via APIs before they can be shared with the buyers or customers. It also covers debit notes and credit notes.
- For B2C transactions, the simplified e-invoices must be reported to the authorities within 24 hours of their generation and sharing with customers.
- Electronic invoices or Fatoorah approved by the Authority will be considered legal and valid.
- e-Invoices must be stored as per the VAT rules such that the authorities can access them anytime.
- QR code is not required from the business. The e-invoice solution will generate a QR code value while the e-invoicing portal updates it during its clearance. Such QR codes shall automatically be printed on the e-invoice. On the other hand, QR code in simplified e-invoices is compulsory, requiring more information under phase 2.