e-Invoicing in KSA: Standard Tax Invoice Clearance and Simplified Invoice Reporting

e-Invoicing Regulations in Saudi Arabia (SA) specified that the applicable taxpayers have to follow the clearance and reporting processes. All e-invoices must pass through the Zakat, Tax and Customs Authority (ZATCA) portal from Phase II (integration) starting from 1st January 2023.

ZATCA notified the waves under phase 2 of e-invoicing as follows:

1. Wave 1 under phase 2: VAT-registered businesses having more than SAR 3 billion turnover in 2021 fall under wave 1 w.e.f 1st January 2023.
2. Wave 2 under phase 2: Businesses registered under KSA VAT whose turnover is more than SAR 500 million in 2021 fall under wave 2 w.e.f 1st July 2023.

You have to do the clearance or reporting of electronic invoices and related Credit or Debit Notes (CDNs) based on the type of e-invoice. This article explains the clearance and reporting processes in detail so you’ll understand the requirements to be ensured before sharing e-invoices with buyers or customers. Otherwise, such e-invoices and related CDNs considered invalid under the law.

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Clearance of Standard Tax e-Invoices

Clearance of e-invoices from the ZATCA is required for both the Business-to-Business (B2B) and Business-to-Government (B2G) transactions, also classified as standard tax invoices under VAT. It applies to standard tax invoices and related CDNs issued by taxpayers registered under VAT subject to the e-invoicing regulations. 

The taxpayers must declare and get B2B and B2G invoices cleared from the ZATCA via the API integration. Such real-time transaction integration must be between the compliant e-Invoice Generation Solution (EGS) and the ZATCA’s system, mandatory in Phase II of KSA e-invoicing starting from 1st January 2023. One must note that the clearance process is not compulsory for invoices during the first phase of e-invoicing in KSA. 

e-Invoices are then verified for the set criteria. The ZATCA will approve and stamp such validated e-invoices and returns the same to the taxpayer. The following table explains the clearance process of simplified e-invoices and related CDNs, starting from 1st January 2023-

The criteria looked into by the ZATCA to ‘clear’ e-invoices are listed below-

• The e-invoice must satisfy controls and necessary details as per the format laid out in the e-Invoicing Regulations.
• The e-invoice should comply with the conditions listed in Annexure (1) and Annexure (2) of the Resolution.
• The e-invoice should adhere to the technical documentation relevant to the taxpayer and invoice type.

Reporting of Simplified e-Invoices

Reporting e-invoices to the ZATCA is mandatory for all the Business-to-Consumers (B2C) transactions, also classified as simplified invoices under VAT.

• It is mandatory to report simplified e-invoices and related CDNs to the ZATCA’s e-invoice portal within 24 hours of its issuance. 
• Such e-invoices must bear a cryptographic stamp as mentioned in the e-Invoicing Regulations. 
• Such reporting of e-invoices must be done via integration directly with the ZATCA portal. 
• It works as a near-real-time transaction system, i.e., it does not require immediate reporting to the ZATCA. 
• The authority will verify it, acknowledge the simplified e-invoice and intimate the same to the supplier.
• A compliant EGS must also be used for generating simplified e-invoices.

The following table explains the process of reporting B2C invoices and related CDNs, starting from 1st January 2023:

Standard Tax Invoice Clearance vs Simplified Invoice Reporting

The following table lists the differences between the clearance and reporting processes under the KSA e-invoicing: