Saudi Arabia e-Invoicing: Process Flow for Generating e-Invoices in Phase II

Zakat, Tax and Customs Authority (ZATCA) plans to implement phase II of e-invoicing in Saudi Arabia from 1 January 2023. Also, ZATCA intends to implement this phase in waves by dividing taxpayers into targeted taxpayer groups. It also informs the applicable businesses of their wave at least six months in advance.

Accordingly, ZATCA announced the waves under phase 2 of e-invoicing in Saudi Arabia as follows:

1. Wave 1 under phase 2: VAT-registered businesses in KSA having more than SAR 3 billion turnover in 2021 fall under wave 1 and must implement phase 2 from 1 January 2023.
2. Wave 2 under phase 2: Businesses registered under KSA VAT with more than SAR 500 million and less than SAR 3 billion turnover in 2021 fall under wave 2 and shall implement phase 2 from 1 July 2023.
3. Wave 3 under phase 2: Saudi businesses registered under VAT whose turnover is more than SAR 250 million and less than SAR 500 million in 2021 or 2022 fall under wave 3 w.e.f 1 October 2023.
4. Wave 4 under phase 2: Businesses registered under Saudi VAT with more than SAR 150 million and less than SAR 250 million turnover in 2021 or 2022 fall under wave 4 w.e.f 1 November 2023.
5. Wave 5  under phase 2: Businesses registered under KSA VAT whose turnover is more than SAR 100 million and less than SAR 150 million in 2021 or 2022 fall under wave 5 from 1 December 2023.
6. Wave 6 under phase 2: Saudi VAT-registered businesses having more than SAR 70 million and less than SAR 100 million turnover in 2021 or 2022 fall under wave 6 w.e.f 1 January 2024.
7. Wave 7 under phase 2: VAT-registered taxpayers in Saudi with more than SAR 50 million and less than SAR 70 million turnover in 2021 or 2022 fall under wave 7 w.e.f 1 February 2024.
8. Wave 8 under phase 2: Businesses registered under KSA VAT whose turnover is more than SAR 40 million and less than SAR 50 million in 2021 or 2022 fall under wave 8 w.e.f 1 March 2024.
9. Wave 9 under phase 2: Saudi businesses registered under VAT with more than SAR 30 million and less than SAR 40 million turnover in 2021 or 2022 fall under wave 9 w.e.f 1 June 2024.
10. Wave 10 under phase 2: Saudi businesses registered under VAT with more than SAR 25 million and less than SAR 30 million turnover in 2022 or 2023 fall under wave 10 w.e.f 1 October 2024.
11. Wave 11 under phase 2: Saudi businesses registered under VAT with more than SAR 15 million and less than SAR 25 million turnover in 2022 or 2023 fall under wave 11 w.e.f 1 November 2024.
12. Wave 12 under phase 2: Saudi businesses registered under VAT with more than SAR 10 million and less than SAR 15 million turnover in 2022 or 2023 fall under wave 12 w.e.f 1 December 2024.
13. Wave 13 under phase 2: Saudi businesses registered under VAT with more than SAR 7 million and less than SAR 10 million turnover in 2022 or 2023 fall under wave 13 w.e.f 1 January 2025.
14. Wave 14 under phase 2: Saudi businesses registered under VAT with more than SAR 5 million and less than SAR 7 million turnover in 2022 or 2023 fall under wave 13 w.e.f 1 February 2025.
15. Wave 14 under phase 2: Saudi businesses registered under VAT with more than SAR 5 million and less than SAR 7 million turnover in 2022 or 2023 fall under wave 14 w.e.f 1 February 2025.
16. Wave 15 under phase 2: Saudi businesses registered under VAT with more than SAR 4 million and less than SAR 5 million turnover in 2022 or 2023 fall under wave 15 w.e.f 1 March 2025.
17. Wave 16 under phase 2: Saudi businesses registered under VAT with more than SAR 3 million and less than SAR 4 million turnover in 2022 or 2023 fall under wave 16 w.e.f 1 April 2025.

What is the process flow for phase II KSA e-invoicing?

All the e-invoicing applicable businesses shall integrate their ERP/POS/accounting software with ZATCA’s system. The e-invoicing resolution states that the standard tax invoices shall be cleared in real-time, whereas it is sufficient to report the simplified tax invoices within 24 hours of generation.

Also, the phase II requirements include device registration, cryptographic stamp for each e-Invoicing Generation Solution (EGS) unit, modified QR code, ZATCA compliant XML generation, and invoice format of PDF A/3 (XML embedded). Also, the XML shall include new key fields such as Universally Unique Identifiers (UUID), Previous Invoice Hash (PIH), and Invoice Counter Value (ICV).

However, the process flow for generating an e-invoice differs based on the type of invoice. With the phase II implementation date approaching, it is important to understand the process of generating electronic invoices in the Kingdom of Saudi Arabia (KSA). This article explains the process flow for generating the standard and simplified tax invoices in phase II of Saudi Arabia’s e-invoicing.

Standard tax invoice generation flow in phase 2

Here’s the step-by-step process flow of standard tax invoices in phase II:

Step 1: First, you must generate invoices using the ERP.

Step 2: Once your EGS unit receives the invoice data, it shall generate the UUID, PIH, and ICV along with the ZATCA-compliant XML file.

Step 3: After that, the EGS unit will send the data files to the Fatoora portal.

Step 4: If the invoice data is in valid format and complaint as per rules, ZATCA will successfully clear the invoice and places a cryptographic stamp.

Step 5: Your EGS unit receives the ZATCA cleared XML and QR code.

Step 6: Now, your EGS unit shall generate the invoice in PDF A-3 format using the data received from ZATCA.

Step 7: You must store and archive the invoices according to the ZATCA specified XML format.

Step 8: You can now share PDF A-3 (XML embedded) or XML e-invoice with your customer. However, when you are sharing the printed copy of the standard tax e-invoice, you must e-mail the XML to the buyer.

Step 9: Also, your customer can validate the standard tax e-invoice using ZATCA’s special app.

Simplified tax invoice generation flow in phase 2

Here’s the step-by-step process flow of simplified tax invoices in phase II:

Step 1: First, you must generate invoices using the ERP.

Step 2: Once your EGS unit receives the invoice data, it shall generate the UUID, PIH, and ICV. In addition, it shall generate a QR code including the details such as a cryptographic stamp, public key, etc. Your EGS unit shall also maintain the invoice counter.

Step 3: Now, you can share this simplified tax e-invoice with your customer.

Step 4: Your customer can validate the simplified tax e-invoice using ZATCA’s special app.

Step 5: Make sure to report these simplified tax e-invoices with Fatoora portal within 24 hours of generation.

Step 6: If the invoice data is in valid format and complaint as per rules, ZATCA will issue the acknowledgment validating the simplified e-invoices.

Step 7: Finally, don’t forget to store and archive invoices in ZATCA specified XML format.

Frequently Asked Questions (FAQs)

Q: What information shall I submit to ZATCA (Fatoora portal)?

A: You shall submit the invoice data, including all the mandatory, optional, conditional and customised fields.

Q: What will I get?

A: You get a signed QR code and the ZATCA status of your e-invoice (cleared/reported/ not cleared/not reported). Then you can create an invoice in PDF/A3 format using the data received.

Q: What kind of permissions does your e-invoicing solution need?

A: You must whitelist the IP addresses of middleware if you are using APIs of middleware to generate e-invoice. However, if you're following the FTP model, you must give read & write access to the FTP folder within your organisation to generate e-invoices.