e-Invoicing (Fatoora) in Saudi Arabia

Yarab A | Updated on: September 13, 2024

• e-Invoicing in Saudi Arabia
• How is an e-invoice different from an invoice?
• e-Invoicing system
• e-Invoicing implementation phase
• e-Invoicing implementation date
• Businesses to whom e-invoicing is applicable
• Type of transactions covered under e-invoice

In December,2020 Zakat, Tax and Customs Authority announced the mandatory implementation of e-invoicing in Saudi. With the concept of e-invoicing, the handwritten or paper invoice will no longer be valid.  

Invoice being an essential document and e-invoicing being a reform related to it, it is super important for businesses to understand it fully and accordingly prepare for it. In this article, let’s discuss and understand everything about e-invoicing in Saudi.

e-Invoicing in Saudi Arabia

Electronic invoicing, known as e-invoicing, is a concept that aims to change the process of issuing paper invoices and notes to an electronic way of invoicing.  The electronic form of issuing invoice allows for the exchange and processing of invoices, credit notes and debit notes in a structured electronic format between buyer and seller through an integrated electronic solution.

How is an e-invoice different from an invoice?

A tax invoice that is generated in a structured electronic format using any software or electronic means. Currently, any invoice, be it electronic or handwritten or paper written, is considered valid as long it consists of mandatory details. However, e-invoicing concept, an invoice generated using software or any electronic system will be valid.  A paper invoice that is converted into an electronic format through copying, scanning, or any other method will not be considered an electronic invoice

e-Invoicing system

Online cash registers, virtual cash registers on tablets, e-invoicing software installed on a computer, e-invoicing software installed on phone or tablet, and cloud-based solutions are examples of e-invoicing systems

e-Invoicing implementation phase

e-invoicing in Saudi will be implemented in 2 phases. In the first phase, businesses are required to generate and store compliant electronic tax invoices and notes using compliant e-invoicing systems. In the second phase, the e-invoicing software or systems used by businesses will be integrated with ZATCA. 

ZATCA is implementing the 2nd phase, also known as the integration phase of e-invoicing starting from January 1, 2023, enforced in waves by targeted taxpayer groups. The first wave is applicable to businesses with revenue exceeding 3 billion from 1^st January,2023. The second phase will apply to businesses with revenue exceeding 500 million in FY 2021 from 1^st July,2023.

e-Invoicing implementation date

The first phase of e-invoicing will be implemented from 4th December,2021. This phase is also called as generation phase, which requires businesses to generate invoices using software or any electronic system. The second phase, known as the integration phase, will be implemented from 1st January,2023.

Integration phase implementation date

Businesses to whom e-invoicing is applicable

By default, all VAT registered businesses must generate e-invoices and comply with the e-invoicing regulations. Companies that are not registered but required to register should also adhere to the e-invoicing requirements. Below are the businesses subject to e-invoicing:

• A taxable person who is a resident in the Kingdom
• The customer or any third party who issues a tax invoice on behalf of the taxable person who is a resident in the Kingdom

Businesses who are not resident in KSA are not required to issue electronic invoices or electronic notes for supplies or amounts received, which are subject to tax in KSA

Type of transactions covered under e-invoice

The concept of e-invoicing includes most of the transactions that are covered under VAT. The following are transaction types that require businesses to generate e-invoice:

• Tax Invoice
• Simplified Tax Invoice
• Credit Notes
• Debit Notes

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