How Phase-1 of e-Invoicing System Work?

Yarab A | Updated on: August 14, 2023

The introduction of an e-invoicing system in Saudi Arabia mandates businesses to generate invoices using software or any other electronic system. This implies that the manual way of issuing invoices, including handwritten ones, will no longer be considered valid invoices. The e-invoicing system in Saudi will be implemented in two phases, started from 4th December,2021.

The first phase is a generation phase that requires businesses to generate and store compliant electronic tax invoices and notes using compliant e-invoicing systems. In the next phase, known as the ‘Integration Phase’, e-invoicing software or systems used by businesses will be integrated with ZATCA starting from 1^st January,2023.

The first wave of the integration phase is applicable to businesses with revenue exceeding 3 billion from 1st January,2023. The second wave will apply to businesses with revenue exceeding 500 million in FY 2021 from 1st July,2023.

Understanding how generation phase of e-invoicing work plays a crucial role in implementing e-invoicing for your business.

How phase-1 of e-invoicing system work

In the first phase, called the generation phase, the critical requirement is that the business uses e-invoicing software or a solution that complies with the e-invoicing requirements and specifications issued by the authority.

In this phase,  you need to generate an e-invoice using business software or other electronic means and issue it to the seller. The only thing that businesses need to ensure is that invoice consists of all mandatory components like TRN number, QR code in case of simplified invoice etc. Adding of QR code is compulsory for Simplified invoices and tax invoices. It is optional.

Let’s understand this with an illustrative workflow

The above illustrative diagram on e-invoice system is explained below:

• The seller generates e-invoice through a complaint e-invoice system which can be ERP software or any other electronic system
• The e-invoice generated should include all the mandatory details of the invoice. The mandatory details e-invoice will have the same requirements as the current invoice specified in VAT law and regulations
• The additions in the e-invoice are buyers VAT registration number for tax invoices and QR code on simplified invoices
• Once an e-invoice is generated, the seller stores the invoices in the same e-invoicing system.
• The buyer receives a copy of the e-invoice
• In case if it is a simplified invoice, the QR code printed on the e-invoice should be scannable

With nearing the deadline of implementing e-invoicing, it is essential to understand how the e-invoicing system works and, even more importantly, to have the right ERP or accounting software. TallyPrime is a business management software that supports the VAT requirements in Saudi Arabia. The best part is that TallyPrime is now enhanced to support e-invocing requirements.  You can generate e-invoice, electronically store the invoice details and implement the access control to comply with the e-invoicing guidelines.

What’s more? TallyPrime is qualified by ZATCA (GAZT) as a compliant e-Invoicing (FATOORA) software.

Explore More Products