E-invoice in Saudi Arabia

E-Invoicing in Saudi Arabia: A Complete Guide to ZATCA Requirements

E-invoicing has become a core part of the digital transformation led by the Zakat, Tax and Customs Authority (ZATCA). It aims to increase transparency, reduce tax evasion, and make the economy more efficient, in line with Saudi Vision 2030. This guide covers the implementation phases, the technical requirements, the penalties, and how Tranquil ERP helps you comply.

What Is E-Invoicing (FATOORAH)?

E-invoicing converts the issuing of paper invoices and notes into a fully electronic process, through an electronic solution that meets ZATCA’s requirements. It covers issuing, storing, and exchanging tax invoices in a structured, machine-readable format (XML, or PDF/A-3 with embedded XML). The goal is a unified, secure digital record of commercial transactions in the Kingdom that is hard to forge or alter.

E-invoicing applies to all VAT-registered taxpayers resident in Saudi Arabia, and to any third party issuing tax invoices on behalf of a VAT-registered supplier. It covers standard tax invoices (B2B) and simplified tax invoices (B2C) issued at the point of sale.

Roll-out Phases

ZATCA has divided e-invoicing in Saudi Arabia into two main phases, giving businesses time to prepare their systems:

Phase 1: Generation (from December 4, 2021)

Phase 1, known as the Generation phase, requires all VAT-registered taxpayers to:

• Issue tax invoices and their related debit and credit notes electronically through a compliant solution.
• Store these invoices electronically in a structured, secure format.
• Stop using handwritten invoices or invoices created with ordinary text or spreadsheet software such as Word or Excel.
• Include all mandatory fields, such as the seller’s VAT number, the issue date, a QR code on simplified invoices, and clear VAT details.

Phase 1 applies to all resident taxpayers, excluding non-resident taxpayers, and to any party issuing tax invoices on behalf of suppliers subject to VAT.

Phase 2: Integration (from January 1, 2023, in waves)

Phase 2, known as the Integration phase, connects businesses’ e-invoicing systems directly to ZATCA’s FATOORAH platform through an API. Its technical requirements include:

• XML invoices: issuing invoices in XML, or PDF/A-3 with embedded XML, based on the UBL 2.1 standard.
• Cryptographic stamp: obtaining a cryptographic stamp identifier (CSID) from ZATCA for each e-invoicing unit.
• Clearance: sending standard tax invoices to ZATCA for clearance before sharing them with the buyer.
• Reporting: reporting simplified invoices to ZATCA within 24 hours of issuing them.
• Tamper protection: adding a UUID, a hash, and a cryptographic stamp to every invoice to protect it and keep the invoice sequence intact.

Phase 2 is rolled out in waves based on annual revenue. ZATCA notifies each group of taxpayers at least six months before their deadline, giving them time to choose a compliant system and train their teams.

What a Compliant E-Invoicing Solution Must Not Allow

ZATCA’s guidelines also list functions that a compliant e-invoicing solution must not have:

• Tampering with invoices or their logs.
• Running more than one invoice sequence.
• Changing the system date and time.
• Exporting the private key of the cryptographic stamp.
• Working without user access management.

Penalties for Non-Compliance

ZATCA has set penalties for businesses that do not meet e-invoicing requirements. Depending on the type of violation and how often it is repeated, a business may receive a warning or a fine of up to SAR 50,000 per violation. Violations include not issuing or not storing e-invoices, issuing simplified invoices without a QR code, deleting or changing an invoice after issuing it instead of using a credit or debit note, and not informing ZATCA of a technical problem that prevents issuing e-invoices. A compliant ERP system helps you avoid these legal and financial risks.

How Tranquil ERP Helps You Comply

Tranquil ERP meets the technical requirements of both Phase 1 and Phase 2:

• Issues standard and simplified tax invoices in XML based on UBL 2.1.
• Generates the QR code automatically according to ZATCA’s technical specifications.
• Connects directly to the FATOORAH platform through an API to send and store invoices in real time.
• Archives invoices securely in the cloud for at least six years, as required by VAT regulations.
• Prepares VAT reports ready for submission to ZATCA, including monthly and quarterly VAT returns.
• Integrates fully with inventory management, HR, and accounting on one platform.
• Local technical support and on-site training teams.

Start Your Path to Full Compliance

Whether you run a small business or a large company, meeting e-invoicing requirements is now a legal and operational necessity. Request a free demo today, and the Tranquil team will help you prepare your system for full compliance.

Source: ZATCA