The e-invoicing rollout in Saudi Arabia

In 2020, Saudi Arabia’s Zakat, Tax and Customs Authority (ZATCA) revealed plans to launch their e-invoicing system (Fatoorah)  in two phases. Now, the first deadline for e-invoicing compliance is just around the corner.

The e-invoicing regulations cover what is referred to as standard invoices and simplified invoices (and the debit or credit notes associated with each of these two invoice types):

• Standard tax invoices are used for B2B and B2G invoices.
• Simplified tax invoices are used in B2C transactions.

The new rules are applicable to all taxable persons resident in Saudi Arabia and third parties who issue tax invoices on behalf of resident taxable persons. 

Continue reading to find out everything you need to know to navigate the new rules and stay compliant throughout each phase of the rollout. 

Phase 1 is called the generation phase, and it’s quickly approaching with legislation and enforcement coming into effect on 4 December 2021.

A central e-invoicing system won’t be implemented in this phase. Instead, the regulations aim to move suppliers away from handwritten invoices and paper storage and prepare them for phase 2.

In phase 1, VAT-registered taxpayers will need to:

• generate invoices in an electronic format
• use an appropriate e-invoicing solution. This can be operated on-premises, in the cloud, or in hybrid mode
• store e-invoices electronically 
• send a copy of the invoice to the buyer.

For extra security, issuers can choose to include a QR code on B2B invoices, but they must do so on e-invoices issued to final customers (B2C).

When this phase comes into force, manual invoices will no longer be accepted. Businesses therefore need to start updating their processes as soon as possible to remain compliant.

Phase 2 of the e-invoicing mandate will come into effect on 1 January 2023, and it will be rolled out in waves depending on taxpayer class. ZATCA will inform taxpayers at least 6 months before their mandatory integration date, and the enforcement for the first target group will be no earlier than 1 January 2023.​​

In this phase, the e-invoices must be issued in either of the two regulated formats (XML or PDF/A3 with embedded XML) through specific e-invoicing solutions that comply with the new ZATCA system. All e-invoices from then on will go through ZATCA’s new invoicing platform via an API integration connecting each invoicing system to the central platform.

To guarantee the integrity of the invoices, e-invoicing solutions must include certain anti-tampering features to remain compliant during this phase, such as:

• a digital signature
• a unique universal identifier (UUID) 
• a hash value
• a QR code

Companies implementing e-invoicing after the introduction of phase 1 would be advised to use one of the formats that are set to become mandatory in phase 2 to avoid complications in the future.

Dealing with new regulations can be stressful for businesses — particularly when making the leap from paper to electronic invoices. Avalara can help make the transition as smooth as possible with our intuitive solutions.

Discover how you can future-proof your business with Avalara’s e-invoicing and live reporting solutions.