What is KSA e-invoicing software?

The Kingdom of Saudi Arabia (KSA) initiated various economic digitization activities, including e-invoicing, launched by the General Authority of Zakat and Tax (GAZT) and Zakat, Tax and Customs Authority (ZATCA). On September 17, 2020, a draft modification was issued per the Value Added Tax Implementing Regulations. The aim is to replace paper-based invoices and notes with an electronic process, facilitating the exchange and processing of credit notes, debit notes, and invoices between buyers and sellers via an integrated electronic solution.

Why is KSA e-invoicing software being introduced?

• E-invoicing involves creating, issuing, and saving digital invoices online. The Kingdom of Saudi Arabia's Zakat, Tax and Customs Authority (ZATCA) mandates a switch to e-invoicing in two stages, starting December 4, 2021. E-invoices for VAT taxpayers are generated online using KSA e-invoice software and resemble regular VAT invoices.
  
  
• Scanned paper invoices do not qualify. Once issued, e-invoices cannot be modified, but electronic debit and credit notes can be issued via e-invoice software in compliance with VAT regulations. For example, a credit note can be issued if a buyer returns a product.
  
  
• All invoicing and note-issuing transactions must use KSA e-invoice software to ensure consistency and data security. E-invoices are required for domestic sales, exports, and advance payments. They are not needed for VAT-exempt supplies, imports, or transactions subject to the reverse charge mechanism.
  
  
• Using KSA e-invoice software streamlines the process, ensuring all transactions comply with ZATCA rules and that data is securely stored.

Phases for FATOORAH e-Invoicing

Phase 1: Generation

It will be mandatory for taxpayers to generate electronic invoices using a system that is compatible and permits the electronic invoice to include the necessary elements. Additionally, the system needs to archive and produce an electronic copy for the customer. Manual invoices will not be accepted going forward.

The VAT number of the buyer, if registered as a taxpayer required to invoice, the invoice's issuance date, and the VAT are obligatory fields that must be included in the phase 1 electronic invoice. Issuers are required to include a QR code on simplified B2C invoices, but they are optional for B2B invoices.

Phase 2: Integration phase

Observe the compliance schedule:

• As of January 1, 2023, the first group of companies required to connect to ZATCA are those with VAT-subject revenue exceeding 3 billion SAR in the year 2021.
  
  
• As of July 1, 2023, taxpayers required to connect to ZATCA are those with VAT-subject revenues exceeding SAR 0.5 billion.
  
  
• As of October 1, 2023, taxpayers required to integrate their e-Invoicing systems with the FATOORAH platform are those with VATable income exceeding 250 million SAR.
  
  
• As of November 1, 2023, taxpayers required to integrate their e-Invoicing systems with the FATOORAH platform are those with VATable income exceeding 150 million SAR.
  
  
• As of December 1, 2023, taxpayers required to integrate their e-Invoicing systems with the FATOORAH platform are those with VATable income exceeding 100 million SAR.
  
  
• Starting January 1st, 2024, taxpayers required to integrate their e-Invoicing systems with the FATOORAH platform are those with VATable income exceeding 70 million SAR.
  
  
• From February 1st, 2024, taxpayers required to integrate their e-Invoicing systems with the FATOORAH platform are those with VATable income exceeding 50 million SAR.
  
  
• As of March 1st, 2024, taxpayers required to integrate their e-Invoicing systems with the FATOORAH platform are those with VATable income exceeding 40 million SAR.
  
  
• From June 1st, 2024, taxpayers required to integrate their e-Invoicing systems with the FATOORAH platform are those with VATable income exceeding 30 million SAR.
  
  
• Starting October 1st, 2024, taxpayers required to integrate their e-Invoicing systems with the FATOORAH platform are those with VATable income exceeding 25 million SAR.

All e-invoices, including tax invoices and simplified tax invoices, as well as the related documentation, must be prepared in an XML or PDF/A-3 (with XML) format during this period.

The ZATCA's API must enable the e-invoicing solution to link with external systems and establish an internet connection.

To ensure the integrity of the invoices, the following security measures must be put in place: a QR code, digital signature, hash creation, and unique universal identification (UUID).

KSA's e-invoicing guidelines

All taxable goods and services that are subject to VAT (regardless of whether they have a standard or zero rate) will be covered by the e-invoicing requirements.

The e-invoicing method must be used by all VAT-registered business owners in Saudi Arabia (except non-resident taxable individuals) who conduct both domestic and international business. It will also be necessary for you to implement the e-invoicing process if you are a third party in Saudi Arabia sending a tax invoice on behalf of a taxable person. These rules would apply, for example, to an accounting company that bills textile sellers on their behalf.

All transactions, whether B2B, B2G, or B2C, must use e-invoicing. A printed copy of the invoice should be sent to the buyer together with the electronic version.

The bills must be written in Arabic. The e-invoice must be sent in Arabic, while you are free to add or translate them into another language.

How Saudi Arabia's e-invoicing system works

E-invoicing and traditional invoicing are similar processes. It's the same procedure, but the e-invoice is carried out more securely and smoothly.

• Make sure the e-invoice has all the necessary fields by using a compliant e-invoicing system.
  
  
• Provide a copy to the purchaser. Before sending this invoice to the buyer, you must push it to ZATCA's portal by step 2 and get it validated.
  
  
• For future use, save the electronic invoice on your system. Storage will be made simpler and compliance will be automatically ensured by switching to a cloud-based system that gives you e-invoicing capabilities.

Conclusion

Saudi Arabia's shift to e-invoicing, led by ZATCA, is a pivotal move towards digital transformation, enhancing tax compliance and business efficiency. This initiative replaces traditional paper invoices with a secure and standardized electronic system, ensuring all transactions are transparent and accurate.

Taxilla offers streamlined e-invoicing solutions to keep your business compliant with ZATCA's regulations. Simplify your transition to digital invoicing and ensure seamless operations. Contact Taxilla today to secure your spot in the future of business efficiency.

Frequently Asked Questions:

1. What is e-invoicing in Saudi Arabia (e-invoice KSA)?

E-invoicing in Saudi Arabia, also known as e-invoice KSA, involves the digital creation and storage of invoices. It replaces traditional paper invoices with electronic invoices that comply with ZATCA's regulations. This transition ensures accuracy and standardization in financial transactions.

2. Who needs to comply with e-invoicing regulations in Saudi Arabia?

All VAT-registered businesses in Saudi Arabia, including those involved in domestic and international transactions, must comply with e-invoicing regulations. This includes third party entities generating invoices on behalf of others. Non-resident taxable individuals are exempt from this requirement.

3. How does e-invoice software KSA help in generating compliant invoices?

E-invoice software KSA facilitates the creation, validation, and storage of invoices in line with ZATCA’s requirements. The software automates the inclusion of mandatory fields like VAT numbers and QR codes, ensuring all invoices meet compliance standards.

4. What are the two phases of e-invoicing implementation in Saudi Arabia?

The implementation of e-invoice KSA is divided into two phases:

Generation Phase: Businesses must generate electronic invoices that include all required elements and archive them.

Integration Phase: Businesses must integrate their e-invoicing systems with ZATCA's platform, FATOORAH, in a phased manner according to their revenue thresholds.

5. What are the benefits of using e-invoice software KSA?

Using e-invoice software KSA offers several benefits, including:

Compliance: Ensures all invoices adhere to ZATCA regulations.

Efficiency: Streamlines the invoicing process, reducing manual errors.

Security: Protects data with features like digital signatures and encryption.

6. Are there specific formats required for e-invoices in KSA?

Yes, all e-invoices in Saudi Arabia must be in XML or PDF/A-3 format with embedded XML. This ensures compatibility with ZATCA’s system for validation and storage.

7. Can an e-invoice in KSA be modified after issuance?

No, once an e-invoice in KSA is issued, it cannot be modified. If adjustments are necessary, such as a product return, you must issue a credit note through the e-invoicing system and link it to the original invoice.

8. How does e-invoicing impact businesses exporting goods from Saudi Arabia?

Businesses exporting goods from Saudi Arabia must issue e-invoices for these transactions. This helps in maintaining clear records and ensuring compliance with international trade regulations.

9. What are the mandatory fields required in an e-invoice KSA?

Mandatory fields for an e-invoice KSA include the VAT number of the buyer and seller, invoice date, VAT amount, and a QR code for B2C transactions. For B2B transactions, a QR code is optional but recommended.

10. How can businesses prepare for the integration phase of e-invoicing in Saudi Arabia?

To prepare for the integration phase of e-invoicing in KSA, businesses should:

• Select e-invoice software KSA that complies with ZATCA's API requirements.
• Train staff on the new system to ensure smooth operations.
• Stay updated on the compliance timeline and revenue thresholds for integration with the FATOORAH platform.