Saudi Arabia Makes Electronic Invoicing Mandatory
In December 2021 Saudi Arabia will make the electronic invoice mandatory for all in country tax payers. The implementation of the electronic invoicing system will begin on December 4th and the Zakat, Tax and Custom Authority (ZATCA) declared it will implement in two phases.
FATOORAH, Electronic invoicing in Saudi Arabia.
The electronic invoicing project in Saudi Arabia is called the FATOORAH and is applicable to B2B, B2C and B2G transactions. The project began in December 2020 when the ZATCA previously named the GAZT published the electronic invoicing regulation specifying the terms, requirements and conditions related to the electronic invoices and their associated documents. The ZATCA published more details concerning the regulation on May 28, 2021, including, technical specifications, requirements and the rules framing each phase of the project.
Who is obligated to use the electronic invoice in Saudi Arabia?
The new norm will apply to B2B transactions and will affect all resident taxpayers in the country. It will also affect third parties who issue invoices in the name of a taxpayer subject to VAT. Companies that do not reside in Saudi Arabia are exempted.
Phases of the FATOORAH e-invoicing project and key dates
Phase 1. December 4th 2021.
Taxpayers will have to issue electronic invoices with a compatible system that allows the required fields to be represented in the electronic invoice. The system must also archive and generate an electronic copy to the client. Manual invoices will no longer be accepted
The mandatory fields that must be included in the electronic invoice in phase 1 are: VAT number of the buyer, if registered as a taxpayer mandated to invoice; the issuance date of the invoice and the VAT. Optionally issuers can add a QR code to B2B invoices but must include it on the simplified B2C invoices.
Phase 2. January 1st 2023.
This is known as the “integration phase”. After this date all invoicing systems must be compatible with the ZATCA system. The integration with the ZATCA’s system will be rolled out progressively based on the taxpayer class. ZATCA will inform taxpayers at least 6 months before their mandatory integration date.
During this phase the following requirements must be followed: all electronic invoices including tax invoices or simplified tax invoices and their associated documents must be generated in an XML or PDF/ A-3 (with XML) format.
The electronic invoicing solution must be able to connect to the internet and integrate with external systems through the ZATCA’s API.
The following security mechanisms must be implemented to guarantee the integrity of the invoices: digital signature, unique universal identifier (UUID), the generation of a hash and a QR code.
The ZATCA has defined its electronic invoicing system as well as the technical requirements for the electronic invoices. It is highly recommended to begin the transition to the new electronic invoicing system. Phase 1 enables taxpayers to begin exploring the system and establish the foundations for a solution that is compatible with the ZATCA system.
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