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KSA E-Invoicing is rapidly becoming mandatory for enterprises in Saudi Arabia to adhere to the rules and regulation of the kingdom. This system was launched by the Zakat, Tax, and Customs Authority (ZATCA) which requires the usage of electronic invoices in B2B as well as B2G operations. Launched for improving the efficiency of VAT collection, increasing the level of transparency, and combating tax evasion, the KSA E-Invoicing system prescribes the format and set of requirements for the invoices that have to be issued by the businesses. This change to electronic invoicing is revolutionizing the business world, guaranteeing improved, efficient, and accurate tax collection.
In Saudi Arabia, the adoption of e-invoicing started on the 4th of December, 2021, with the beginning of Phase I. Since then the companies have been mandated to adopt the defined format while preparing tax invoices and credit/debit notes. These are the standard field of e-invoice format which includes the invoice reference number of the seller and the buyer as well as the VAT amount. To be compliant, businesses have to meet these requirements and make sure their invoicing systems are connected to the Fatoora portal by the deadlines that ZATCA set. These deadlines are dependent on the business’s VAT turnover and are established on 2025 based on the annual turnover of 2022 or 2023.
Because the fields in an e-invoice can be categorized into mandatory, conditional, and optional, businesses in KSA need to familiarize themselves with the standard e-invoice fields. There are common fields that are used in all the invoices and they include the type of invoice, reference number, VAT. The last type is conditional fields which are applicable depending on the type of transaction, for instance export or self-billed invoices. The fields that are not mandatory for Phase I of the KSA E-Invoicing implementation can be included but are not mandatory. When the system moves to Phase 2, businesses must make sure that they are ready for the connection of their ERP or POS system for KSA E-Invoicing regulation compliance.
A standard e-invoice is an electronic version of an invoice that contains key information to both the buyer and the seller. These invoices are needed for claiming input VAT deductions and come with prescribed formats that the Zakat, Tax and Customs Authority (ZATCA) requires. For any business planning to operate in Riyadh or the entirety of Saudi Arabia, it is crucial to know the different fields to be included in those e-invoices to meet the E-invoicing in Riyadh requirements.
As the KSA E-Invoicing system continues to evolve, ZATCA has outlined the following phases for businesses to integrate their systems with the Fatoora portal:
Such deadlines explain why it is crucial to adhere to KSA E-Invoicing standards at the right time for organizations operating in Riyadh and other parts of Saudi Arabia.
A standard e-invoice under KSA E-Invoicing can be categorized into three types of fields: compulsory, probable, and possible. All of these have important function in making sure that the invoice is correct and in compliance with the regulation.
Mandatory Fields
In every e-invoice, these fields are mandatory to be mentioned. Omission of any of these required details results in non-compliance and this may impact on VAT claims. Some of the key mandatory fields in a standard e-invoice are:
These fields must be created by the e-invoicing solution so that the invoice meets the requirements of Phase I, which started on December 4th, 2021.
Some field is mandatory depending on certain conditions. These may not always be required for an invoice but if required they must be included. These include:
These conditional fields assist the businesses in their ability to generate invoices that vary according to the type of transaction or the tax treatment that has been accorded.
Optional field, as the name suggests, do not have to be included in the invoice as it is mandatory for the other two types of fields. In the initial period of KSA E-Invoicing, the taxpayers are not required to complete these optional fields. Examples include:
Therefore, as the use of E-invoicing in Saudi Arabia progresses, it is highly advisable for companies to keep abreast with the current regulations and ensure that their invoices are in line with the current ZATCA standards. This involves compliance with the basic fields for e-invoicing across Riyadh and other areas, as well as connection with Fatoora portal by the set timelines.
The transition towards digital invoices in KSA is not merely a compliance issue but also has many advantages such as cutting the paperwork time, improving the clarity of the invoices, and expediting the VAT refund procedures. With the onset of Phase 2 and the implementation of the integration of ERP/POS systems with the Fatoora portal, businesses must be ready weeks in advance to avoid penalties and to have a smooth e-invoicing process.
KSA E-Invoicing is one of the key regulatory measures that have become compulsory for organizations operating in Saudi Arabia to meet the requirements of the country’s VAT legislation. Recognizing the standard e-invoice fields allows the businesses to enhance their current practices of invoice production, minimize the frequency of mistakes, and increase the efficiency of their operations. With the approach of Phase 2, companies need to connect their ERP or POS to the Fatoora portal, as ZATCA has set deadlines for their integration. By adopting this change not only the compliance is achieved but also long-term benefits such as increased tax transparency and faster preparation of VAT also help in achieving Saudi Arabia’s vision for a more progressive economy.
