According to the official website of the Saudi General Authority for Taxation and Customs (ZATCA), the second phase of e-Invoicing (Integration Phase, also known as Integration Stage) was officially implemented from January 1, 2023, enabling taxpayers to integrate with the ZATCA platform's tax system (FATOORA), requiring taxpayers subject to e-Invoicing to comply with all requirements.
In the process of communicating with KSA e-commerce cross-border sellers, Green Circle Accounting Firm often encounters buyers requesting us to issue electronic invoices with QC code for non-KSA resident enterprise sellers.
The following green circle to the seller friend specific introduction to the electronic invoice E-Invoicing related content:
Which taxpayers are subject to the electronic invoicing (E-Invoicing) required by this statute?
1. Local Saudi VAT taxable residents/businesses;
2. Third-party platform for issuing tax invoices on behalf of local taxable residents of Saudi Arabia in accordance with VAT regulations.
Specifically, non-KSA resident taxpayers are not required to issue electronic invoices for taxable goods, which means that our KSA cross-border businesses are not subject to local electronic invoicing regulations and are not mandated to issue electronic invoices.
What is an electronic invoice?
Electronic invoicing refers to the electronic transmission of digital invoices and related documents (e.g., credit notes, payment terms, and purchase orders).
Electronic invoices contain the same information as paper invoices; they are issued, stored and amended in a structured electronic format through an electronic system that contains all the requirements for VAT invoices and is completely paperless, saving companies time, resources and labor.
The e-Invoice Ordinance contains seven clauses that regulate the mechanism for taxpayers to issue, amend and store e-Invoice, clarify the requirements, procedures and categorization to be followed, and outline the key enforcement rules and deadlines.
Paper invoices that have been converted to electronic format by copying, scanning or any other means are not considered as electronic invoices.
Key Definitions Related to Electronic Invoicing
Electronic Invoicing Solutions
Online cash registers, virtual cash registers on tablets, e-invoicing software installed on PCs, e-invoicing software installed on mobile phones or tablets, and cloud-based solutions are examples of e-invoicing solutions.
QR-CODE
A matrix barcode with a black and white square pattern that can be read by a VAT application through a 2D code scanner or a camera of a smart device for basic validation of e-invoices and e-tickets.
Tax Invoices
An invoice (B2B), usually issued by one business to another, contains all the elements of a tax invoice.
Simplified Tax Invoices
A (B2C) invoice, usually issued by a business to a consumer, which contains all the elements of a simplified tax invoice.
Let's review the policies implemented in the first phase of Saudi e-invoicing.
Saudi Arabia E-Invoice Phase I
As early as December 4, 2021, the Saudi government officially started the application rollout of the first phase (generation phase) of the mandatory e-invoicing process (fatoorah), which requires taxpayers subject to e-invoicing to generate and maintain compliant tax invoices and bills using a compatible e-invoicing solution
The main measure in the first phase is to ensure the popularization and promotion of the technology of issuing electronic invoices and related software programs.
Integration of the taxpayer's e-invoice solution with ZATCA's system ("Fatoora" portal) ensures that the e-invoice solution can connect to the Internet to generate and store e-invoices in the specified format (XML or PDF/A3 embedded in XML).
Phase I of the e-invoice process:
The popularity of electronic invoices in the first phase means that there will be no more handwritten invoices or invoices prepared through text editors or other numeric analysis applications that come with the computers.
After the popularization of e-invoice, taxpayers who fail to include 2D codes in e-invoice or report malfunctioning in the process of e-invoice issuance to the authorities will be subject to warnings and penalties;
Failure to issue and keep invoices electronically is punishable by a fine of 5000 Rials;
Deletion or modification of an electronic invoice is subject to a minimum fine of 10,000 Rials.
Saudi Arabia e-Invoice Phase II
The second phase of Saudi e-Invoice was implemented as a unified e-Invoice system, whereby taxpayers issue e-Invoice based on a specific format and include additional identification fields in the e-Invoice.
ZATCA has included companies that pay more than SAR 3 billion in taxes in the first list to implement the second phase of e-invoicing, based on their VAT payments in 2021.
The second phase of e-invoicing will be done gradually and in batches, with taxpayers receiving six months' notice of ZATCA's consolidation.
Phase II Streamlining the e-invoice process for tax invoices
Example of Simplified Tax Invoice
Simplified tax invoices always include all mandatory fields and items of an electronic invoice.
Electronic invoicing process for Phase II tax invoicing process
Example of tax invoice
Tax invoices always include all mandatory fields and items of an electronic invoice.
QR code
The structure of the 2D code should follow the e-invoice solution, the 2D code contains the following components:
1) Name of Vendor
(2) Vendor's VAT registration number
3) Date and time of invoice/bill issuance
4) Amount of VAT
5) Total invoices/bills (including VAT)
How to scan the QR code?
Simply scan the QR code using the VAT app.
Points of Attention
All of the following need to be avoided after the implementation of the first phase of electronic invoicing:
1) Generate manual/handwritten invoices
(2) Generate invoices that do not meet the requirements for electronic invoicing
3) Use of e-invoice solutions that do not meet e-invoice requirements
4) After generating e-invoices, please delete them.
After the implementation of the second phase of e-invoice, in addition to the four points mentioned above in the first phase, you need to pay attention to avoid the following scenarios:
5) Generate electronic invoices using an electronic invoicing solution that is not integrated with ZATCA.
How to prepare an e-invoice?
1）Visit the e-invoice website
ZATCA.GOV.SA
2) Understanding the e-invoice fields
3) Obtain or upgrade to a compatible e-invoicing solution
4) Test the generation of electronic invoices before the execution date
How can I access the e-invoice solution through the "Fatoora" portal?
1) ZATCA notifies taxpayers on their particular channel;
2) The taxpayer logs on to the "Fatoora" portal (ERAD);
3) Click on the "Fatora" portal;
4) Click "onboard a device";
5) Generate OTP (One Time Password);
6) Enter OTP in your e-invoice solution;
7) Start generating electronic invoices.
In summary, I believe that sellers and friends of Saudi Arabia electronic invoices have a certain understanding of the most important thing is that we are non-KSA residents taxpaying enterprises are not mandatory to open VAT electronic invoices!
Green Circle is a Middle East tax expert with first-hand tax resources in Saudi Arabia and the United Arab Emirates, a clear price advantage, and an industry leader in time efficiency and service, and is a benchmark enterprise for one-stop Middle East tax services.
For more updates on Saudi tax policies, please continue to pay attention to the Green Circle public number, we will continue to bring the latest and most accurate policies shared by the Department of Revenue for our sellers.
If you have any questions, please feel free to contact us.
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