A Guide For E-invoicing in Saudi Arabia | E Invoicing KSA

1
A Guide For E-invoicing in Saudi Arabia E
Invoicing KSA
E-invoicing is all about generating and storing
invoices electronically. The Zakat, Tax and
Customs Authority (ZATCA), formerly known as the
General Authority of Zakat and Tax (GAZT),
declared that e-invoicing in KSA is mandatory
from December 4, 2021. Hence, traders will not
be able to create or store PDF or paper invoices.
2

• What is e-invoicing?
• It is the process of generating, storing, and
  managing invoices electronically or in a digital
  format. A scanned or copied paper invoice is not
  considered as an e-invoice.
• After issuing an e-invoice, it cannot be edited
  or altered. However, if there is any issue like
  your product being returned, you can give a
  credit note with reference to the original
  e-invoice.
• But, all of the note-issuing transactions should
  be done through the same invoicing system.
• Why e-invoicing?
• With the implementation of e-invoicing in KSA,
  businesses can have two benefits security and
  efficiency.
• It can make trading seamless, swift, efficient,
  and reduce costs. In addition, it can also offer
  great insights into marketing conditions.
• It allows government authorities to identify and
  minimise the shadow economy.
• With e-invoicing, the government can also analyse
  the movement of services, goods, and money. As a
  result, tax compliance and transparent
  commercial transactions are improved, leading to
  better decision- making.
• It reduces errors and fraud compared to paper
  invoices.

3

• How does e-invoicing work?
• E-invoicing is no different than the general
  invoicing process but is carried out securely
  and efficiently.
• Employ e-invoicing software to create invoices
  that comply with rules and regulations.
• Share an e-invoicing copy with the buyer, but in
  phase 2, it should be validated through ZATCAs
  portal.
• You can opt for cloud-based software to store
  e-invoices for future reference.
• What do businesses need to do?
• First of all, businesses need to determine if the
  e-invoicing rules and regulations apply to them
  or not. That is VAT taxable businesses (except
  non-resident taxable people).
• Identify which processes and systems are affected
  and their relation to e-invoice.
• For which transactions will e-invoicing be
  applicable?
• How can your ERP or billing systems integrate e-
  invoicing?
• What are the phases of e-invoicing regulations?
• Phase 1 Issuing and storing e-invoices (December
  4, 2021)
• From December 4, 2021, merchants have to generate
  and store e-invoices electric notes in place
  of paper invoices notes.
• In addition, you need to use an e-invoicing
  system like Pagero having internet connectivity
  and compliance with ZATCA. The

4
system can be e-invoicing software, a cloud-based
solution, or an online cash register. Every
mandatory field and elements like sellers
details, VAT registration number, date and time,
the value of the invoice, and the VAT total
should be included in the e-invoice. However, in
phase 1, you do not need to report invoices and
share data with ZATCA. Phase 2 integrating with
the ZATCA system (January 1, 2023) Starting
from January 1, 2023, this phase will be
implemented in various stages for certain groups
of taxpayers. Here, you will need to integrate
the e-invoicing system with the ZATCA
e-invoicing system. So, you will be able to send
generated e-invoices for validation and
verification. However, this rule will affect
different people at various times ZATCA will
inform about the implementation date six months
prior. Moreover, you will need to create
e-invoices in specific formats like PDF/A-3
integrated with XML or XML. As this phase will
have more technical requirements, it is ideal to
use a system that complies with ZATCAs
regulations. A system should generate UUID
(Universally Unique Identifier), digital sign,
different sequential numbers for each e-invoice,
and be able to connect to external software with
API, cryptographic stamp, and a hash.
Furthermore, it should also be tamper-proof.
5
However, you need not worry about all
technicalities because a power platform partner
providing multiple services can also solve your
e-invoicing issues. What are the types of
e-invoicing? Tax or standard e-invoice Tax
invoices are generated for B2B and B2G and are
usually used for claiming input VAT
deduction. However, in phase 1, suppliers need to
share invoices with the buyers in the required
format. In phase 2, suppliers need to stamp the
e-invoices cryptographically, and the invoice
should comply with the ZATCA system before
sharing with buyers. In addition, if your buyer
has VAT registration, you need to add its number
in the e-invoice, and you can also add a QR
code. Simplified e-invoice These e-invoices are
specifically issued for B2C transactions. As a
result, buyers will not need to use invoices for
input VAT deductions. However, your systems must
generate a QR code for these invoices for the
validation process. In phase 1, you can just
share the simplified e-invoice, but in phase 2,
the invoices should be reported within 24 hours
to ZATCA.
6

• These e-invoices can be billed by a third party
  or self-billed. However, you will still be in
  charge of the accuracy of the e- invoice.
• Credit and debit notes
• Credit and debit notes are issued along with
  e-invoices if there is any error in the original
  data. However, they shall be shared with the
  original e-invoice.
• What not to do in the e-invoicing process? For
  phase 1
• Anonymous login is not allowed, and users should
  log in with a unique ID and password.
• A default password is prohibited, and the user
  should reset the password on the first login
  attempt.
• The system should record all user activities, and
  the absence of user session management is not
  allowed.
• Modification and deletion of generated e-invoices
  are banned.
• Alteration of stored system activities.
• Inaccurate timestamps.
• Not having sequential log entries.
• A feature to reset invoice counters is
  prohibited.
• For phase 2
• Generation of more than one sequence for the
  invoice is not allowed, and all invoices should
  be linked using
• previous invoice hash.

7

• If a user generates an invalid e-invoice, it
  should not be deleted.
• The system should not allow changing times in e-
  invoices.
• There should not be any option to export the
  cryptographic stamp or stamping key.
• Conclusion
• E-invoicing in KSA ensures security, accuracy,
  and efficiency for businesses. It saves paper,
  prevents fraud, and streamlines business
  processes.
• When e-invoicing has become mandatory in Saudi
  Arabia, it is essential to use reliable systems
  to generate invoices that comply with ZATCA
  rules.
• Visit our website for more information
• https//www.terracez.com/
• Email to info_at_terracez.com Call to 971505892311