E-invoicing in Saudi Arabia

1. E-INVOICING E-INVOICING IN SAUDI ARABIA IN SAUDI ARABIA

2. Saudi Arabia is going through a major digital change as part of its Vision 2030 plan, and one important step in this journey is the move to e-invoicing. To make business transactions more transparent and efficient, the Zakat, Tax and Customs Authority (ZATCA) has introduced new rules that require businesses to switch from paper invoices to electronic ones. If you’re a business owner in Saudi Arabia, it’s important to understand how this system works and what you need to do to stay compliant.

3. WHAT IS E-INVOICING WHAT IS E-INVOICING IN SAUDI ARABIA In Saudi Arabia, e-invoicing, commonly known as Fatoorah, is a government-mandated process that replaces traditional paper invoices with fully digital ones. Instead of printing and manually storing invoices, businesses must now generate, issue, and keep them electronically. The Zakat, Tax and Customs Authority (ZATCA) introduced e- invoicing in two key phases. Phase 1, which began on December 4, 2021, focuses on the digital creation and storage of invoices. Phase 2, launched on January 1, 2023, goes a step further by requiring businesses to integrate their e-invoicing systems directly with ZATCA’s Fatoora platform for real-time reporting and validation.

4. TRADITIONAL VS. TRADITIONAL VS. ELECTRONIC INVOICING ELECTRONIC INVOICING Let’s understand at how electronic invoicing (e-invoicing) compares to the old way of issuing paper invoices. TRADITIONAL INVOICING Invoice Creation: Format and Structure: Delivery Method: Government Integration: Reporting: ELECTRONIC INVOICING Invoice Creation: Authentication: System Integration: Reporting:

5. LEGAL FRAMEWORK LEGAL FRAMEWORK AND ZATCA’S AND ZATCA’S E-INVOICING MANDATE E-INVOICING MANDATE The Zakat, Tax and Customs Authority (ZATCA) is the governing body responsible for implementing and overseeing the e- invoicing system in Saudi Arabia. Its primary objectives include: Enhancing Transparency: By digitizing invoices, ZATCA aims to reduce the shadow economy and ensure accurate reporting of transactions. Improving Compliance: E-invoicing facilitates real-time monitoring, making it easier for businesses to adhere to tax regulations. Reducing Fraud: Electronic records are harder to manipulate, thereby minimizing fraudulent activities,

6. WHO MUST COMPLY WHO MUST COMPLY WITH E-INVOICING IN SAUDI ARABIA WITH E-INVOICING IN SAUDI ARABIA E-invoicing is mandatory for the following entities under the VAT system: VAT-Registered Businesses: All businesses registered for VAT in Saudi Arabia must issue e-invoices. Entities Required to Register for VAT: If your business meets the VAT registration threshold, you must also comply with e-invoicing rules. Third Parties: Agents or service providers issuing invoices on behalf of VAT-registered businesses must follow e- invoicing regulations. Resident Taxable Persons: Individuals or businesses residing in Saudi Arabia and conducting taxable activities are included.

7. TYPES OF E-INVOICES IN SAUDI ARABIA TYPES OF E-INVOICES IN SAUDI ARABIA Under the e-invoicing regulations by ZATCA, there are two main types of electronic invoices that businesses must issue: 1. STANDARD TAX INVOICE 2. SIMPLIFIED TAX INVOICE The Standard Tax Invoice is used for business-to-business (B2B) and business- to-government (B2G) transactions. It includes detailed information such as the seller and buyer’s VAT numbers, invoice number, VAT amount, and more. This type of invoice allows the buyer to claim input VAT and, in Phase 2, must be issued in a specific XML format embedded within a PDF/A-3 file. The Simplified Tax Invoice is designed for business-to-consumer (B2C) transactions. It contains basic details like the seller’s information, total amount, VAT charged, and a QR code. This invoice is usually issued at the point of sale and is simpler than the standard invoice, making it suitable for retail and consumer-facing businesses.

8. HOW TO IMPLEMENT HOW TO IMPLEMENT E-INVOICING E-INVOICING IN YOUR BUSINESS IN SAUDI ARABIA IN YOUR BUSINESS IN SAUDI ARABIA Phase 2 (Integration): Your system must be integrated with ZATCA’s Fatoora portal. STEP 1: UNDERSTAND THE REGULATIONS STEP 1: UNDERSTAND THE REGULATIONS STEP 2: ASSESS YOUR CURRENT INVOICING SYSTEM STEP 2: ASSESS YOUR CURRENT INVOICING SYSTEM STEP 3: CHOOSE A COMPLIANT E-INVOICING SOLUTION STEP 3: CHOOSE A COMPLIANT E-INVOICING SOLUTION STEP 4: IMPLEMENT SECURITY AND DATA ACCURACY MEASURES STEP 4: IMPLEMENT SECURITY AND DATA ACCURACY MEASURES STEP 5: PREPARE YOUR TEAM STEP 5: PREPARE YOUR TEAM STEP 6: CONFIGURE AND TEST YOUR SYSTEM STEP 6: CONFIGURE AND TEST YOUR SYSTEM STEP 7: GO LIVE AND STAY UPDATED STEP 7: GO LIVE AND STAY UPDATED

9. GET YOUR BUSINESS E-INVOICE GET YOUR BUSINESS E-INVOICE READY TODAY READY TODAY E-invoicing in Saudi Arabia is not just a rule, it’s part of the country’s move toward a smarter, digital future. If your business hasn’t started yet, now is the right time. Getting Phase 2 (Integration): Your system must be integrated with ZATCA’s Fatoora portal. on board early means you’ll avoid last-minute rush, stay fully compliant with ZATCA, and enjoy long-term benefits like better record-keeping, fewer errors, and faster processing. But we understand it can feel confusing at first and that’s where Shuraa Tax can help. Our experts will guide you through the entire e-invoicing process, from choosing the right ZATCA-approved software to setting it up and keeping you updated with the latest rules.

10. CONTACT US Phone +(971) 44081900 Email info@shuraatax.com Website shuraatax.com Location 601 Sheikh Zayed Road, 6th Floor, Aspin Commercial Tower – Dubai