In today’s era of digital transformation, the ZATCA e invoice system has become an essential part of financial operations in many countries, including Saudi Arabia.
In this article, we’ll answer common questions about the ZATCA e invoice system in Saudi Arabia, covering regulatory requirements, technical aspects, integration solutions, and more to help businesses and entrepreneurs stay compliant.
What is the ZATCA E Invoice System?
As part of Saudi Arabia’s Vision 2030 and its comprehensive digital transformation initiative, the ZATCA e invoice system was launched to enhance the efficiency of financial processes and ensure tax compliance.
The system mandates businesses to use advanced technologies to issue and store invoices electronically, adhering to strict regulatory standards to guarantee data accuracy and compliance.
Saudi Arabia is a pioneer in the Middle East in transitioning from traditional paper-based invoicing to a robust digital e invoicing system.
How Does the ZATCA E Invoice System Work?
The ZATCA e invoice system operates based on specific rules and regulations established by the Zakat, Tax, and Customs Authority (ZATCA). It has been implemented in phases:
Phase 1: Generation Phase
Began in December 2021, requiring businesses to issue electronic invoices containing mandatory fields such as the tax number and VAT percentage.
Phase 2: Integration Phase
Started in January 2023, mandating real-time submission of invoices to the FATOORA platform for instant verification by ZATCA.
Who Must Comply with the ZATCA E Invoice System?
The ZATCA e invoice system applies to:
- All businesses subject to VAT in Saudi Arabia, regardless of size.
- Individuals registered under the VAT system.
- Merchants operating across various commercial sectors, including e-commerce platforms.
Is the E Invoice System Mandatory for Foreign Traders?
Yes, foreign traders conducting business in Saudi Arabia must comply with the ZATCA e invoice regulations. This ensures transparency and financial discipline across the Saudi market, regardless of the trader’s origin.
Do All Companies in Saudi Arabia Need to Use the E Invoice System?
Yes, under the new regulations, all companies in Saudi Arabia must implement the ZATCA e invoice system, whether large corporations or small businesses.
The implementation of the Integration Phase is being rolled out gradually, targeting different “waves” based on size and industry. Companies must ensure compliance to avoid fines.
What Challenges Might Businesses Face When Adopting the ZATCA E Invoice System?
While the ZATCA e invoice system offers numerous benefits, businesses may encounter challenges during implementation, including:
- Transitioning to electronic systems.
- Ensuring data security.
- Adapting to evolving regulations.
Also read: How to Overcome ZATCA Phase 2 E-Invoicing Challenges
What Is the Difference Between a Tax Invoice and a Simplified Invoice?
Tax Invoice: Used for B2B transactions, it includes detailed mandatory fields like supplier and buyer information.
Simplified Invoice: Used for B2C transactions and requires fewer details, focusing on the essentials.
How Are E Invoices Sent in Saudi Arabia?
The process depends on the type of invoice:
Simplified Invoice: Sent directly to the customer upon issuance and shared with ZATCA within 24 hours.
Tax Invoice: First sent to the FATOORA platform for verification, then shared with the recipient in XML or PDF/A-3 format.
What Are the Technical Requirements for the ZATCA E Invoice System?
Compliance with the ZATCA e invoice system involves two key elements:
- Using an approved invoicing software.
- Including mandatory fields such as invoice number, supplier and buyer details, item descriptions, and tax information.
Also read: How to Perform E-Invoice Validation: Tips to Avoid Fraud
How Does EZ Integrated Support the ZATCA E Invoice System?
As a ZATCA-approved e invoicing solution provider, EZ Integrated offers comprehensive tools to streamline your e invoicing process:
- Seamless integration with the FATOORA platform.
- Advanced security to protect financial data.
- Automatic updates to meet evolving regulations.
Contact us today to schedule your consultation and discover how EZ Integrated can simplify your invoicing and ensure full compliance with the ZATCA e invoice system.