Introduction to e-Invoicing in KSA by ZATCA

With a view to promoting digitalization and ease of doing business, KSA introduced an E-invoicing system, wherein the invoices can be generated, issued, and stored in an electronic format.

This process involves an exchange of invoices and credit-debit notes in electronic mode between the buyer and seller.

The two main reasons for the government to introduce this concept were efficiency and security. Efficiency in the way the work is performed, by making the trade more seamless and efficient, leading to faster payments. Security to detect and reduce false transactions and collect greater insights on the market conditions.

This process not only increases transparency but also brings uniformity and standardization amongst all the Businesses.

Authority and Regulations in ZACA e-Invoicing

The Zakat, Tax and Customs Authority (ZATCA) is the authority for E-invoicing implementation in KSA. It has rolled out the regulations related to E-invoicing, mandating the businesses to adopt the process in two phases starting from December 04, 2021.

The regulations issued specify the important dates, the manner in which the process is to be implemented and various terms and conditions as the authority deem fit.

All the provisions related to tax invoices under VAT legislation shall mutatis mutandis apply to an e-invoice under this new system and any non-compliance will lead to a violation of regulation and can lead to penalties.

The important point to note here is, as per the regulations, in this system of E-Invoicing the invoice once generated cannot be altered or modified. In any case of change, a debit note or credit note relating to the original invoice has to be issued. Also, s scanned copy of the physical invoice will not be considered an e-invoice.

System and Software Required for ZATCA e-Invoicing in Both Phases

In KSA, this system of E-invoicing is commonly known as Fatoorah, and the software is termed Fatoorah Software. The E-invoice must be issued in the Arabic language.

If you are a taxpayer under KSA, then you can either select an E-invoicing system or can find an invoicing provider who can configure the system to offer E-invoicing solutions as per the regulations.

The software enabled for the issuance of an invoice shall comply with all the directions and regulations issued by the ZATCA and shall be updated from time to time to avoid any non -compliance. This software in the later stages of implementation will have to be integrated with GAZT’s system.

As mentioned above, the implementation will be done in two phases, let’s understand each one of them in detail.

Phase-I of ZATCA e-Invoicing: Generation Phase

Implementation of this phase started on 4th December 21. This phase focused on helping the taxpayers to be able to generate the E-invoice. In this phase, the taxpayers have to first identify whether the regulations related to E-invoicing apply to them. If, yes, then comply with all the requirements as stated.

The taxpayers have to evaluate whether the existing billing system can be used to generate E-invoices or if it requires any modification and the potential changes to be made to bring the necessary capabilities to the business that this process requires.

In the first phase, the taxpayers don’t need to share the data and report invoices to ZATCA.

Phase-1 is just about enabling the taxpayers to start using the E-invoicing system which can be an online cash register, e-invoicing installed on the computer or cloud-based E-invoicing methods.

Phase-2 of ZATCA e-Invoicing: Integration Phase

The implementation of this phase will start on January 01, 2023. This phase will be implemented in different stages, targeting different taxpayers. The ZATCA will inform the taxpayers of the applicability of this stage, at least six months in advance.

This phase is concerned with integrating the taxpayers billing software with that of the ZATCA system to share the data and information.

Once the invoice is issued using its own software, it will then be shared with ZATCA for verification and validation. The whole process will be done in a real-time system, where the seller will need to get the invoice cleared from the ZATCA system and then share the legal invoice with the customers.

But for simplified invoices, the seller is required to report the same to ZATCA within 24 hours of its generation.

How to Get Ready for Phase-2 of ZATCA e-Invoicing

To make the business ready for phase two following points need to be considered:

1. Since this phase will have more technical requirements so the system of the taxpayers should be able to connect with external systems, generate a Universally Unique Identifier, and digital signature and be able to comply with all the requirements under ZATCA. Most importantly the system must be equipped with anti-tampering features.

2. In most businesses, more than one person is handling the accounts department, so make sure everyone is trained well for using the software as per the guidelines.

3. The developers and subject matter experts can visit the ZATCA website from time to time to stay updated with new requirements rolled out.

4. There are certain points that need to be kept in mind relating to the invoice is that, once the invoice has been issued, do not delete the same, or no alteration should be made to it.

There are certain prohibited functionalities relating to implementation in phase 2, which are given below:

1. All the prohibited functionalities of phase 1 shall be carried forwarded to phase 2 as well.

2. Export of stamping key.

3. Time changes.

E-Invoicing Solution for Phase 2 of ZATCA e-Invoicing

After reading these articles you must be thinking that there are a lot of compliance and technicalities relating to the invoices. But for your help, we are here with a software that is updated with all the requirements of ZATCA, provides seamless e-invoicing and is already trusted by big brands who fall under eligibility of ZATCA e-invoicing.

The ZATCA e-invoicing software provided by Webtel enables you to issue e-invoices, generation of QR-code, generation of invoices in a specified format, storage of E-invoice, and anti-tampering features. You don’t need to worry about any changes in the regulations or requirements as the software at Webtel is completely updated as per ZATCA e-invoicing norms, and is designed in a user-friendly manner.

It also provides seamless integration with the ERP and also uploading of invoices at ZATCA, which makes it a perfect e-invoicing solution for phase 2 of ZATCA e-invoicing that is the integration phase.

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To know more about Webtel's ZATCA e-invoicing solution, visit ZATCA e-invoicing by Webtel