E-Invoicing updates in the Kingdom of Saudi Arabia

The Kingdom of Saudi Arabia (KSA) is rolling out a national e-invoicing mandate. The second phase of the Faroora e-invoicing mandate will involve taxpayers meeting new business and technical requirements to issue and receive e-invoices, as well as connecting their e-invoicing systems to the General Authority for Zakat, Tax, and Customs Authority (ZATCA)’s platform for pre-clearance of e-invoices. There have been a number of recent developments providing clarity on the next phase of the mandate and the next wave of businesses that will need to comply.

ZATCA recently published new and updated detailed guidance for KSA taxpayers on Phase 2 of the Fatoora e-invoicing mandate. This confirms the new requirements that Saudi businesses will need to meet under this “integration phase”. This includes:

• Invoices must be generated through electronic means
  
• Invoices must be generated in XML format
  
• Generate additional invoice data fields required for integration and compliance features
  
• Invoices must be archived as per VAT regulations and accessible at any point in time by the Authority
  
• The QR code value will be generated by the taxpayer’s solutions and the Fatoora portal will update the code during the Clearance process. The QR code will then be printed to be visualized on the human readable invoice by the taxpayer.
  
• Cryptographic stamps are applied by the Fatoora Portal
  
• Compliant e-invoicing solutions must be registered on the FATOORA Portal following the onboarding process
  
• UUID (a unique universal identifier) and Hash need to be included as part of the e-invoice
  
• Sharing of invoices (for clearance) with the Fatoora Portal in real- time via API
  

• The human readable format (PDF/A3) must be presented in Arabic (in addition to any other language) and Arabic or Hindi numerals can be used (either of which will be considered as Arabic in the invoices)

ZATCA has confirmed that it will notify taxpayers of their specific Phase 2 wave at least six months in advance through official emails & SMS registered with ZATCA. It has also recently announced next wave of taxpayers that need to comply with the mandatory Phase 2 implementation.  All resident taxpayers whose annual taxable revenue exceed 500 million riyals (c. USD 135m) must integrate their e-invoicing systems with ZATCA starting 1 July 2023 (and completed by 31 December 2023). While taxpayers are not required to implement Phase 2 requirements until they are notified by ZATCA about their wave and enforcement date, ZATCA are recommending that taxpayers start following Phase 2 requirements on a voluntary basis ahead of their integration enforcement date.

ZATCA has also recently announced a new "Fatoora simulation portal" (FSP) which has been available since 27 December 2022 to businesses that are part of Wave 1 of the integration phase. The FSP is a testing environment replicating ZATCA's Fatoora Portal. The FSP is designed to enable taxpayers to test and experience their end-to-end e-invoicing journey including onboarding, clearance and reporting of e-invoices and related notes.

Customers and related stakeholders are able to validate issued Tax Invoices and Simplified Tax Invoice by scanning the QR code on the invoice. This is done by using the VAT App to scan the QR code which will verify and display the QR code content and the e-invoice’s verification results.

At Avalara, we make e-invoicing compliance simple. The Avalara e-invoicing solution is designed to comply with regulations in over 60 countries and we’ve got the future covered, too. This cloud-based solution is flexible, scalable and allows you to quickly respond to new requirements. Contact us to discuss how Avalara can help you meet e-invoicing requirements and mandates across the globe including the KSA Phase 2 Fatoora integration mandate.