ZATCA e-invoicing 2nd phase is closer. How to prepare and what taxpayers need to know?

The Saudi government has introduced lately several initiatives to digitize the economy and promote e-invoicing. One such initiative is ZATCA-platform or the Saudi Electronic Invoicing System. The Saudi government announced the second phase (also called the integration phase) which starts as of 1st January 2023. It means that all tax-paying companies in the KSA have only 6 months left to comply with the requirements.

Let’s recall what e-invoicing (fatoorah) is

E-invoicing is a process where businesses send, receive, and store invoices electronically. The main benefits of e-invoicing are that the process is paperless, efficient, and secure. E-invoicing is currently being adopted all across the world. This is a natural evolution of modern economies to benefit from e-invoicing which help modernize each country’s tax infrastructure, increase control by the authorities and reduce administrative costs. Following this worldwide trend, Saudi Arabia has also set the ground for a full modernization of its invoicing systems.

In the KSA, ZATCA, or the Zakat, Tax and Customs Authority announced the regulations that made it mandatory for businesses to shift to e-invoicing. For those who pay VAT in KSA, the format of e-invoices will be similar to the VAT invoices issues but will be created online. All invoices and notes have to be issued through e-invoicing compliant systems and have to adhere to the ZATCA’s regulations. This helps in the standardization of transactions and ensures that there is uniformity in everything. It also ensures the secure storage of information.

– says Ammar Hamednalla, e-invoicing Manager in Infinite IT Solutions

What is Phase 2 : integration with ZATCA?

The integration phase is the second phase of fatoorah or the e-invoicing project in the KSA. It shall become effective to businesses as of 1st January 2023.

The integration phase will be implemented in transitions and made mandatory to persons notified under the e-Invoicing Regulations. There is a particular set of criteria identified by the authority.

Within this phase, the applicable tax payers under the e-Invoicing Regulations have to integrate their e-invoice generating systems with the ZATCA’s platform. They are known as target groups in Saudi Arabia.

The Resolution provides the rules for integration and necessary compliance on the Controls, Requirements, Technical Specifications, and Procedural Rules. The authority may update them through resolutions in the future.

The target groups will get notifications about the integration procedures at least six months in advance to the implementation date.

The second phase (integration) focuses on transmission of e-invoices, additional functionalities and its integration with ZATCA systems by using an application programming interface (API). Furthermore, the second phase of the proposed regulations requires electronic invoices to be generated in XML or PDF/A-3 (with embedded XML) format, while the first phase did not mention any required e-invoicing format as long as the mandatory data are present on the invoices and in the notes. Furthermore, the taxpayers’ e-invoicing software must be able to generate a universally unique identifier (UUID), cryptographic stamp, hash and QR codes.

– added Ammar Hamednalla

Requirements for businesses during this phase:

• Integrate your e-invoicing solution with ZATCA’s system to send invoices to their portal for verification and validation.
• Issue invoices in specific formats such as XML, or PDF/A-3 with embedded XML.
• Have a system that complies with ZATCA’s guidelines related with technical requirements.
• Your system should be able to connect to external systems with Application Programming Interfaces (APIs) and produce a UUID (Universally Unique Identifier), digital signature, a unique sequential number for each invoice, and a cryptographic stamp.

During this phase, you will be required to share data and report invoices to ZATCA for validation and verification.

Remember that very important thing is to cooperate with experienced e-invoicing solution provider. Infinite IT Solutions is not only a proven provider but also officially certified one by ZATCA. We have many clients in Saudi Arabia who benefit from our e-invoicing solutions and daily business digitization opportunities.

– Ammar Hamednalla

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