In its quest to digitize the economy, Saudi Arabia has put a requirement for e-invoicing on all its taxable persons. Phase 1 changes enter into force on December 4, 2021, which lay down the base for an ordered and compliant process of invoicing. This article will avail the insights into the minimum technical functionalities that have to be mandatorily available or made accessible, the prohibited functions, and other main guidelines that businesses need to follow by way of this transition.
Technical Functionalities Required to Be Availed in the E-Invoicing Solutions in Phase 1
The business has to ensure that its e-solution technical functionality includes the following features to meet the Phase 1 e-invoicing requirements:
Invoice Generation:
- All types of invoices and notes to be generated, including simplified invoices, tax invoices, and the related credit/debit notes.
- The account shall be guaranteed for the structure of e-invoices and notes according to the specification emanating from ZATCA.
Data Format and Structure:
- No Particular formatting will be required provided that the data and content prescribed by ZATCA are available.
- E-invoices and notes shall comply with ZATCA’s technical specifications.
Security and Data Processing:
- Export the e-invoice and all its notes to an offline local archiving system.
- Apply tools to lock units of e-invoicing or provide a record of tampering.
- Store data and archive according to the requirements.
- Generate QR codes for simplified invoices and notes including details like: name of the seller, VAT registration number, timestamp, total amount with VAT, and VAT total.
Prohibited Functions for E-Invoicing Systems in Phase 1
Some of the specifically identified prohibited functions on compliant e-invoicing systems by ZATCA are meant to help in preserving the integrity and security of these systems. Consequently, this will include the following:
Access Control:
- No uncontrolled access; ensure proper user management with no possibility of anonymous access.
- user session management; no operating with default passwords.
Integrity of Data:
- No deletion/alteration of e-invoices, notes, and logs.
- Accurate generation of timestamps.
- Sequential production of log files.
- Setting an electronic invoice counter is not reset.
Invoice Sequence:
There shall be no generation of several sequences of electronic invoices at one time.
Approval of Electronic Invoices
Under Phase 1, there is no mandate on the taxpayer to get his or her electronic bills approved from ZATCA or any third-party solution; instead, businesses may generate and issue an e-invoice directly.
Key changes as of December 4, 2021
Careful planning and execution are required for the transition to e-invoicing. Listed below are some steps that can guide your business toward a seamless transition process:
- E–Invoicing Mandation: All persons subject to e–invoicing shall apply electronic solutions meeting all the applicable requirements.
- Additional Fields to e–invoicing: E–invoices should include additional fields according to ZATCA that the said details are to be displayed on the invoice. These fields should save the information as QR codes.
- B2C Supplies: The simplified tax invoices issued for B2C supplies shall include a QR code.
- B2B Supplies: The tax invoice for B2B supplies must include the VAT registration number of the buyer if he is registered; however, a QR code will not be required in Phase 1.
- Retention of Invoices: The taxpayers have to retain the copies of all issued tax invoices.
The first phase of e-invoicing in Saudi Arabia is unprecedented in the area of digital transformation and regulatory compliance. For a smooth transition towards e-invoicing, the business will ensure technological mandatories works within their systems while ceasing or disabling features that lie under the prohibited functions by ZATCA. This transformation not only brings about transparency and efficiency but falls within the agenda of Saudi Arabia Vision 2030.
Get your business organization ready to go and leverage the full power of e-invoicing while ensuring you stay ahead in the rapidly moving digital landscape.
