The Zakat, Tax, and Customs Authority (ZATCA) of Saudi Arabia is rolling out e-invoicing in phases, aiming to enhance compliance, transparency, and operational efficiency across businesses in the Kingdom.
Overview of E-Invoicing in Saudi Arabia
Phase 1 – Generation Phase (Effective December 4, 2021):
Taxpayers must generate and archive tax invoices, simplified tax invoices, and related credit/debit notes (CDNs) using ZATCA-accredited E-Invoicing Generation Solutions (EGS).
Phase 2 – Integration Phase (Started January 1, 2023):
This phase involves real-time integration with ZATCA’s Fatoora platform, where e-invoices and CDNs are transmitted for validation and archiving. Implementation is happening in waves, based on the taxpayer’s annual VAT turnover.
ZATCA Phase 2: Mandatory Compliance Requirement
Businesses must ensure their systems meet the following technical and operational standards:
- System Integration: Real-time connectivity with ZATCA’s Fatoora platform.
- XML Format Compliance: Invoices must be in standardized XML.
- Cryptographic Stamp: Guarantees invoice integrity and authenticity.
- UUID & QR Code: Unique invoice ID and QR code for validation.
- Anti-Tampering Features: Secure access, digital signatures, and tamper-proof logs.
- Error Handling & Reporting: Instant issue detection and resolution support.
Regulatory Updates & Enhancements
The final Phase 2 regulations, based on pilot feedback and taxpayer input, were released on June 24, 2022. Notable updates include:
Clear classification of XML data fields: Mandatory, Conditional, Optional.
Enhanced invoice validation rules.
Improved authentication mechanisms between EGS and ZATCA.
Removal of separate Group and Individual VAT Number distinctions.
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Impact on Businesses & Compliance Deadlines
Businesses with VAT turnover above SAR 3 billion (2021) have been required to comply with Phase 2 from January 1, 2023. Failure to do so may lead to penalties under KSA VAT law.
Companies must update their ERP/POS systems, integrate with ZATCA, and ensure full technical compliance before their designated wave date.
Tax2gov: Effortless Phase 2 Compliance Solution
Tax2gov APIs enable smooth integration between your business systems and ZATCA, offering:
UUID & QR Code Generation
XML Invoice Conversion
Invoice Hashing & Counter Values
Certified XML Reception from ZATCA
Automated PDF/A-3 Invoice Generation
Secure Cloud Archiving (up to 6 years)
Email Dispatch of Final Invoices
