Saudi Arabia has been updating its financial and business dealings, and e-invoicing is one move to prevent the processes from being noisy, opaque, and unfriendly to grievances. As in any system, e-invoicing too is not free from troubles. Businesses run into a set of situations where an e-invoice is either rejected or needs to be amended. This set of knowledge is key to both smooth running of operations and for compliance purposes.
Understanding Rejected Electronic Invoices
An rejected electronic invoice usually ensues when such an invoice does not pass the validation criteria as defined by the Zakat, Tax and Customs Authority or by the recipient’s system. The possible causes of the rejection of an electronic invoice include:
Incorrect or Missing Information: The invoice may get rejected due to incorrect or incomplete information at the level of VAT registration number, invoice number, wrong tax calculations, etc.
Format Issues: E-invoices shall be in a format specified by ZATCA. Invoices not in the required XML format or missing some of the needed fields could be rejected.
Validation Errors: The e-invoicing system may reject an invoice automatically in scenarios where the validation checks fail for instance, a potential mismatch between the purchase order and the invoice, or mismatching line items.
Statistics: SOCPA reports that approximately 10-15% of electronic invoices are rejected due to validation failures.
How To Follow up on Rejected Invoices
After an electronic invoice is rejected, its problem should be dealt with as a matter of urgency to avoid issues such as delaying payments and penalties for non-compliance. Below, do the following if an invoice is rejected:
Establish the cause of the rejection of the invoice: Rejection notices need to be examined from ZATCA or from the recipient to determine the exact reason for rejection.
Correct the Errors: Correction of errors on the invoice is done after establishing the reason for the rejection. This either entails updating information that was incorrect, ensuring that the invoice’s format meets ZATCA’s requirements, or even rectifying the discrepancy noted in the details on the invoice.
Resubmit the Invoice: After the errors are corrected, an updated invoice is resubmitted through the e-invoicing platform.
Record Keeping: Keep detailed records of the rejected invoices, stating reasons for rejection and steps taken to rectify the matter.
Processing Amended Electronic Invoices
There could be cases when amendments are required in electronic invoices submitted earlier, which is done because errors might have been found in the invoice after submission, or transaction details may change, or changes may be ordered by the customer. Here’s how to handle amended electronic invoices:
Creation of Credit or Debit Note: In the case of any amendments introduced to an issued invoice under ZATCA, the same should be reflected by means of a credit note or debit note. The credit note refers to when there is a decrease in the payable amount, and when an increase in the payable amount occurs, a debit note.
Issue a New Invoice if Needed: This may, therefore, require the issue of a fresh invoice. The fresh invoice shall reference the original invoice and prominently indicate that it is a corrigendum thereto.
As per the ZATCA Guidelines: Where a replacement invoice is issued, this shall be in compliance to the ZATCA guidelines related to the correct form and other particulars.
Inform the Customer: Amendments have to be brought to the immediate notice of the customer. Hence, you have to present him with the revised invoice or credit/debit note and ensure that it is acknowledged.
Update Your Records: The changes to the rejected invoice or on the credit/debit note should be captured in your accounting records. This is very important to finance and tax compliance.
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