The Zakat, Tax and Custom Authority (ZATCA), formerly known as GAZT (General Authority of Zakat and Tax), in the Kingdom of Saudi Arabia announced in December 2020 new E-Invoicing (FATOORAH) requirements for the year 2021. With this announcement, Saudi Arabia will join the trend of electronic invoicing to decrease the VAT gap and further benefit from more effective business operations.
In this blog article, I explain the upcoming legal E-Invoicing requirements for Saudi Arabia in detail and provide more information about the announced roadmap of the ZATCA.
Saudi Arabia E-Invoicing requirements and deadlines
ZATCA has established two main phases for the realization of the e-invoice requirements itself:
1. Generation phase: 4th December 2021
The first phase is used to prepare organizations for the upcoming legal E-Invoicing requirements. The organization should prepare to generate E-Invoices in a structured XML format. These E-documents must be generated using an electronic solution and must be stored electronically. The tax authority has defined the mandatory fields which must be filled in on all E-Invoices to comply with the business and validation rules. Moreover, all tax invoices must contain the buyer’s VAT registration number, if it is registered. Finally, simplified tax invoices must include a QR code of a Base64 format with up to 500 characters to check for validity by scanning from a mobile device.
2. Integration phase live in Waves
The second phase, also known as the integration phase, requires companies to implement e-invoicing in their systems and comply with the FATOORA government platform. This phase is divided into different rollouts based on the annual turnover of the organization. ZATCA will inform taxpayers of their mandatory integration date at least 6 months in advance.
During this phase, all e-invoices, including tax invoices and simplified tax invoices, debit/credit notes, must be generated in XML or PDF/A-3 format with attached XML. The government’s chosen e-invoicing portal is the FATOORA portal, where all e-invoices must be received. Additionally, some security mechanisms, namely the Universal Unique Identifier (UUID) and the generation of a QR code, must be implemented.
There is a distinction between the simplified tax invoice and the tax invoice layout, and ZATCA provides information on how the structure of the invoice must be maintained for both. For both types of invoices, a QR code is obligatory, with the only difference being the information included in the QR code.
Both phases are relevant for B2C, B2B, and B2G E-Invoicing, applying to all taxable supplies subject to the standard or zero rates of VAT, for both resident and non-resident entities. Non-compliance actions will result in penalties from ZATCA.
The following waves are announced by ZATCA:
E-Invoicing Saudi Arabia solution SAP Document Compliance
SAP Document Compliance is an integrated solution within SAP that collaborates with both SAP ECC and SAP S/4HANA, ensuring that your e-invoicing process is 100% compliant with the Saudi Arabian e-invoicing requirements. PIKON has successfully implemented this solution and possesses extensive experience with the specific requirements in Saudi Arabia.
SAP Document Compliance guarantees adherence to various other country-specific legal requirements globally, including SII Spain, SDI Italy, CFDI Mexico, RTIR, and EKAER Hungary, among others. The SAP eDocument Cockpit plays a central role in managing all implemented country-specific legal requirements efficiently within SAP Document Compliance.
By leveraging SAP Document Compliance, you gain access to an end-to-end solution that automatically generates the necessary XML file based on source information from your SD or FI invoices and digitally signs the file. This solution can seamlessly integrate with SAP CPI or third-party middleware systems, facilitating the management of all data communication with local tax authority systems.
Interested in learning more? Explore additional insights about SAP Document Compliance in our previous blog article titled “SAP Document Compliance to Meet Legal Requirements Worldwide.”
How PIKON could help you
Although Saudi Arabia’s E-Invoicing system has yet to be defined, GAZT recommends that all taxpayers who are required to invoice begin preparations as soon as possible. Businesses should consider whether they can comply with the technical requirements of the new system and should analyze their invoice volumes. Another key aspect to take into account is the possibility of initiating a complete digitalization process with a scalable electronic invoicing solution.
With our Competence Center for Legal Requirements, we are a strategic partner who ensures that your SAP system and business processes meet different country-specific legal requirements all over the world in the long run. We have a team of experts that combine SAP expertise and in-depth knowledge of the end-to-end legal process and technical requirements of the Saudi Arabian and many other E-Invoicing regulations. We have gathered this experience through our many SAP Document Compliance and local implementation projects all around the world. Some examples are SDI in Italy, SII in Spain, CFDI and Complemento de Pago in Mexico, RTIR and EKAER in Hungary, XRechnung in Germany, the different legal requirements in Turkey, etc. We have also developed our own compliance SAP Add-Ons e.g. MTD VAT in the UK and the VAT Whitelist in Poland. Furthermore, we always keep an eye on new and changing legal requirements and inform our customers when action is needed. This ensures that your company doesn’t need to follow up on all the legal requirements yourselves, and you can concentrate on your daily business.
If you have any questions about Saudi Arabian E-Invoicing requirements or about how we can help you achieve compliance in your SAP system, please ask me in the comments section below or feel free to request a web meeting. I am happy to help you.
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