E-Invoicing Phases in Saudi Arabia: Dates & Requirements

Saudi Arabia moved from paper invoicing to electronic invoicing through a clearly defined plan, announced by the Zakat, Tax and Customs Authority (ZATCA) in two consecutive phases. Each phase has a mandatory date and specific technical requirements, and whoever falls behind on compliance exposes their business to fines.

In this guide you’ll find the date of each phase precisely, who it covers, and what actually changes in the way you issue your invoices. The goal is to know where your business stands in the Authority’s plan, and how to prepare for integration with e-invoicing software without any disruption to your work.

The compliance journey begins with e-invoicing implementation — from choosing a compliant invoicing system, to issuing the invoice in the approved format, and finally linking the system to the Authority’s Fatoora platform. We explain each step in detail below.

Phases of E-Invoicing Implementation in Saudi Arabia 

The phases of e-invoicing implementation are usually carried out under specific conditions in two phases, which can be summarized as follows:

For more on the conditions for implementing e-invoicing and the companies required to apply it

Phase 1 of E-Invoicing Implementation

The start of e-invoicing implementation in the Kingdom was with Phase 1, concerning generation and storage, which began on December 4, 2021.

In this phase, e-invoicing applies to all persons subject to the e-invoicing regulation, including those who issue invoices on behalf of taxpayers.

In this phase, electronic invoices are issued in the same way traditional invoices are issued, but through the use of a compliant electronic invoicing system, and they must include all required elements according to the specific invoice type.

Phase 1 was named the generation and storage phase. It covered all taxpayers registered for VAT within the Kingdom, in addition to those who issue invoices on their behalf. Its essence is that the business stops using manual invoices and hand-written documents, and moves to an electronic system that issues a structured, machine-readable invoice.

In this phase there was no direct link with the Authority. The invoice is created and stored on the seller’s own system, provided it includes the mandatory fields: the seller’s name, the tax number, an invoice timestamp, item details, the tax value, and the total. A QR code is also added to end-consumer invoices.

In clearer terms: Phase 1 built the technical capability for digital generation, and prepared businesses for what’s harder in Phase 2. Those who set up their system early in this phase found the move to linking much easier.

Phase 2 of E-Invoicing Implementation

began Phase 2 on January 1, 2023, in stages, and in this phase, the electronic solution integrates with the Zakat, Tax and Customs Authority’s system, and invoices must be issued in the required format according to the specified requirements.

Electronic invoices are required to be compliant with the approved system, and to contain all the necessary and required information to meet the Zakat, Tax and Customs Authority’s needs.

Phase 2 is known as the integration and linking phase. Here, your invoicing system connects directly to the Fatoora platform, so every invoice is sent to the Authority at the moment of issuance or within a very short window. This is the fundamental difference from Phase 1.

Phase 2 implementation began in waves according to the business’s revenue size, not all at once. The first wave covered businesses whose revenue exceeds SAR 3 billion a year, then the Authority announced the subsequent waves successively by revenue tier, giving each wave a preparation window of about six months before its compliance date.

To know your wave precisely, rely on the official notification you receive from the Authority, not on estimation. Waves are determined based on your recorded revenue data, and they differ from one business to another.

Additional Technical Requirements in Phase 2

Phase 2 added technical fields that were not present in Phase 1, and they are necessary for the invoice to be accepted by the Authority:

• The cryptographic stamp (digital signature) using a PKI certificate issued through the Authority.
• The invoice’s Universally Unique Identifier (UUID), which distinguishes each invoice from another.
• The hash value of the previous invoice, to link invoices into a connected chain that’s hard to tamper with.
• The QR code, including the invoice data and the signature.

Clearance or Reporting? The Difference by Invoice Type

The Authority treats the two invoice types in two different ways. The tax invoice between businesses (B2B) is subject to what’s called Clearance: it’s sent to the Fatoora platform and approved before it reaches the buyer. As for the simplified tax invoice directed at the end consumer (B2C), it’s delivered to the buyer immediately, then the Authority is notified of it within 24 hours.

Understanding this difference protects you from mistakes. The invoice between businesses isn’t considered valid until the Authority approves it in real time, whereas for the simplified invoice the reporting window is enough. The full details of Phase 2 explaining each case individually.

Note

E-invoicing moves through these phases with the aim of improving the efficiency and accuracy of the invoicing process, facilitating verification and review, and improving communication between the parties involved.

It also aims to reduce paper use, and achieve savings in the costs and efforts associated with the traditional invoicing process.

What Is the Saudi Invoicing System? 

After learning the phases of e-invoicing implementation, we should know what the e-invoicing system is:

It’s a system that aims to convert the process of issuing paper invoices and notes into an easy, organized electronic process. This system allows invoices, and debit and credit notes, to be exchanged between the seller and buyer electronically and securely, using an integrated electronic format.

The Saudi system is built on a simple idea: the invoice is no longer just a piece of paper between a seller and buyer, but a unified digital statement read automatically by the Authority’s systems. This unification prevents tampering, speeds up auditing, and links market data in one place.

The system covers tax and simplified invoices, and the debit and credit notes associated with them. Each document carries its own digital fingerprint, so it’s hard to forge or later deny.

Everything About the Importance of E-Invoicing

The move to e-invoicing is a practical shift in managing your business, not just a regulatory obligation. Here are the most notable benefits you gain from it:

Enhancing transparency and meeting compliance requirements

E-invoicing provides accurate and transparent tracking of correct invoicing operations, which include creating a simple sales invoice or adding a new sales invoice to the accounting system, or creating tax sales invoices and others.

Every step on the compliance path and movement through the supply chain can be recorded electronically; this enables companies and regulators to meet local and international compliance requirements more easily.

Through Qoyod accounting software, the best software supporting e-invoicing, you can report tax sales invoices

  and carry out all complex accounting operations easily, which includes:

• Creating an electronic invoice — you can create a free electronic invoice. –

• Calculating tax and all types of taxes — you can use the tax calculator here –

• Submitting a report of tax sales invoices

• Adding a new purchase invoice through the accounting software or via the mobile e-invoicing device integrated with the cashier device

• Extracting invoices online

Reducing the frequency of tax audits

Compared with paper invoices, all phases of e-invoicing implementation facilitate operations such as issuing a tax invoice and tax auditing, and reduce the effort spent on them. 

We can briefly describe the tax invoice here as the official document a business issues to prove a sale or the provision of a service, and it’s the same tax invoice but in an electronic form compliant with ZATCA requirements. It must include:

• A sequential number.
• The buyer’s and seller’s data.
• The business’s tax number.
• Details of the products or services.
• Calculating VAT clearly.

The difference between the tax invoice and the simplified tax invoice is that the former is usually issued between businesses (B2B) and contains all the detailed data.

As for the simplified tax invoice, it’s often used in direct sales to the end consumer (B2C), and is brief but approved.

Tax compliance and understanding the regulatory conditions and requirements, validating the electronic invoice , and submitting and reviewing the tax invoice correctly, and understanding the differences between an invoice and a receipt , or understanding the difference between an invoice and a proforma invoice , are among the essentials for the accounting team in companies.

Through the new electronic tax invoicing system and software, authorities can access the necessary data easily and quickly; which reduces the total time and effort required to conduct an audit.

For more on the VAT payment (SADAD) code and obtaining a Zakat and Income biller number

Increasing efficiency and accuracy in creating invoices

E-invoicing allows the use of predefined templates, and integration with inventory and sales management systems; which reduces human errors, and increases the accuracy and speed of creating invoices.

Creating a shared database for audits

E-invoicing can contribute to creating a shared database accessible by companies, suppliers, customers, and regulators; thereby facilitating audits, and increasing transparency and trust between the parties involved.

Reducing costs

E-invoicing can reduce the costs associated with everything related to printing, distributing, and storing invoices, in addition to the costs of managing paper, and the space required to store it, and it can also reduce the costs incurred by auditing and internationalization operations.

Improving cash flow

E-invoicing can speed up payment operations, and improve companies’ cash flow, since electronic invoices can be submitted instantly, payment status monitored, and money collected faster; which contributes to improving the company’s overall cash flow.

The cash-flow impact is clearly visible in small and medium businesses. When the invoice reaches the customer at the moment of issuance in an approved format, the collection cycle shortens, and it becomes easy to track unpaid invoices and take action on them before they accumulate and pressure liquidity.

Improving the data management process

With the phases of e-invoicing implementation, data can be stored and managed more effectively and easily, since invoices and related data can be accessed quickly and accurately; which helps improve decision-making and business management.

The digital archive also eliminates the hassle of searching paper files at audit time. You retrieve any invoice by its unique identifier or its date in seconds, and link it directly to your tax return, so preparing for an auditor’s visit becomes an organized procedure rather than an annual crisis.

Eliminating fraudulent activities

E-invoicing provides an additional layer of security and credibility, since encryption and digital signature technologies can be adopted to verify the validity and authenticity of invoices; thereby limiting the chances of forgery and fraudulent activities.

On a practical level, this security means that each party in the transaction trusts the invoice without needing a manual audit. The digital signature and the chain of hash values make any later modification to the invoice immediately detectable, so the risk of tampering and fake claims between the seller and buyer drops.

Fines for Delaying Compliance with the E-Invoicing Phases

The Authority has tied non-compliance with the e-invoicing phases to graduated financial fines. Knowing them in advance makes compliance a clear economic decision, not just a regulatory step. The most notable violations and their fines:

• Not issuing the electronic invoice: a fine ranging between SAR 5,000 and SAR 50,000.
• Cancelling or editing an electronic invoice in a non-compliant way: a fine between SAR 10,000 and SAR 50,000.
• Absence of the QR code from the simplified invoice: a warning first, then escalating fines that may reach SAR 40,000 upon repetition within 12 months.
• Not linking with the Fatoora platform after the wave’s window ends: a fine estimated by the Authority, which may be large.

The Authority usually starts with a warning at the first apparent violation, then the fine escalates if it recurs within 12 months. That’s why preparing early before your wave’s date is always cheaper than dealing with violations later.

How to Prepare Your Business Before Your Wave’s Date in Phase 2

Since Phase 2 is implemented in waves, every business needs a readiness plan well ahead of its mandatory date. The practical steps we recommend:

• First, make sure you’re registered for VAT, as linking in Phase 2 starts from this point.
• Review the conditions for implementing e-invoicing and the companies required to apply it to determine your obligations precisely.
• Wait for your wave’s official notification from the Authority, and note the compliance date as soon as you receive it.
• Set up a compliant invoicing system well before the date, with enough time to test, not in the final weeks.
• Register your business’s compliance certificate (CSID) and complete the linking steps with the Fatoora platform.
• Train your team to issue invoices in the new format, and run test invoices to confirm they’re accepted.

Whoever starts these steps early enters their wave’s date ready, with no interruption in sales and no fines. Whoever delays them until the last minute risks an interruption in invoicing when the obligation begins.

How Qoyod Helps You Comply with the E-Invoicing Phases

Complying with Phase 2 isn’t just issuing an invoice, but signing it, stamping it, and linking it to the Authority per precise technical specifications. Here’s where a compliant accounting program comes in to handle these details for you.

What Qoyod does automatically

• Issuing every invoice signed and stamped, with a Universally Unique Identifier (UUID) and a QR code compliant with the Phase 2 specifications.
• Instant clearance for business invoices (B2B) with the Fatoora platform, and reporting within 24 hours for consumer invoices (B2C).
• Generating the invoice’s XML file automatically per the UBL 2.1 standard with no manual intervention from you.
• Managing the signing certificate (CSID) and keeping the chain of hash values for all invoices for later verification.
• Calculating VAT at 15% on every transaction automatically. You can review its value via the VAT calculator.

What remains your responsibility

Clarity here spares you surprises. There are steps the business owner handles themselves, which no program does on your behalf:

• Registering your business’s compliance certificate (CSID) with the Authority at the start. Qoyod guides you through the linking steps, but the registration is done in the business’s name.
• Submitting the VAT return on the Authority’s portal. The program prepares the return summary for you, but you’re the one who logs in and uploads it.
• Paying the tax value to the Authority via “SADAD” or a bank transfer.

With this clear separation between the program’s role and the business’s role, you can validate your electronic invoices and be assured they’re accepted by the Authority before any audit.

How to Adopt E-Invoicing in Your Business

Now that we’ve learned the phases of e-invoicing implementation, you should know that adopting it in your business requires taking specific steps to ensure it’s implemented successfully. The following is a step-by-step guide you can follow:

Research the different solutions and compare them

Conduct thorough research on the available e-invoicing solutions, and compare the features and costs, as well as compatibility with your business’s needs.

Choose a secure solution

After learning the phases of e-invoicing implementation, make sure that any accounting software you choose provides a high level of security and data protection; check for data encryption, and access-protection and authentication mechanisms.

Take scalability into account

Choose a solution that lets you expand your capabilities in the future. You may need to add more users, expand the scope of your business, or delegate e-invoicing; so make sure the solution supports this scalability.

Integrating the invoicing system with your existing systems

Check the e-invoicing system’s compatibility with your existing systems, such as a securities management system or an accounting system, and remember that the system must be able to exchange data seamlessly with these systems.

Read also: How do you prepare your business for Phase 2 of e-invoicing?

E-invoicing

Review your workflows

Review and analyze your current workflows through a certified electronic invoice template , and make sure you understand how e-invoicing integrates into them, then determine the processes that must be modified or restructured to suit e-invoicing.

Read also: E-invoicing for the operation and maintenance sector.

Collaborate with your IT team

Collaborate with your business’s IT team to implement and support the e-invoicing system, as they can help you choose the right solution and ensure it integrates effectively with the existing IT infrastructure.

Ensure data compatibility

Before implementing e-invoicing, make sure the data required on invoices complies with local tax laws and requirements; verify that the new system can include all the necessary data on the invoices.

Test the system you chose

Run the new system after implementing it to make sure it works correctly according to your needs, and don’t forget to run tests and review the invoice-issuance process, and verify the validity and completeness of the generated data.

Train employees on the new process

Provide comprehensive training for employees on how to use the new e-invoicing system, which may include: explaining the procedures, the new features, and the instructions for issuing invoices.

Monitor and evaluate performance

Monitor the new system’s performance, and evaluate its effectiveness over a certain period of time, and also gather feedback from employees and customers, and use it to improve the process and adjust the system if needed.

Note

If you’re looking for an integrated accounting program that guarantees you all of this and more, Qoyod certainly appears at the top of the list, since it ensures you understand the phases of e-invoicing implementation, and handles the routine operations for you, so you can focus on what’s more important.

Get now ready commercial invoice templates 

Conclusion

The phases of e-invoicing implementation in Saudi Arabia are clear and set by dates. Phase 1 established digital generation from December 4, 2021, and Phase 2 linked businesses to the Fatoora platform in waves that began on January 1, 2023. Your position in this plan is determined by the Authority’s notification and the size of your revenue.

Compliance is no longer a choice, but it’s also no longer a heavy technical burden. With a compliant accounting program, signing, stamping, linking, and reporting become steps that run in the background, and you’re freed to manage your business.

To go deeper, attend the e-invoicing workshop your complete guide to compliance and professionalism, and get to know Qoyod’s e-invoicing software.

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