Overview
A e-invoice is an invoice issued and saved in an electronic format generated through an electronic system and contains the tax invoice, simplified tax invoice and respective Credit & Debit Notes (CDNs). It is clarified that a handwritten or scanned invoice will not be considered an electronic invoice.
The Unicore system enables enterprises to perform the following functions for e-invoicing:
- Record sales invoices, debit notes, and credit notes
- Generate reports for sales invoices, debit notes, credit notes, and VAT returns
- Validate the records of sales invoices, debit notes, and credit notes.
A Sales Invoice is a document that is used to record the sale of goods or services. It includes information about the customer, the goods or services that were sold, and the amount that was charged.
A Credit Note is a document issued by a seller to a buyer that indicates a reduction in the amount due to an error in the original invoice or a change in the terms of the transaction.
A Debit Note is a document issued by a seller to a buyer that states a credit is being made to the buyer’s account. It is typically used to correct an error in a previously issued invoice, such as an overcharge or a mistake in the product or quantity.
Concept of e-invoicing in Saudi Arabia
In Saudi Arabia, e-invoicing, widely known as Fatoorah, refers to the process of converting paper invoices into electronic format. The term “Fatoorah software” is commonly used to describe the software used for e-invoicing purposes. The objective of e-invoicing is to facilitate the exchange and processing of structured electronic invoices, credit notes, and debit notes between buyers and sellers through an integrated electronic solution.
It is important to note that all the regulations and requirements pertaining to tax invoices specified in the Value Added Tax (VAT) legislation are applicable to e-invoices. Failure to comply with these provisions may result in penalties imposed by the Zakat, Tax, and Customs Authority (ZATCA). Furthermore, the regulations regarding proof of electronic transactions and the use of electronic signatures, as outlined in the Electronic Transactions Law of Saudi Arabia, are also applicable to e-invoices and electronic notes issued.
Reason behind the introduction of e-invoicing in KSA?
The introduction of e-invoicing in Saudi Arabia aims to replace handwritten invoices and transition to a paperless digital environment. This initiative by the Saudi government aims to enhance business efficiency and security.
Through e-invoicing, businesses are required to integrate their systems with the Zakat, Tax, and Customs Authority (ZATCA) to promote transparency in trade. This integration ensures that invoices are reported to the system using a standardized, machine-readable format. As a result, all transactions are pushed to the Fatoora portal, creating a centralized database.
The implementation of e-invoicing enables ZATCA to effectively identify and prevent fraudulent activities. Additionally, it facilitates the creation of a unified database that can be accessed during audits. As a result, tax authorities gain real-time visibility into transactions, leading to a reduction in the frequency of audits.
Overall, the introduction of e-invoicing in Saudi Arabia aims to promote efficiency, transparency, and fraud detection, while providing tax authorities with improved access to transaction data.
Authority who implements e-invoicing in Saudi Arabia?
The authority responsible for implementing e-invoicing in Saudi Arabia is the Zakat, Tax, and Customs Authority (ZATCA). Formerly known as GAZT, ZATCA released the draft e-Invoicing Regulations in Saudi Arabia in March 2021, allowing the public and stakeholders to provide feedback until April 17th, 2021. Subsequently, the e-Invoicing Regulations were officially published on May 28th, 2021.
According to these regulations, all resident taxpayers are required to be fully equipped to issue, store, and modify e-invoices by December 4th, 2021. The regulations outline the terms, requirements, and conditions for electronic invoices, as well as electronic credit and debit notes. Furthermore, ZATCA has also issued comprehensive guidelines to ensure the smooth implementation of e-invoicing in Saudi Arabia.
What is an e-invoice and types of e-invoices in KSA?
An e-invoice, or electronic invoice, is a digital version of a traditional paper invoice. It is generated, transmitted, received, and stored electronically, eliminating the need for physical paperwork. In Saudi Arabia (KSA), e-invoicing is a method introduced to streamline invoicing processes, enhance efficiency, and facilitate compliance with tax regulations.
There are two main types of e-invoices implemented in KSA:
Standard e-Invoice: A standard e-invoice refers to the electronic invoice that complies with the specific format and requirements set by the Zakat, Tax, and Customs Authority (ZATCA). It follows the guidelines outlined in the e-Invoicing Regulations and includes mandatory information such as the buyer’s and seller’s details, invoice number, invoice date, tax amount, etc. Standard e-invoices are used for business-to-business (B2B) transactions.
Simplified e-Invoice: A simplified e-invoice is a more streamlined version of the standard e-invoice. It is designed for business-to-consumer (B2C) transactions, where the buyer may not be registered for VAT. Simplified e-invoices have fewer mandatory fields compared to standard e-invoices, but they still include important information such as the seller’s details, invoice number, invoice date, and tax amount. These invoices are typically used for retail transactions or sales to non-registered VAT individuals.