E-Invoicing for business

E-Invoicing

E-invoicing is one of the most important digital initiatives launched by the Zakat, Tax, and Customs Authority (ZATCA) in the Kingdom of Saudi Arabia as part of the comprehensive digital transformation envisioned by Saudi Vision 2030. This initiative aims to replace traditional paper invoices with advanced electronic systems that enable the issuance and exchange of invoices, debit notes, and credit notes in a structured electronic format. It contributes to enhancing transparency, reducing commercial concealment, and improving financial operations efficiency between companies and individuals.

What is an Electronic Invoice?

An electronic invoice represents a technological advancement in accounting and invoice management. It is a digital document that is issued, sent, and stored through approved electronic systems instead of being printed on paper. This step responds to digital transformation requirements and serves as an effective tool to ensure transparency and tax compliance.

An e-invoice can be defined as a digital document issued through an electronic system containing all sales or supply data, such as the supplier and buyer’s name, tax identification number, the type of goods or services provided, value, and the VAT rate.

E-invoices are issued in specific formats, such as XML or PDF/A-3, and are sent directly to the Authority's system via electronic integration, allowing for real-time validation and verification.

The fundamental difference between paper and electronic invoices lies not only in the format but also in the processing and storage mechanism. While paper invoices rely on manual handling and printing, electronic invoices are processed automatically, reducing errors, speeding up procedures, and ensuring better organized and more secure record-keeping.

Types of E-Invoices

With the implementation of the e-invoicing system in Saudi Arabia, ZATCA defined two main types of electronic invoices, each depending on the nature of the business transaction and the recipient. This classification aims to regulate transactions, ensure transparency, and enforce tax compliance. Taxpayers must use the appropriate type based on their activity and the nature of their customers.

1. Tax Invoice

Used for transactions between two VAT-registered entities (B2B). It must include detailed information that allows the customer (the recipient) to claim input VAT.

Key features:

Directed to a VAT-registered client (business or registered entity).
Must include: seller’s name and tax registration number, buyer’s name and tax number (if available), invoice number and issue date, detailed description of goods or services, quantity, unit price, and total before tax.
The total amount including VAT.
Used for business-to-business transactions such as intercompany supplies or service provisions between official service providers and clients.

2. Simplified Tax Invoice

Used for transactions between a business and a final consumer (B2C) where the buyer will not use the invoice to claim input VAT. This type is less complex but still subject to the same digital standards.

Key features:

Directed to a non-tax-registered consumer (ordinary person).
Must include: seller’s name and tax ID, invoice number and issue date, brief description of goods or services.
The total amount including VAT.
Used for direct-to-consumer sales such as retail stores, restaurants, service centers, and e-commerce platforms.

Electronic Invoice Phase two (Integration Phase)

After the successful launch of Phase One of e-invoicing in December 2021, ZATCA introduced Electroni invoice Phase Two, known as the Integration Phase, as an advanced step to deepen digital transformation and enable real-time monitoring of commercial transactions.

This phase enhances the efficiency of the tax system, increases compliance, and facilitates accurate and effective data exchange between businesses and the authority.

Unlike Phase One, the electronic invoice Phase Two involves real-time and direct integration between company invoicing systems and ZATCA’s platform. Invoices are sent instantly to the authority for approval before being shared with the customer, allowing real-time transaction tracking and ensuring the accuracy of tax data.

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Objectives of Electronic invoice Phase Two

Key goals of the electronic invoice phase two include:

Achieving maximum transparency by making invoices instantly available to the authority.
Reducing fraud and forgery through instant invoice validation.
Enhancing tax collection efficiency via automated and precise data analysis.
Facilitating VAT return filing by providing detailed, real-time information.

How Phase Two is Implemented

The integration system is applied gradually to groups of taxpayers. ZATCA notifies each business 6 months in advance to prepare their systems for compliance.

Requirements for businesses in Phase Two:

Use an e-invoicing system compliant with ZATCA’s requirements.
Issue invoices in XML or PDF/A-3 with XML.
Ensure each invoice contains a cryptographic signature.
Be capable of sending invoices directly to ZATCA’s platform for validation and approval.

How to Register for E-Invoicing

ZATCA has mandated VAT-registered taxpayers to use the e-invoicing system. Registration and compliance occur in two phases. Registration is automated, based on the authority’s classification of businesses and official notifications.

Step 1: Confirm Your Inclusion

Phase One (Issuance and Storage):

Phase Two (Integration):

Step 2: Prepare and Register for E-Invoicing

Login: Visit ZATCA’s official website, and log into the taxpayer portal using your business credentials.
Verify Notification: If you are included in Phase Two, a notice will appear in your dashboard indicating your go-live date and compliance timeline.
Select a Compliant E-Invoicing Solution:Use an approved solution provider from ZATCA’s list to ensure seamless integration.
Prepare Your Internal System:Ensure your system can:
- Issue invoices in XML or PDF/A-3 with XML.
- Add cryptographic signatures.
- Generate a UUID for each invoice.
- Automatically send invoices to ZATCA in real time.
Obtain a Digital Signature Certificate:Get a digital certificate for signing invoices via the Digital Government Authority or certified providers.
Integrate with ZATCA’s Platform:Use the provided API to register your device, get a Device ID, and a Cryptographic Key.

Step 3: Issue Invoices Electronically

Once integration is complete, businesses can issue tax and simplified invoices according to their activity while including required elements like:

VAT number
Electronic signature
QR code
Invoice type (Tax or Simplified)

Wazen E-Invoicing Software

As Saudi Arabia advances in implementing e-invoicing across both phases, businesses are required to use approved and compliant software, especially in Electronic invoice Phase Two. Wazen is one such approved system that meets all technical and legal requirements for integration with ZATCA.

Wazen is a comprehensive financial system used to manage and issue e-invoices in compliance with ZATCA's regulations. It is easy to use, fully integrated with tax systems, and includes all essential accounting functionalities, making it an ideal solution for SMEs seeking full e-invoicing compliance.

Wazen is officially listed among ZATCA-approved solution providers and:

Complies with all technical requirements
Supports issuing invoices in XML or PDF/A-3 with XML
Allows digital signing with cryptographic encryption
Offers real-time API integration with ZATCA’s platform
Provides a user-friendly interface for generating UUID and QR codes

Features of the Best E-Invoicing Software

The best e-invoicing software offers several advantages, including:

Full compliance with government regulations for both phases
Seamless integration with ZATCA using built-in connectors
User-friendly interface requiring no advanced accounting knowledge
Support for all invoice types: tax invoices, simplified tax invoices, credit and debit notes
High data security: encrypted storage and easy retrieval
Integration with accounting operations: VAT, inventory, sales, and financial reports

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Conclusion

E-invoicing in Saudi Arabia is a strategic step in the digital transformation journey outlined by Vision 2030. It is a powerful tool for enhancing transparency and tax fairness within the commercial environment. Through its two clearly defined phases, ZATCA has improved tax collection efficiency, reduced fraud and concealment, and made accounting processes easier for businesses of all sizes.