What is an electronic invoice and what are its types?

The electronic invoice is considered one of the most important digital initiatives launched by the Zakat, Tax and Customs Authority in the Kingdom of Saudi Arabia as part of the comprehensive digital transformation efforts pursued under Saudi Vision 2030. This initiative aims to replace traditional paper invoices with advanced electronic systems that rely on issuing and exchanging invoices, credit notes, and debit notes in a structured electronic format, thereby enhancing transparency, reducing commercial concealment, and improving the efficiency of financial operations between businesses and individuals.

Electronic Invoice

The electronic invoice represents a technological advancement in the field of 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 comes in response to digital transformation requirements and serves as an effective tool to ensure transparency and tax compliance.

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

Electronic invoices are issued in specific approved formats, such as XML or PDF/A-3, and are sent directly to the Authority’s system through electronic integration, allowing real-time review and validation.

The fundamental difference between paper and electronic invoices lies not only in form but also in processing and storage mechanisms. While paper invoices rely on manual processing and printing, electronic invoices depend on automated processing, reducing errors, speeding up procedures, and enabling more secure and organized record retention.

Types of Electronic Invoice

With the implementation of the e-invoicing system in Saudi Arabia, the Zakat, Tax and Customs Authority has defined two main types of electronic invoices. Each type differs depending on the nature of the commercial transaction and the recipient of the invoice. This classification aims to regulate transactions, ensure transparency, and maintain tax compliance. Taxpayers are required to use the appropriate type based on their business activity and customer base.

The main types of electronic invoices are as follows:

Tax Invoice

A tax invoice is used when conducting transactions between two VAT-registered entities (B2B). It must contain detailed and accurate information that allows the customer (recipient) to deduct input VAT.

Key features of this type include:

• Issued to a VAT-registered customer (business or registered entity).
• Must include the following details: seller’s name and VAT registration number, buyer’s name and VAT registration number (if applicable), invoice number and issue date, detailed description of goods or services, quantity, unit price, subtotal before tax.
• Total amount inclusive of VAT.
• Used in all commercial transactions between VAT-registered entities, such as intercompany supplies or services provided to official entities.

Simplified Tax Invoice

This invoice is used in transactions between a business and a final consumer (B2C), where the recipient does not need the invoice to deduct input VAT. It is less complex than a standard tax invoice but remains subject to the same digital and documentation standards.

Key features of the simplified tax electronic invoice include:

• Issued to a non-taxable consumer (individual).
• Must include the following details: seller’s name and VAT number, invoice number and issue date, brief description of goods or services.
• Total amount inclusive of VAT.
• Used when selling products directly to consumers, such as in retail stores, restaurants, service centers, and online marketplaces.

Second Phase of the Electronic Invoice

After the success of the first phase of implementing the electronic invoice in Saudi Arabia, which began in December 2021, the Zakat, Tax and Customs Authority launched the second phase, known as the Integration Phase. This advanced step aims to deepen digital transformation and activate real-time monitoring of commercial transactions.

This phase enhances the efficiency of the tax system, increases compliance levels, and facilitates more accurate and effective data exchange between establishments and the Authority.

The second phase is an extension of the first phase but relies on direct and immediate integration between businesses’ invoicing systems and the Authority’s platform. Invoices are sent instantly to the Authority for approval before being shared with the customer, enabling real-time monitoring and validation of tax data.

Objectives of the Second Phase of the Electronic Invoice

The second phase aims to achieve several fundamental objectives, including:

• Achieving the highest levels of transparency by making invoices electronically available to the Authority immediately upon issuance.
• Reducing manipulation and fraud through instant invoice validation.
• Improving tax collection efficiency through automated and accurate data analysis.
• Facilitating tax return preparation by providing detailed and real-time updated information.

Mechanism for Implementing the Second Phase of the Electronic Invoice

The integration system is applied gradually in waves of taxpayers. The Authority notifies each concerned establishment six months before the specified integration date, allowing sufficient time to prepare technical systems in accordance with requirements.

Businesses included in the second phase must:

• Use an electronic invoicing system compliant with the Authority’s requirements.
• Issue invoices in XML or PDF/A-3 format with embedded XML.
• Include a cryptographic electronic stamp in each invoice.
• Be capable of sending invoices directly to the Authority’s platform for validation and approval.

How to Register for the Electronic Invoice

The Zakat, Tax and Customs Authority in Saudi Arabia has mandated VAT-registered taxpayers to use the electronic invoicing system through compliance with technical requirements in two phases. Registration is not completed through a traditional application form but occurs automatically based on the Authority’s classification and official notification.

Below are the practical steps to join the electronic invoicing system:

First: Ensuring the Establishment is Included in E-Invoicing

Taxpayers in Phase One (Issuance and Storage Phase):All VAT-registered establishments within the Kingdom, except non-residents, have been required to implement electronic invoicing since December 4, 2021.
Taxpayers in Phase Two (Integration Phase):Establishments are included gradually in waves and receive official notification via email and their ZATCA account.

Second: Practical Preparation and Registration Steps

LoginVisit the official website of the Zakat, Tax and Customs Authority and log in to the taxpayer portal using the establishment’s username and password.

Check Authority NotificationIf included in Phase Two, a notification will appear in the dashboard specifying the compliance date. Systems must be updated before the final date mentioned.

Select a Compliant E-Invoicing SolutionThe establishment must use an electronic invoicing program compliant with the Authority’s requirements. The Authority provides a list of qualified solution providers.

Configure the Internal SystemEnsure the system can:

• Issue invoices in XML or PDF/A-3 format with XML attachment.
• Add a cryptographic stamp.
• Generate a UUID for each invoice.
• Automatically send invoices to the Authority’s platform during Phase Two.

Obtain a Digital Signature CertificateThe establishment must obtain a digital signature certificate from an approved certification provider in the Kingdom.

Integrate with the Authority’s PlatformTechnical integration is completed via API. This requires device registration with the Authority and obtaining a Device ID and encryption key.

Third: Issuing Electronic Invoices

After completing integration, the establishment can begin issuing tax and simplified invoices according to its activity, ensuring inclusion of all mandatory elements such as:

• VAT registration number.
• Electronic signature.
• QR code.
• Invoice type (tax or simplified).

Electronic Invoice Program

With the advancement of the e-invoicing system in Saudi Arabia across two phases, it has become necessary for businesses to use approved and compliant software solutions, particularly in the second phase. Wazen is one of the approved systems that meets the technical and legal requirements for integration with the Authority’s platform.

Wazen is a comprehensive financial system used to manage and issue electronic invoices in accordance with the Authority’s requirements. It features ease of use and integration with tax systems, making it an ideal choice for small and medium enterprises seeking full compliance.

The program:

• Complies with all technical requirements issued by the Authority.
• Supports invoice issuance in XML or PDF/A-3 with embedded XML.
• Enables digital signing of invoices.
• Provides real-time API integration with the Authority.
• Generates UUID and QR codes for simplified invoices.

Features of the Best Electronic Invoicing Software

The best electronic invoicing software offers several key advantages, including:

• Full compliance with government regulations.
• Easy integration with the Authority.
• User-friendly interface.
• Support for tax invoices, simplified invoices, credit and debit notes.
• High-level data security and encrypted archiving.
• Integration with accounting, VAT, inventory, and sales operations.

Start your free trial with Wazen, an approved system for the second phase of the electronic invoicing system, to achieve your organization’s goals efficiently and quickly.

Conclusion

Electronic invoicing in Saudi Arabia represents a strategic step in the Kingdom’s digital transformation journey under Vision 2030. Through its two-phase implementation, the Zakat, Tax and Customs Authority has enhanced tax collection efficiency, reduced concealment and manipulation, and simplified accounting operations for businesses of all sizes.

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FAQ

What is the Saudi Electronic Invoicing System?

The Saudi electronic invoicing system is a digital system launched by the Zakat, Tax and Customs Authority to transform paper invoices into structured electronic invoices issued and stored through compliant accounting systems. It aims to enhance transparency, reduce tax evasion, and regulate commercial transactions within the Kingdom.

Who is required to issue electronic invoices?

All VAT-registered taxpayers with the Zakat, Tax and Customs Authority, including companies and commercial establishments exceeding the VAT registration threshold, are required to issue electronic invoices for taxable sales and purchases within the Kingdom.

How do I create an electronic invoice?

To create an electronic invoice in Saudi Arabia:

Use a compliant accounting or e-invoicing system.
Enter invoice details (customer name, commercial registration number, invoice number, issue date, goods/services details, quantities, prices).
Add VAT where applicable and ensure accurate calculation.
Save the invoice in an approved digital format.
Send it to the Authority’s platform for validation and compliance.

Which companies are exempt from electronic invoicing?

Certain businesses may be exempt, such as those that do not exceed the VAT registration threshold or operate in VAT-exempt activities like specific educational or healthcare services, subject to current regulations issued by the Authority.

Is electronic invoicing mandatory for exports?

Yes, electronic invoicing also applies to export transactions conducted by VAT-registered establishments in Saudi Arabia, in accordance with applicable VAT regulations and any specific exemptions outlined by the Authority.