FAQs about e-invoicing Phase 2 in Saudi Arabia

In December 2020, Saudi Arabia introduced a phased e-invoicing plan to make tax reporting smoother, increase transparency, and reduce tax evasion. The first phase kicked off in December 2021, when businesses started creating and storing e-invoices following guidelines from the Zakat, Tax, and Customs Authority (ZATCA). Now, Phase 2 is underway, which began in January 2023. In this phase, businesses need to connect their e-invoicing systems with ZATCA’s platform, allowing real-time invoice validation and data sharing. This transition aims to make the invoicing process more seamless and secure for businesses across the country.

1. When did Phase 2 e-invoicing start in Saudi Arabia?

The Phase 2 of e-invoicing started on January 1, 2023 for businesses with annual taxable revenue more than SAR 3 billion in 2021. Additionally, the Zakat, Tax, and Customs Authority in Saudi Arabia announced that businesses with a turnover beyond SAR 7 million should integrate their e-invoicing systems with ZATCA by February 1, 2025.

2. Is Zoho Books compliant with Phase 2 of e-invoicing in Saudi Arabia?

Yes, Zoho Books is compliant with the Fatoora portal and is listed on the ZATCA website as an approved e-invoicing solution. You can use Zoho Books to generate e-invoices accurately with zero latency. Additionally, you can schedule a free demo with our product experts to see how Zoho Books can help you stay compliant.

3. How did ZATCA implement Phase 2 of e-invoicing in KSA? What should KSA businesses do?

ZATCA implemented e-invoicing in waves within the phases, and Phase 2 started on January 1, 2023, based on business turnover. ZATCA provided detailed information to businesses about the compliance requirements, more than six months ahead of their implementation dates. Businesses should use software that is both compatible with ZATCA's system and reports records in real time.

4. How much time do businesses have to prepare for Phase 2?

ZATCA gives specific businesses a six-month notice before their Phase 2 integration deadline. For example, businesses notified on June 24, 2022 were required to be fully integrated by January 1, 2023. This notice applies to all upcoming groups as well.

5. What are the different waves in the second phase?

6. What different types of invoices should businesses manage under the new e-invoicing system?

Typically, businesses are required to keep the following invoice formats:

• Standard tax invoice
• Simplified tax invoice
• Credit note
• Debit note
• Nominal invoice
• Self-billing invoice
• Export invoice
• Third-party invoice
• Summary invoice

7. What is a simplified tax invoice in KSA and when is it issued?

A simplified tax invoice is the form where a supplier mentions the transactions without any customer details. A supplier can complete a simplified tax invoice if the transaction value is less than SAR 1,000 and when the goods or services reaches the end consumer. However, if the supplier is going to export goods or services or supply them within the GCC after VAT implementation, then they cannot submit a simplified tax invoice.

8. What is the Phase 2 e-invoicing process for simplified tax invoices? 

In the second phase, the seller will generate an e-invoice including all the mandated fields and share it with the buyer. Simultaneously, the seller will store this e-invoice and report it to ZATCA within 24 hours using an e-invoicing system that is integrated with the Fatoora portal.

9. What are the additional Phase 1 and Phase 2 requirements for a simplified tax invoice?

Additional Phase 1 requirements:

• Invoice reference number
• Invoice type
• QR code

Additional Phase 2 requirements:

• Subtotal including VAT at the line item level

10. What is the e-invoicing process for Phase 2 standard tax invoices?

There is a slight difference in the process for this type of invoice compared to the simplified tax invoices. The seller generates the tax invoice with all the mandatory details but first shares it with ZATCA through the compatible e-invoicing software and receives it after clearance. Then, they send the cleared invoice to the buyer and store it on their e-invoicing software.

11. What are the additional Phase 1 and Phase 2 requirements for a standard tax invoice?

Additional Phase 1 requirements:

• Invoice type
• Invoice reference number

Phase 2 mandatory requirements:

• QR code
• Additional seller ID
• Subtotal with and without VAT at the line item level
• Invoice taxable amount

12. What is the structure for creating the QR code and how is the code scanned?

The structure is as follows:

• Seller's name
• Seller's VAT registration number
• Date and time of the invoice or note
• VAT amount
• Total amount of invoice or note including VAT

You can scan the QR code only with software like Zoho Books that is compliant with e-invoicing.

13. Is Zoho Books technically compliant for Phase 2 e-invoicing?

Yes, Zoho Books lets you create a CSID easily, integrates with the Fatoora portal, and helps generate the right type of QR code based on ZATCA’s guidelines. It also helps generate invoices in XML format, store them, and export them at your convenience.

14. How do I reach out to Zoho Books if I need support?

You can reach out to Zoho Books via chat, or email us at support.me@zohobooks.com. You can also reach us by phone Sunday to Friday from 9:00 AM to 6:00 PM at 800-844-5940 or 800-850-0478.