8 key questions about e-invoicing in Saudi Arabia

Phase 1 of the e-invoicing mandate in Saudi Arabia, introduced by the Zakat, Tax and Customs Authority (ZATCA), is now live. Suppliers can no longer generate or store paper, picture format or PDF invoices. Phase 2, also known as the integration phase, will come into place on 1 January 2023. In the preparation and selection process for the mandate, we have received common questions from clients in relation to the new law, so let’s address these below.

1. What are the different waves in Phase 2

ZATCA have announced that Phase 2 will be implemented in waves based in taxpayer revenues:

• Wave 1 (1 Jan 2023) - Annual revenues exceeding SAR 3 billion
• Wave 2 (1 Jul 2023) – Annual revenues exceeding SAR 500 million
• Wave 3 (1 Oct 2023) – Annual revenues exceeding SAR 250 million 
• Wave 4 (1 Nov 2023) - Annual revenues exceeding SAR 150 million
• Wave 5 (1 Dec 2023) - Annual revenues exceeding SAR 100 million
• Wave 6 (1 Jan 2024) - Annual revenues exceeding SAR 70 million
• Wave 7 (1 Feb 2024) - Annual revenues exceeding SAR 50 million
• Wave 8 (1 Mar 2024) - Annual revenues exceeding SAR 40 million
• Wave 9 (1 Jun 2024) - Annual revenues exceeding SAR 30 million

2. Are we open to use any software application or ERP system to meet e-invoicing criteria?

Yes – you can use any software or ERP system as long as it complies with the different regulations (e.g. e-invoice, VAT, Cloud Computing, Cyber Security). If we are referring to the capabilities of your existing ERP system to help streamline your processes, there are 3 things you have to first check:

• Can it create and electronic invoice dataset?
• Is it possible to build up a technical interface for communication?
• Is my software able to deliver all the needed content in Arabic?

If your answer is yes, then you can start streamlining your invoice flow with Pagero. If your answer is no, you can use the Pagero portal to create your e-invoices through our online platform.

3. Are e-invoices just mandatory towards public sector transactions (B2G) in Saudi Arabia?

No – all taxpayers are affected by the mandate, which includes all B2G, B2B and B2C transactions.

Exemptions to the mandate include: exempt supplies, advanced payments related to exempt supplies, reverse charge supplies, and import of goods.

4. How will Pagero cover the need for Arabic content? Is it going to come from the ERP or can Pagero take care of that?

The translation of invoice data into another language is associated with many risks, therefore Pagero does not offer a translation tool. However, Pagero partners offer managed services for e-invoicing which include translations and other related services. Get in touch to learn more.

Additionally, invoices are either created in Arabic by the ERP or typed in Arabic into the Pagero portal – watch our demo to find out how.

5. What does the term “offline archiving on local soil” mean?

‘Offline archiving’ means that the structured data file (which stands for the e-invoice) has to be digitally archived in a server environment based in Saudi Arabia. Additionally, the archive has to follow certain technical specifications related to:

• Naming convention
• Non-tampering
• Nonrepudiation

6. Is there also an obligation to process inbound e-invoices?

Currently there is no specific regulation to process inbound e-invoices. The e-invoicing mandate regulates the sending of electronic invoices and the tax law in Saudi Arabia requires businesses to keep records of all their tax invoices.

Given that the legal tax invoices in Saudi Arabia will be in electronic format only from 4 December 2021, they must also be stored in electronic format as these documents are the legal supporting documents for tax obligations such as VAT returns.

Additionally, as e-invoicing will digitalise the invoices received by your AP function, it is a great opportunity to gain efficiency and reduce processing costs by automating your supplier invoice handling.

7. Can non-Saudi Arabian companies still benefit from this mandate?

Digitalisation is always beneficial from a process efficiency perspective. If you are transacting business with companies in Saudi Arabia you can improve your business, both operationally and from a compliance perspective, by migrating your current manual AP and/or AR processes into fully digital processes.

8. Could my business in Saudi Arabia receive a fine for non-compliance with ZATCA?

Yes - penalties of SAR 1,000-40,000 will be applied for non-compliance:

• Failure to issue and save invoices and notes electronically and non-compliance with the prescribed format for keeping e-invoices and electronic notes
• Failure to report any system malfunctions that prevent the issuance of invoices and electronic notes and Omission of the QR code from the e-invoice
• Use of prohibited functions in the electronic invoicing system for issuing and storing invoices and deletion of alteration of issued invoices or electronic notes