Last year, the Zakat, Tax and Income Authority of Saudi Arabia announced the introduction of an e-invoicing system with the aim of reducing administrative burdens on taxpayers, raising the rate of tax liability, and reducing the volume of transactions in the hidden economy, as well as combating commercial cover-ups. The first phase (issue phase) entered into force on December 4, 2021. The second phase (linkage and integration phase) of the e-billing system comes into effect from 1 June 2023.

Simply what is the e-invoice system? As a business owner, you need to know the steps of the second phase in accordance with the regulations and regulations stipulated by the system.

E-invoicing system:

E-invoicing system aims to transform the process of issuing paper invoices into electronic invoices approved by the Authority.

What is an e-invoice?

The invoice is issued, stored, and edited electronically via an electronic system containing the requirements of the tax invoice for proof of sale and purchase of various goods and services since the paper invoice and handwritten is not an electronic invoice according to the Authority’s controls.

Difference between Phase I and Phase II requirements:

The invoice requires provisions and regulations to meet the requirements of the electronic invoice, and these requirements are divided into two consecutive phases. Phase I “Release Phase” came into force mandatorily last year. One of its most important requirements currently binding on the VAT establishment is as follows:

Phase I requirements

• Installation or update of invoicing system (no handwritten invoice)
• Add QR code on the invoice (QR-Code)
• Add buyer’s VAT registration number if registered in VAT (tax number consists of 15 numbers)

On June 25, the Authority began the implementation of the second phase of the e-invoicing system (linkage and integration phase) aimed at connecting and integrating the e-invoicing systems of the e-invoicing regulators with the e-invoicing system (invoice). In addition to the requirements of Phase I previously mentioned, Phase II requirements with the clarification that they are not yet in force include the following:

Phase II requirements:

• Invoice (XML, PDF/A-3)
• Manipulative properties
  (e.g. encryption function, digital seal)
• Other technical characteristics (e.g. UUID)
• Linking and integrating with the Authority’s systems

Steps for the implementation of Phase II:

• The supplier system issues the invoice file as (XML, PDF/A-3) and shares it electronically with the Authority’s platform instantaneously
• The Authority’s platform verifies e-invoice information
• After verifying the authenticity of e-invoice information, the platform adopts and seals it electronically immediately
• The supplier system then receives the approved and stamped invoice automatically and instantly
• Supplier shares electronic invoice with buyer
• Finally, the buyer can check the electronic invoice on the platform via the encryption code or scan (QR – Code) through the Authority’s application

As a business owner, how are you preparing to apply the second phase of the system?

As a VAT-subject business owner, an electronic invoicing system must be used.

Phase II is the completion of Phase I, so it is expected that you are currently using an electronic invoicing system for Phase I requirements, but is your system now ready to apply Phase II requirements? You need to check with your technical team.

Our ERP system is Certified by Zakat and Income Authority works to issue and archive e-invoices and save them as required. We advise you to rely entirely on us and see the prices of our ERP system Here. Our ERP system includes inventory and order management, human resources and salaries, customer relationship management, project management, customer service, and financial accounting.

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