Zatca e-Invoicing: Guide for UK Business

If your business has a branch or subsidiary in Saudi Arabia, you’ll need to know about ZATCA e-invoicing.

The country has new rules which make it mandatory for B2B businesses to issue invoices electronically. Electronic invoices are digital versions of paper invoices, and are usually issued and processed using automated digital tools.

In this helpful guide, we’ll run through everything you need to know about ZATCA e-invoicing software, rules and regulations.

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ZATCA e-invoicing - An overview¹

ZATCA stands for the Zakat, Tax and Customs Authority, which is the official tax authority in Saudi Arabia. It’s the equivalent of HMRC in the UK.

In December 2021, ZATCA introduced Phase 1 of the FATOORAH e-invoicing project. It brought in new rules making electronic invoicing mandatory for all resident taxpayers, and applies to all B2B and B2C transactions in the country.

During Phase 1, taxpayers were told to stop issuing manual and handwritten invoices. These will no longer be legally accepted in Saudi Arabia. Instead, they were required to adopt an electronic invoicing solution which complied with ZATCA requirements.

Phase 2 of the project got underway in January 2023. This involved phased compliance, where companies meeting certain revenue thresholds were informed that they’d need to connect to the ZATCA system within 6 months.

If companies fail to comply with the regulations, penalties of up to 50,000 SAR may apply.²

UK companies e-invoicing Saudi Arabia

Importantly, the FATOORAH e-invoicing project only affects resident individuals and companies within Saudi Arabia. Non-resident businesses will not have to use compliant e-invoicing solutions.¹

So if you’re a UK-based company with Saudi Arabian clients, you can invoice as normal - or reach an agreement with your client on how to proceed with billing and invoicing.

However, if you are a UK company with branches or subsidiaries in Saudi Arabia, the ZATCA rules may apply to you. If unsure, contact the authority to find out more about your obligations with regards to e-invoicing.

ZATCA e-invoicing requirements

If you do need to comply with ZATCA e-invoicing rules, here are the main rules and key points you need to know about:¹

• ZATCA will give you a Phase 2 compliance deadline - you’ll be notified of this at least six months in advance. This should give you adequate time to bring your invoicing system into compliance
• By your compliance deadline, you need to integrate your e-invoicing system with the FATOORAH platform and meet all ZATCA rules and requirements
• Before this, you need to switch from paper invoices to ZATCA e-invoicing software - or at least make sure you use software that includes the mandatory fields. These include VAT number, invoice issuance date and the VAT. An optional QR code can be added
• Phase 2 requirements include the ability to generate and store e-invoices in the XML or PDF format, with the required mandatory fields
• It’s also essential that your e-invoicing system or solution can connect to the internet

ZATCA e-invoicing - FAQs

If you’re new to e-invoicing or to doing business in Saudi Arabia, you’re bound to have questions. To help make it a little easier, we’ve tackled some of the most frequently asked questions about ZATCA e-invoicing below.

Is electronic invoice mandatory?

Yes, electronic invoicing became mandatory for all B2B and B2C transactions from December 2012. The Zakat, Tax and Customs Authority (ZATCA) is managing compliance in phases, to give businesses and organisations time to update their invoicing systems and integrate them with the FATOORAH platform.

By June 1st 2024, most businesses in Saudi Arabia will be legally obliged to comply with the ZATCA e-invoicing system.¹

What is Phase 2 of e-invoicing in Saudi Arabia?

Phase 1 of the FATOORAH e-invoicing project in Saudi Arabia is known as the generation phase. It’s essentially a notification to all taxpayers and businesses that manual, paper and hand-written invoices are no longer accepted in the country - and that they must switch to an e-invoicing solution.

Phase 2 of the project aims to gradually bring businesses into compliance, with staged compliance deadlines based on annual revenue. During this phase, businesses will need to ensure their e-invoicing solutions integrate with the FATOORAH platform.

What is the difference between an e-invoice and a normal invoice?

An e-invoice is a digital version of an invoice document, which is submitted and processed electronically. A normal invoice is usually in paper form, and requires manual processing and filing.

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And that’s it - all the essentials you need to know about the ZATCA e-invoicing rules and requirements. We’ve run through what the FATOORAH e-invoicing project is, who it affects and the key deadline dates to ensure compliance.

If you’re a UK business with a branch or subsidiary in Saudi Arabia, this information really is crucial for you. It’s important to understand your obligations and get your electronic invoicing system up to date and compliant with ZATCA rules.

If you only trade with Saudi Arabia and you’re based in the UK, you don’t have to take any specific action but it’s useful to know about the FATOORAH e-invoicing project all the same. In the future, it may be updated to include international businesses which trade with Saudi Arabian clients.

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Sources used for this article:

1. Edicom Group - Saudi Arabia Makes Electronic Invoicing Mandatory: FATOORAH Project
2. Deloitte - ZATCA announces violations and penalties in relation to e-Invoicing in KSA

Sources checked on 30-04-2024.