ZATCA initiates procedures for implementing the integration phase of electronic invoicing

30 June 2022 - After concluding the public consultation on 10 June 2022, the Kingdom of Saudi Arabia (KSA) Zakat, Tax and Customs Authority (ZATCA), has published the updated electronic invoicing (e-Invoicing) Implementation Resolution in Arabic on 24 June 2022. The Implementation Resolution is part of the earlier released e-Invoicing Regulations issued on 4 December 2020. This latest Resolution, annexes and related technical specifications will be relevant for the integration phase that will go live on 1 January 2023. The English version has not been published yet.

There are two major phases for the introduction of e-Invoicing in the KSA:

1. The generation phase that has already gone live on 4 December 2021; and
2. The integration phase that will go live on 1 January 2023.

In respect of the integration phase, the ZATCA will implement it in waves. As per the announcement dated 24 June 2022, the first wave comprises KSA resident businesses that reported a taxable revenue exceeding SAR 3 billion in the VAT returns filed for 2021. The selected taxpayers will be notified by ZATCA and should comply with the integration phase requirements between 1 January 2023 and 30 June 2023 as per the Administrative Resolution No. 62737 dated 23/11/1443H.  

The key changes to the e-invoicing Implementation Resolution including related annexures, i.e., data dictionary, XML implementation and security feature implementation standards, are:

• It is not necessary to obtain ZATCA’s cleared invoices and notes for the purpose of availing of input VAT deduction, until further notified from the authority.
• For standard tax invoices:
  • Inclusion of cryptographic stamp in XML will be mandatory from 1 January 2023 however is not required to be printed on the human readable invoice format.
  • Special billing arrangement and transaction type flags like third party, nominal supply, export or summary invoices are not required to be included in the human readable invoice format.
  • Explanation has been added to multiple fields such as Value Added Tax registration number, additional seller and buyer ID. 
• For standard tax invoice credit/debit note:
  • Explanation has been added to the type of note (credit or debit) field.
  • Inclusion of note issuance time field that will be mandatory in the XML, while not required to be printed on the human readable invoice format.
• For simplified tax invoices: 
  • Special billing arrangement and transaction type flags like third party billing invoice, nominal supply and summary invoice, are not required to be included in the human readable invoice format.
  • Inclusion of date of supply field that will be conditional in the XML and the human readable invoice format.
  • Inclusion of purchase order and contract number fields as an optional in the XML, while not required to be printed on the human readable invoice format.
  • Special tax treatment field has been added as a conditional in the XML, while not required to be printed on the human readable invoice format.
• For simplified tax invoice credit/debit note:
  • Explanation has been added to the type of note (credit or debit) field.
  • Inclusion of note issuance time field that will be mandatory in the XML, while not required to be printed on the human readable invoice format.
• Update to the type of encryption of cryptographic stamp signature from RSA to ECDSA. 
• Introduction of ISO 8601 for the timestamp in the QR code.
• Changes made to various business rules in the data dictionary and XML implementation standards for validation of the XML invoices.

The ZATCA through unofficial channels has also mentioned that the first wave taxpayers will be penalized if they are not fully compliant by 1 July 2023. This is an unofficial communication and the formal e-invoicing implementation date remains 1 January 2023. It does not rule out that the penalties for non-compliance could still apply from 1 January 2023 as stipulated in the VAT legislation. Therefore, taxpayers should comply with the e-invoicing integration phase requirements based on the notification sent to them by the ZATCA and initiate the process to analyze and deploy the necessary changes to the IT and business landscape.