A Beginner’s Guide to Digital Invoicing Regulations for Riyadh-Based Businesses

Digitalization of Saudi Arabian economy has brought new regulatory mechanisms that have been aimed at enhancing transparency, effectiveness, and accountability. Mandatory e-invoicing under the leadership of the Zakat, Tax and Customs Authority (ZATCA) has been one of the most important changes that businesses in Riyadh and the Kingdom have experienced.
As a small retailer, service provider, or a growing enterprise, ZATCA approved e-invoicing in Riyadh will be essential to keep up-to-date with current conditions and not be fined.
This guide will break down the essentials of digital invoicing regulations in Saudi Arabia and help beginners understand how to prepare, implement, and benefit from the new system.

What Is E-Invoicing?

E-invoicing is the digital generation and storage of tax invoices in a structured format. It substitutes the conventional paper or PDF-based invoicing systems. E-invoices in Saudi Arabia are subject to particular formats, compulsory fields, and, ultimately, they will be connected to the platform of ZATCA to be checked in real-time.
These rules cover the entire Saudi Arabian VAT-registered business, and special implementation is being implemented in the regions such as ZATCA approved e-invoicing in Riyadh.

Phases of E-Invoicing
The e-invoicing requirement by ZATCA is being implemented in two phases:

• Phase 1 Generation Phase
  As of December 4, 2021, companies will have to create and save invoices in electronic format. Such invoices have to contain certain information including VAT number of the buyer, QR code, and an electronic receipt of the transaction. Nonetheless, at this point, there was no need to integrate with the system of ZATCA.

• Phase 2- Integration Phase
  This has begun in January 2023 and is being implemented in phases depending on the size and nature of the business. Firms in Riyadh with revenues above the revenue thresholds will have to connect their systems directly to the ZATCA Fatoora system enabling real-time exchange and verification of invoices.

This second phase is critical for businesses that want to fully comply with ZATCA approved e-invoicing in Riyadh and beyond.

Who Needs to Comply?
Any business in Saudi Arabia that is VAT-registered is required to comply with the e-invoicing regulations. This includes:

• Businesses that issue tax invoices to other VAT-registered ones (B2B)

• Retailers and service providers in the business with end customers (B2C)

• Freelancers and other professionals who have to pay VAT

Operating in Riyadh or any other region, the approved e-invoicing in Saudi Arabia is a legal requirement and not an optional upgrade.

So what makes an e-Invoice ZATCA approved?
An e-invoice must:

• Be created using a compliant and secure system

• Add required fields like the type of invoice, VAT numbers of buyers and sellers and amount in detail

• Be XML-structured

• Add QR code (simplified invoices)

• Digitally signed (particularly to Phase 2 compliance)

• Be safely stored and be proof against tampering during at least six years

The compliance of any generic invoicing platform or manually generated PDFs does not comply with ZATCA approved e-invoicing in Saudi Arabia.

Selection of a Compliant Solution
Businesses should adopt the e-invoicing software, which is already approved or meets the technical and security standards of the ZATCA. A number of local and international vendors have solutions which can be easily integrated with your current accounting or ERP systems.

Looking at a solution to ZATCA approved e-invoicing in Riyadh, ensure that it has:

• Live ZATCA (Phase 2 ready)

• English and Arabic invoice templates

• Automated calculation of VAT

• Safe storage and control of data

• Continuous software updates as the guidelines of ZATCA change

Final Thoughts
The move to e-invoicing forms a critical component of the national vision of modernising the Saudi economy and enhancing tax compliance. Although it can sound technical at the beginning of the process, the payoffs, including the reduction in errors, the acceleration of the payments process, and the convenience of audits, justify the process in any company.

When you are based in Riyadh, the need to understand and adopt ZATCA approved e-invoicing in Riyadh goes beyond compliance, it is a strategic step towards a more efficient and future-ready business. Since the regulations are still changing, it is best to keep up with the changes and make an appropriate solution to stay compliant and invest in growth.