ZATCA: Types of e-invoices

The Kingdom of Saudi Arabia (KSA) has introduced e-invoicing in two phases through the Zakat, Tax, and Customs Authority (ZATCA), formerly known as GAZT. E-invoicing in KSA is applicable to all VAT-registered taxpayers, with the exception of those classified as non-residents for VAT purposes.

ZATCA has provided clarification that e-invoices (Fatoorah) must be issued for all categories of tax invoices within the scope of VAT. As a result, various types of e-invoices exist, which we will explore individually.

Standard Tax Invoice

A standard electronic invoice is a requirement for transactions between businesses (B2B) and between businesses and government entities (B2G). This type of electronic invoice is essential for buyers who want to claim input VAT deductions, as outlined in Article 53 (5) of the VAT Implementing Regulations.

The standard tax invoice can only be generated after obtaining cryptographic stamps and clearance through the Fatoora portal and must comply with VAT legislation, including information about the seller and buyer, transaction specifics, details of goods or services, and various technical data.

Example of Standard Tax Invoice

Simplified e-invoice

Simplified electronic invoices are designed for Business to Consumer (B2C) transactions where the buyer doesn't require the invoice for input VAT deduction purposes. These B2C e-invoices must include the details specified in Article 53 (8) of the VAT Implementing Regulations and the appendix of the e-Invoicing Resolution.

Simplified e-invoices should be issued and provided to customers at the point of sale, with a copy archived and retained for record-keeping purposes.

In Phase 2 (integration), a simplified e-invoice must be reported on the ZATCA portal within 24 hours of issuance.

Example of Standard Tax Invoice

Electronic notes (credit and debit notes)

Article 54 of the VAT Implementing Regulations pertains to credit and debit notes, while Article 40(1) addresses adjustments to the value of a supply. If a taxpayer makes adjustments to a transaction for which an e-invoice or simplified e-invoice has already been issued, they are required to issue an electronic credit or debit note.

Credit and debit notes must be associated with the original invoices. The types of credit or debit notes issued depend on the type of e-invoice originally used. Taxpayers are also obligated to issue a standard credit/debit note for a standard e-invoice and a simplified electronic note for a simplified e-invoice.

Subtypes:

Summary e-invoice

Summary tax invoices are utilized when there are multiple supplies of goods or services. Suppliers who follow periodic invoicing practices can issue a single commercial invoice that consolidates all the supplies made within that specific period. For instance, a seller may issue a single summary invoice covering all goods supplied during a month.

As per VAT Legislation, a taxable individual has the option to issue a summary tax invoice, encompassing all taxable supplies of goods and services made to a single customer. There are no additional format or content requirements for summary tax invoices in the context of VAT.

It's important to note that when a taxable person opts for a summary tax invoice, they should refrain from issuing separate tax invoices for the individual supplies of goods and services included in the summary tax invoice. In such cases, the taxpayer should issue a summary electronic invoice.

Self-billing e-invoice

The Unified Agreement for Value Added Tax (VAT Law) and its implementing regulations permit a taxable buyer to issue tax invoices on behalf of the supplier. However, this practice requires approval from the tax authority for the buyer to issue self-billing invoices, and the buyer must adhere to the specific requirements outlined in the regulations.

Even though the buyer is responsible for issuing self-billing invoices, the supplier remains accountable to the tax authority for the accuracy of the data presented in the tax invoices. In such cases, the buyer is obligated to create tax invoices in an electronic format in accordance with the provisions of the e-invoicing regulation.

Self-billing e-invoices generated by a buyer should include an electronic marker indicating this arrangement. This marker is generated automatically and remains invisible in the human-readable version of the e-invoice. Therefore, the human-readable format of the invoice must contain a statement declaring it as a self-billing invoice.

Third-party billing e-invoice

An external entity, such as an accounting firm, can issue invoices on behalf of the seller once they have met the specific requirements outlined in the VAT legislation.

E-invoices produced by a third party must include an electronic marker denoting this arrangement. This marker is generated automatically and remains invisible in the human-readable version of the e-invoice. Therefore, the human-readable format of the invoice must include a statement confirming that it is a third-party billing invoice.

ZATCA provided guidelines clarifying that the type of e-invoice to be issued depends on the nature of the supply. Below is a table outlining the specific type of e-invoice to be issued for each scenario:

* If there are taxable supplies or zero-rated supplies made to a taxable person or a non-taxable legal entity, and the total value is less than SAR 1000, the seller can issue simplified tax invoices. However, if the buyer intends to claim input VAT deduction, the seller should request the issuance of a standard tax invoice by the buyer.

^ A non-taxable legal person refers to a business establishment in KSA that is not registered under VAT due to meeting the threshold limit.