Tuesday, December 20, 2022
Important terms in KSA e-invoicing you must know
In order to digitize the economy and make it easier for businesses to create and send invoices on time, the Kingdom of Saudi Arabia implemented electronic invoices in the country through Zakat, Tax and Customs Authority (ZATCA). The implementation was carried out in two phases, with the generation phase (phase 1) set in motion in December 2021 and the integration phase to be commenced on 1st January 2023. Now that the second phase is on the horizon, e-invoices will be formally legalized, making it essential for all citizens to understand everything there is to know about the process. Before you start choosing your e-invoice software in Saudi Arabia, take a moment to scroll through and learn all the important terms related to this process.
Important e-Invoicing Terms to Understand
The following are some of the important terms you need to know to understand e-invoicing in Saudi Arabia better.
1. Electronic Invoicing : This refers to the process of generating invoices and their related Credit or Debit Notes (CDNs) in an electronic system, thus dispelling the need for paper. On the adoption of the new process, the exchange and processing of invoices shall happen in an integrated electronic format via a ZATCA-complaint e-invoice software in Saudi Arabia.
2. e–Invoice : This term refers to electronic format invoices. A seller typically issues these to a buyer when they buy selected goods and services. It is important to understand that if you convert an invoice into an electronic format with the help of a scanner, it is not considered an e-invoice.
3. Simplified e-Invoice : This refers to a type of e-invoice that is generated only in the case of B2C transactions. Such invoices do not include the buyer’s details like name, address, and contact number. However, there is an exception. For invoices that are generated by medical institutions, in instances where the supply is treated as zero-rated, it is mandatory to include the buyer’s details.
4. Electronic Note : This refers to electronically generated credit and debit notes.
5. Debit Note : These are issued in situations where one is under-invoicing an original Value Added Tax (VAT) invoice. The format is the same as an e-invoice.
6. Credit Note : These are issued in situations where one is over-invoicing in an original VAT invoice. Credit notes also follow the same format of the invoice.
7. e-Invoice Solution : This refers to any e-invoice software in Saudi Arabia that can generate ZATCA-compliant invoices.
8. e–Invoice Solution Unit : This term refers to a component of the e-invoice solution that is utilized by a specific unit of a group entity, as long as it is subject to e-invoicing regulations. Each unit must have its unique cryptographic stamp.
9. e-Invoicing Integration Portal : Once Phase 2 of e-Invoicing Regulations is rolled out; taxpayers must mandatorily upload their e-invoices on ZATCA portal. It is essential to note that the ZATCA portal is also referred to as the e-Invoicing Integration Portal.
10. Cryptographic Stamp : Created via cryptographic algorithms, this stamp is a mandatory component for every e-invoice. It is used to ensure the authenticity of the e-invoices.
11. Cryptographic Stamp Identifier : This term refers to a unique identifier that is used to confirm the seller’s identity.
12. UUID : Short for Universally Unique Identifier (UUID), this is a 128-bit number. It is added to the invoice by the invoicing software to help create a means of identification for the invoice.
13. QR Code : This refers to a matrix barcode that has a unique pattern that is made of black and white squares. The pattern is machine-readable, and it can be used for validating e-invoices.
14. Hash : This term refers to a digital fingerprint generated with the help of a standardized algorithm. It is generated each time an invoice is changed to validate its authenticity.
15. Invoice Reference Number : This term refers to a unique reference number that is added to each e-invoice.
16. Clearance : This term refers to the official process through which ZATCA makes sure that the invoices that have been generated through integration are complying with the e-Invoicing Regulations and their Annexures.
17. Reporting of simplified e-invoices and their associated notes : This term refers to the process by which sellers share their simplified (B2C) invoices with ZATCA within 24 hours of generation.
18. Invoicing Solution Provider : This term refers to any third party that develops and sells e-invoice solutions.
19. Human Readable Format : This term refers to a specific format of the e-invoice that humans can read.
20. The Authority’s Toolkit : This refers to a toolkit or checklist that ZATCA has developed to help sellers use any e-invoice solution and easily verify if it complies with ZATCA’s requirements.
21. Business-to-Business (B2B) : This is an industry term that signifies any trade between two businesses. It typically represents the act of buying or selling goods.
22. Business-to-Consumer (B2C) : This term signifies any trade between a business and a customer, generally in the form of sales.
23. Business-to-Government (B2G) : This term refers to any transactions where a business supplies goods or services to a government body.
This should help you understand the different terms you may come across when generating an e-invoice. Make sure that everything complies with ZATCA's rules and regulations!
