ZAKAT - FAQ - Phase I

1.Is E-invoicing (FATOORAH) mandatory?

Ans: E-invoicing (FATOORAH) applies to all persons subject to VAT and any other parties issuing tax invoices on behalf of suppliers subject to VAT. Non-resident taxable persons for VAT purposes are excluded.

2. What are E-invoicing (FATOORAH) enforcement dates?

Ans: E-invoicing (FATOORAH) will be implemented in two phases:

Phase One, known as the “Generation phase” and enforceable as of December 4, 2021.

Phase Two, known as the “Integration phase” and enforceable starting from January 1, 2023 and implemented in waves by targeted taxpayer groups. Taxpayers will be notified by ZATCA on the date of their integration at least 6 months in advance.

3. Some requirements are technical, how can I prepare for e-invoicing (FATOORAH)?

Ans: The technical requirements are typically implemented by solution providers (e.g. ECR vendors, software vendors) or the internal technical teams for in-house built solutions. Taxpayers may approach a solution provider or their internal technical teams to acquire or upgrade to a compliant electronic system; and make sure they are generating compliant invoices starting from December 4, 2021.

4. What is Phase 1 (Generation Phase)? When will it be enforced and to whom does it apply?

Ans: Phase 1 known as the Generation phase will require taxpayers to generate and store compliant tax invoices and notes using compliant electronic systems.

Phase 1 is enforceable as of December 4, 2021 for all Persons subject to the E-Invoicing Regulation.

5. How will my invoicing practices change starting from December 4, 2021?

Ans: All Persons subject to the E-Invoicing Regulation must use compliant electronic systems to generate invoices starting from December 4, 2021. Manual invoices will no longer be considered as compliant tax invoices.

E-invoices must include the minimum additional fields (see next question).

E-invoicing compliant electronic systems should be able to generate QR codes.

E-invoicing compliant electronic systems must not allow for the prohibited functions specified by ZATCA.

Please approach your solution provider or your internal technical teams to ensure your electronic systems are compliant with ZATCA requirements. In addition, de- velopers and subject matter experts may visit ZATCA’s website for viewing all re- quirements (business, technical, security, etc.).

6. What does an e-invoice look like and how is it different from current invoices?

Ans: E-invoices for Phase 1 (December 4, 2021) are similar to current tax invoices, with minimum additional fields:

For simplified tax invoices and their associated notes (usually issued for B2C transactions) a mandatory QR code.

For tax invoices and their associated notes (usually issued for B2B transactions), an optional QR code and mandatory VAT number of the buyer if the buyer is a registered VAT taxpayer.

There is no specific file format mandated for Phase 1, however, invoices must in- clude the mandatory fields and must be issued from an electronic system meeting ZATCA’s requirements. In addition, electronic copies of all issued invoices must be stored by the taxpayer.

7. Does my solution need to be able to generate QR codes on invoices on December 4, 2021?

Ans: Yes, QR code are mandatory for simplified tax invoices (usually issued for B2C transactions) and optionally for tax invoices (usually issued for B2B transactions).

QR code is not provided by ZATCA and shall be generated by the electronic system. Please approach your solution provider or technical teams to acquire or upgrade to a compliant electronic systems.

8. What are the minimum requirements that must be shown after scanning a QR Code?

Ans: As part of Phase 1 (Generation Phase), the below fields are the minimum required fields that must be shown after scanning a QR code in a simplified tax invoice:

Seller’s name

VAT registration number of the seller

Time stamp of the Electronic Invoice or Credit/Debit Note (date and time)

VAT total

Electronic Invoice or Credit/Debit Note total (with VAT)

9. Do my e-invoices need to be approved by ZATCA before sharing them with the buyer,or reported to ZATCA after issuing them?

Ans : No, for Phase 1 (December 4, 2021), taxpayers are not required to approve, clear or report invoices to ZATCA.

10. What are some of the prohibited functionalities for Phase 1 (Generation Phase) that are not allowed to be part of the E-invoicing system?

Ans: Lack of user management capabilities (uncontrolled access) for example:

Anonymous Access.

Absence of user session management.

Tampering of e-invoices or their associated notes or logs.

Multiple Electronic Invoice sequences.