Complex Made Simple

Saudi’s e-invoicing initiative Fatoorah to save over $100 billion annually   

 One of the key initiatives led by Saudi Arabia’s finance ministry to implement global financial practices across the government sector is Saudi’s e-invoicing project Fatoorah which addresses the ‘shadow economy’

Buyers and sellers will now have a digital system to enable the smooth exchange and processing of invoices The new procedure will activate the consumer’s role in monitoring and reporting Companies should assess if their current invoicing system is in ZTCA's indicative list

 One of the key initiatives led by Saudi Arabia’s finance ministry to implement global financial practices across the government sector is Saudi’s e-invoicing project Fatoorah.

Saudi is ranked amongst the most innovative countries in the world, in its provision of government services and interaction with citizens, according to the GovTech report issued by the World Bank.

At Expo 2020, Paul Arnold, Managing Director of Sovereign Saudi Arabia, a partner company of Sovereign AEI commented on the ongoing digital acceleration across various Government entities in the Kingdom.

“Saudi Arabia aims to strengthen financial control procedures, improve governance, and the overall effortless switch to automation. e-Invoicing project Fatoorah is expected to benefit the Saudi economy, mainly in addressing the commercial concealment and the ‘shadow economy’ that has cost the Kingdom almost $107 billion annually,” Arnold said. 

He explained that buyers and sellers will now have a digital system to enable the smooth exchange and processing of invoices, credit, and debit notes. 

Ahmed Al-Suwailem, CEO of the Anti-Commercial Concealment Program, said that the e-invoice project would open an important window for small and medium enterprises on credit.

“Fatoorah is an incentive for legal enterprises and that reduces waste of time and money, in addition to contributing to improving after-sales services to consumers and preserves the rights of both parties,” he said.

The new procedure will activate the consumer’s role in monitoring and reporting, raise transparency over the movement of funds, and enable the control of crimes and related violations.

According to Zakat, Tax and Customs Authority (ZTCA), the program will be carried out in two phases where the first phase requires generating and storing tax invoices and notes while the next phase will focus on digitally incorporating taxpayers into the system.

The application of the first phase will start to apply on taxpayers subject to the E-Invoice regulation starting from December 4, 2021, and that requires the issuance and storing of tax invoices and related debit and credit notices electronically.

The second phase will be implemented in a phased manner starting from the beginning of January 2022, as it will consolidate integration between the electronic systems of taxpayers, and the systems of ZTCA.

Chronology of Fatoora  

Any Saudi taxable resident, customer, or third-party issuer of tax invoices on behalf of a Saudi taxable resident are subject to Fatoora.

Companies should assess if their current invoicing system is in ZTCA’s indicative list and if it’s compliant with the new e-invoicing regulations.

The following chronicles when Fatoorah came about and other important dates to follow:

  1. December 4, 2020- Release of final e-invoicing regulations
  2. August 24, 2021- Launch of ‘Fatoorah’ Project
  3. December 4, 2021- Phase 1 Generation Phase
  • Targeted taxpayers are required to comply with e-invoicing regulations
  • Non-Compliance penalties will apply
  1. January 1, 2023- Phase 2 Integration phase
  • Integration of the electronic solutions with ZATCA’s systems to be rolled out in waves by targeted taxpayers’ groups
  • Converts the paper invoices and notes into electronic documents
  • To be done using an integrated electronic solution

Fatoora reporting details

Saudi is the first nation in the GCC to officially announce e-invoicing under VAT. VAT is managed by ZTCA. Standard Fatoora electronic invoices shall contain details as per VAT legislation, including the seller and buyer, transaction and goods/services details, along with other technical information.

 

Simplified electronic invoices are to be issued for Business to Consumer (B2C) transactions, shared with the customers at the point of sale, and a copy should be subsequently archived and stored.

During the first phase (generation), the applicable taxpayer can simply share the e-invoice without further action.

However, during the second phase (integration), a simplified e-invoice should be reported in the ZTCA portal within 24 hours of issuance.