Understanding the Fatoorah E-Invoicing System in Saudi Arabia: Concept and Process

As Saudi Arabia moves towards a more digitized economy, the introduction of the Fatoorah e-invoicing system by the Zakat, Tax, and Customs Authority (ZATCA) is a major milestone. It’s designed to make invoicing simpler, tax compliance easier, and overall business operations smoother. Here’s an easy-to-follow overview of what Fatoorah is all about, its main features, and how it works.

The Concept of Fatoorah

Fatoorah, meaning "invoice" in Arabic, is Saudi Arabia's mandatory electronic invoicing system. It’s part of the country’s Vision 2030 plan to modernize the economy and bring more transparency to financial transactions. The system requires businesses to issue, store, and share invoices digitally in a standardized format. Fatoorah has two phases:

1. Generation Phase: Businesses must generate electronic invoices instead of manual ones.

2. Integration Phase: Businesses connect their invoicing systems to ZATCA’s platform to share invoice data in real-time.

There are two types of invoices:

• Standard Tax Invoices: For business-to-business (B2B) transactions.

• Simplified Tax Invoices: For business-to-consumer (B2C) transactions.

Key Features of Fatoorah

2. Phased Rollout:

• Generation Phase (Started December 4, 2021): Businesses must create and store invoices electronically.

• Integration Phase (Started January 1, 2023): Businesses must share invoice data with ZATCA in real-time.
  

Here’s how the Fatoorah system works:

1. Generate the Invoice:

• Businesses create electronic invoices using a ZATCA-approved system.

• Each invoice must include important details like the buyer’s VAT number (for B2B), the total amount, and the VAT amount.

2. Add a Digital Signature:

• A digital signature ensures the invoice is authentic and hasn’t been tampered with.

3. Include a QR Code:

• B2C invoices must include a QR code so customers can verify them using ZATCA’s app.

• During the Integration Phase, businesses must send invoice details to ZATCA in real-time.

5. Archive Invoices:

• Businesses must store electronic invoices for at least six years, as required by ZATCA.

What Has Been Implemented Till Date

1. Generation Phase (December 4, 2021): Businesses started creating and storing invoices electronically, moving away from manual processes.

2. Introduction of Invoice Types: Businesses categorized invoices into B2B (Standard Tax Invoices) and B2C (Simplified Tax Invoices) to meet compliance requirements.

3. Integration Phase (January 1, 2023): Businesses integrated their systems with ZATCA’s platform to allow real-time sharing of invoice data, along with QR code and digital signature requirements.

4. ZATCA-Compliant Solutions: Many software providers introduced systems that meet Fatoorah’s requirements, making it easier for businesses to adapt.

5. Consumer Verification Tools: Customers can now verify invoices using QR codes via ZATCA’s mobile apps and online platforms.

Conclusion

The Fatoorah e-invoicing system is changing how businesses in Saudi Arabia handle their invoicing. It’s making the process more efficient and transparent while also simplifying tax compliance. For businesses, this is an opportunity to modernize and streamline their operations. As the system continues to evolve, it’s expected to bring long-term benefits to both companies and consumers in Saudi Arabia.