Simplified vs. Standard E-Invoices: Which One Does Your Saudi Business Need?

Kingdom of Saudi Arabia is making ambitious steps into digital transformation, and the introduction of E-invoicing in Saudi Arabia is one of the most important regulatory changes over the last few years. The Zakat, Tax and Customs Authority (ZATCA) as part of the Vision 2030 initiative has mandated e-invoicing to enhance transparency, minimize fraud, and simplify tax reporting.

Yet, to a large number of companies especially the ones in Riyadh and other big cities, one of the greatest problems is the discrepancy between Simplified and Standard e-invoices. The selection of a format is critical in terms of compliance and efficiency of its operation. This blog will discuss both the types of e-invoices, the use case of each of these, and which one is best suited to your business.

Understanding E-Invoicing in Saudi Arabia

Phase 1 of e-invoicing by ZATCA was already deployed in December 2021 and obliges businesses to abandon paper invoices and use digital ones. The second phase (or the so-called Integration Phase) started to be gradually rolled out since January 2023. Businesses must now have their invoicing systems connected to the platform of ZATCA to report in real-time or near-real-time.

Such a digital transformation has led to the necessity of business entities to make a distinction that is concrete between the two main categories of invoices that exist according to ZATCA:

·         Ordinary Tax Invoices

·         Simple Tax Invoices

Both forms satisfy the requirements of E-invoicing in Saudi Arabia, and their application varies depending on the transaction, as well as the customer type.

What is Standard Tax Invoice?

A Standard Tax Invoice would be mainly used in B2B (business-to-business) transaction in which the buyer is a VAT registered person and he/she requires to claim input tax credit. These invoices are detailed and are exposed to stricter compliance regulations.

Important Characteristics of Standard Invoices:

·         B2B transactions require it to be mandatory

·         Should have VAT registration number of buyer

·         ZATCA clearance must be on a real-time basis

·         The e-invoices are issued by compliant e-invoicing software

·         It has to be signed electronically and bear a QR code

·         Submitted through integration to ZATCA at Phase 2

The standard invoices are more elaborate and are necessary in claiming tax credit and therefore are required in medium and large companies with registered VAT customers.

What is a Simplified Tax Invoice?

The Simplified Tax Invoice is meant to be used in B2C (business to consumer) sales with the buyer who is not registered as VAT and does not require a tax credit. Such invoices are common in retail stores, restaurants or service businesses where the transactions are fast and highly frequent.

Key Features of Simplified Invoices:

·         A B2C sales design

·         VAT number of the buyer is not included

·         Have to report to ZATCA in 24 hours (not real-time)

·         Need QR code

·         The point of sale (POS) or through e-invoicing software

The simplified invoices can be issued and handled easily and thus are best suited in small business firms and consumer-facing operations.

Selecting the Best E-Invoicing Software

With the technicalities of E-invoicing in Saudi Arabia, the software solution businesses will adopt should take into consideration one that supports:

·         Simplified and Standard dual invoicing

·         Direct compatibility with the portal of ZATCA

·         Real time clearance and archiving

·         Field customization of invoices

·         Support of Arabic and English languages

·         Bulk invoice creation on high-volume businesses

Leading vendors usually provide local support in Riyadh and are already vetted by ZATCA, which means they are fully compliant with regulations since the first day.

Conclusion

As a retailer, a wholesaler, or a service provider, it is important to know the difference between Simplified and Standard Tax Invoices to remain compliant with E-invoicing in Saudi Arabia. In the case of Riyadh-based businesses, where tax inspection and digitalization are more intense, this can be the distinction between successful business operations and regulatory fines.

With the current world of E-invoicing in Riyadh and other parts of the world, being compliant is an important aspect but efficiency, accuracy, and scalability is what will keep your business on top.