How Businesses in Saudi Arabia Can Prepare for ZATCA’s Phase 2 E-Invoicing Mandate?

The world is busy embracing digital transformation. Governments and businesses across the globe are embracing electronic transactions and invoicing to ensure transparency and tax management. Saudi Arabia, a leading business hub in the world is also moving towards digital transformation by introducing e-invoicing to modernize and streamline its tax processes. The Zakat, Tax, and Customs Authority (ZATCA) in Saudi Arabia has introduced a phased approach to adopting e-invoicing. ZATCA makes it mandatory for businesses to eliminate manual and paper-based invoicing systems and transition to electronic invoicing systems. Phase one of ZATCA e-invoicing is already over and the Saudi Administration is set to introduce ZATCA e-invoicing Phase 2.

E-invoicing is part of the Kingdom’s Vision 2030 initiative. This initiative aims to improve economic transparency. Besides, this will also combat tax evasion. With the introduction of ZATCA e-invoicing, businesses in KSA should comply with electronic systems for the generation and exchange of invoices.

Two Phases of E-Invoicing in Saudi Arabia

The ZATCA e-invoicing initiative has currently reached its second phase. 

Phase 1: Generation Phase

ZATCA Phase 1, started off on December 4, 2021. In this phase, businesses were directed to generate electronic invoices and implement compliant e-invoicing solutions. The aim was to issue, store and process electronic invoices and credit or debit notes. The key focus of Phase 1 of ZATCA was to digitize the invoicing process. Furthermore, the e-invoice contains buyer details, VAT numbers, and invoice total along with other details. 

Phase 2: Integration Phase  

ZATCA Phase 2 focuses on integrating business e-invoicing systems with ZATCA’s platform. At this phase, businesses need to transmit invoices to the ZATCA platform in real-time electronically. A major requirement in this phase is that e-invoicing software comply with specific security and technical standards. According to the mandate, the software should comply with cryptographic stamps, unique invoice identifiers, and QR codes. In brief, Phase 2 represents a more stringent stage of compliance. 

Implementation of Phase 2 of ZATCA E-Invoicing – Different Stages 

Phase 2 of ZATCA’s e-invoicing is planned in multiple stages.

 The first task for businesses is to integrate their e-invoicing system integration with the ZATCA platform. This aims to promote real-time reporting of invoices.

Use of Cryptographic Stamps: At this phase, e-invoices must contain cryptographic stamps to ensure the authenticity and security of the invoices.

Unique Invoice Identifiers: Ensure the use of a unique identifier to enable tracking and verification.

Use of QR Codes: QR codes are essential on all invoices. This ensures quick access to the invoice data.

Scope and Challenges of ZATCA Phase 2 E-Invoicing

ZATCA’s Phase 2 e-invoicing will benefit businesses in Saudi Arabia by enhancing operational efficiency to ensure regulatory compliance.

Increased Compliance Requirements

The first and foremost impact of Phase 2 is the increased regulatory requirements on businesses. Phase 2 of ZATCA e-invoicing makes it mandatory for companies to comply with stringent technical requirements, including the use of cryptographic stamps, and real-time reporting to ZATCA. Any failure to comply with the regulations may lead to penalties, fines, or disruptions in business operations.

The most significant goal of ZATCA’s e-invoicing initiative is to ensure transparency in financial transactions.

Enhanced Transparency
The system plans to integrate invoicing systems with the government’s tax platform. This will support the authorities to have real-time access to transaction data and prevent tax fraud.
Operational Efficiency
Once you introduce E-invoicing you can reduce manual data entry and paper invoices. Moreover, it helps you to store invoices digitally. Improved accuracy and reduced human error are also some of the advantages of this system.
Data Security and Invoice Integrity
The use of cryptographic stamps and unique invoice identifiers enhances data security. Besides, stamps and invoice identifiers prevent the manipulation or tampering of invoices promising invoice integrity. Financial transactions become more authentic and prevent fraud with e-invoicing.
Technological Upgrade and Investment
The businesses in KSA may need to invest additional amounts for introducing new e-invoicing apps with the introduction of ZATCA’s Phase 2. This may impose upfront costs for businesses. However, this will be beneficial in the long run as it saves money and ensures transparency in transactions.

How Odoo Can Help with ZATCA Phase 2?
A well-designed business management solution, Odoo ERP is the best partner for businesses in Saudi Arabia to comply with ZATCA’s Phase 2 e-invoicing mandate. Odoo, being a highly customizable and modular ERP, allows businesses to integrate various features that align with ZATCA’s e-invoicing requirements.

ERP Integration
Odoo is a highly flexible ERP tool that allows integration with the ZATCA platform. This integration helps businesses to submit e-invoices in real time and ensure a secure and productive workflow. Odoo modules also support invoice generation, cryptographic stamps, and QR code generation.

Automation of Invoicing
Odoo enables the automation of invoicing processes. Using Odoo, businesses in KSA can generate invoices, store them securely and recover them when necessary. This eliminates manual intervention and errors.

Real-Time Data Synchronization
As Odoo allows real-time data synchronization, all invoicing data gets automatically transmitted to the ZATCA platform instantaneously. This avoids the risk of non-compliance and supports auditing.

Scalability
A scalable ERP solution suitable for businesses of all sizes and shapes, Odoo is suitable for SMEs to large enterprises. Odoo promises smooth and secure invoicing for businesses of varying magnitude.

How IBITS Can Help with Phase 2 of ZATCA E-Invoicing?
IBITS, a leader in Odoo ERP implementation, is the best Odoo implementation partner in Saudi Arabia. By joining hands with IBITS, businesses can set aside all complexities and worries and wait for hassle-free integration of Odoo with the ZATCA platform. This will also eliminate the complexities of ZATCA’s Phase 2 e-invoicing mandate. IBITS has a team of experienced Odoo professionals who can provide customized solutions.
We have a team of Odoo experts who have been closely working with various industries in Saudi Arabia. The team will help businesses assess their current invoicing systems, identify gaps, and implement tailored Odoo solutions.
Contact IBITS today to ensure your business is ready for ZATCA Phase 2.