As we know, The second phase of e-invoicing implementation in Saudi Arabia is called ZATCA Phase 2. So, in comparison to the first phase where businesses only needed to create and store electronic invoices, this Phase 2 needs a direct link between your billing system and the ZATCA (Fatoora) portal.
This implies that all invoices have to be transmitted to the system of the government to be validated or reported in real time. Businesses that need to remain compliant should implement erp software riyadh which is compatible with these technical connections.
How API Connection Works
Your office is linked with ZATCA via an API (Application Programming Interface). This is a technical bridge that enables two computer systems to communicate with each other. Your software automatically shares that kind of information with the government when you make a bill.
Steps to Connect Your System
To have your software ready to support zatca approved e-invoicing in ksa, you typically have to follow the following technical steps:
- Registration of the Device: You have to enter the ZATCA portal and register all the devices or EGS (Electronic Invoice Generation Suite) that are in use in your business.
- Requesting a Digital Certificate: Your system sends a request for a security certificate, which serves as your digital signature.
- Synchronizing the Keys: The portal offers a secret key, which your software stores. This is the key which is used to demonstrate that all the invoices which were sent were dispatched by your company.
- Connection Testing: You would do a set of test invoices in a sandbox environment to ensure the data format is correct and before going live.
Security Requirement and Data Hashing
Phase 2 comes with severe regulations concerning data integrity. Each invoice should include a Hash, a special digital fingerprint of the data on the invoice. The hash will not match with any subsequent change on the invoice, thus warning the authorities about the change.
The other requirement is that of invoice chaining. This implies that one invoice has a bit of data from the other. This will not allow businesses to erase documents or alter the order of the sales. A reliable erp software riyadh will make sure that such codes are automatically generated to keep your accounting accurate and unaltered.
Working with XML and UBL 2.1 Standards
All invoices submitted to ZATCA must be in a certain file format known as XML, based on the UBL 2.1 standard. It is a systematized form of organizing information in such a manner that the computers used by the government can read the information at any time without human intervention.
The software, like the Sowaan ERP, enters with the details you key in your screen like the name of the customer, price of the item and the amount of VAT among others, and it transforms into this XML code in the background. When any of the required information is not provided the system will prevent the issue of issuing an invoice and will help you avoid fines due to improper documentation.
Live Reporting and Clearance
Phase 2 invoices are processed in two key ways. In the case of B2B sales, the system is based on the Clearance model. This implies that ZATCA has to authorize the invoice, which you may only then afford to dispatch to your customer. In B2C sales as in retail stores, the Reporting model applies. Here, the customer is issued with the receipt on the spot and the information is sent to ZATCA in 24 hours.
When zatca approves e-invoicing in ksa, these various workflows will be automatically managed. This saves your accounting team a lot of manual work and the records of your taxes will always be the same as those of the government.
Benefits of Using Cloud-Based ERP Systems
In Riyadh, many companies are shifting to cloud-based software, to handle these updates. Cloud systems are simpler to maintain as the software vendor takes care of all the technical updates needed by ZATCA. When the government modifies its technical specifications, you do not need to install extra hardware, or to update your servers manually.
Conclusion
Phase 2 of ZATCA is an obligatory change in technology among all Saudi Arabian businesses. When you combine your billing system with the government portal, you are able to be fast and accurate in your tax reporting.
Selecting a system to automate the API connection, XML formatting and digital signing will assist you in keeping up with compliance, without interfering with your daily business activities.