How E-Invoicing Is Changing Retail in Saudi Arabia

The retail sector in Saudi Arabia is experiencing a major digital revolution and one of the greatest factors behind this revolution is the embracing of e-invoicing in Saudi Arabia. As a requirement of the Zakat, Tax and Customs Authority (ZATCA), e-invoicing has become a mandatory requirement to all VAT-registered enterprises, including retailers, varying in size, from supermarket chains to small shops.

Although the first move to electronic invoicing could be regarded as regulatory, the effects are much more far-reaching. E-invoicing is simplifying the operations of retailers, generating customer confidence, and making businesses competitive in a fast-evolving market.

The Regulatory Change: e-Invoicing has Become Mandatory

Saudi government used a rollout approach in e-invoicing:

• Phase 1 (Generation Phase): The first phase started on December 4, 2021 and mandated businesses to create and store their invoices electronically as opposed to paper invoices.
• Phase 2 (Integration Phase): This phase is rolled out in waves beginning January 1, 2023, and direct integration with the ZATCA FATOORA platform is mandatory to exchange the invoices in real-time.

The retailers in Saudi Arabia are now required to use compliant invoicing software that will print invoices in XML format, have security elements such as QR codes, UUIDs and integrate to the point-of-sale (POS) systems.

Efficiency and Accuracy in daily running of the business

Among the most direct advantages of e-invoicing in Saudi Arabia to retailers is the fact that it automates invoicing processes. Electronic systems have replaced the need to manually prepare, print, and file paper invoices because they create invoices within seconds, eliminating human errors and saving time.

Retailers with a large number of transactions, like grocery stores or fashion shops, will especially benefit, as they can see their checkout speed increase, automated VAT calculations and instant delivery of the digital invoice.

Improved Tax Compliance Tax Risk Minimization

Retail industry is very vulnerable to VAT underreporting discrepancies particularly in the businesses that transact a huge number of small transactions on a daily basis. With E-invoicing, every transaction is captured correctly and reported to ZATCA in real-time, and this minimizes the chances of:

• Underreporting sales
• Wrong VAT submissions
• Error in manual accounting Manual accounting errors

Because invoices are automatically checked and saved in digital form, retailers are better prepared and exposed to less compliance penalties. This would inculcate a culture of financial integrity and minimize chances of conflicts when the tax is reviewed.

Higher Customer Confidence and Disclosure

The customers in Saudi Arabia are getting more conscious of their rights and the importance of having the right documentation, particularly in the case of returns, guarantees, and tax refunds. Through e-invoicing in Saudi Arabia, the retailers offer customers with a clear digitally formatted invoice with the following contents:

• Business name (VAT number)
• Failure of the billing information
• Good tax statistics
• QR codes that are simple to scan and check

Such openness creates confidence in consumers and shows the willingness of a retailer to be professional and ethically run its business.

Fit with Retail Technology without Breaks

The e-invoicing systems are built in a manner that they can easily interface with the current POS systems, ERP, and inventory management as well as payment gateways. This enables retailing companies to centralize their data and understand more about the sales trend, consumer behaviour and inventory movement.

Retailers are able to centralize information in order to:

• Track the performance of sales in real-time
• Write good tax reports
• Improved forecasting of inventory would involve

These are insights that are priceless to retail chains that have multiple branches within cities or regions.

Supporting Saudi Arabia’s Digital Vision

The transition to e-invoicing fits into the vision 2030, the strategic plan that aims at diversifying the Kingdom economy and enhancing the digital infrastructure. Retail being one of the sectors, it is a major sector in this transformation.

By implementing e-invoicing in Saudi Arabia, the government is not only streamlining taxation to be more open and transparent but it is also making the retail environment smarter and more connected to the aim of encouraging growth, innovation and investor confidence.

Final Thoughts

In Saudi Arabia, e-invoicing is not about remaining compliant anymore, it is about remaining competitive. By implementing e-invoicing, retailers will be capable of streamlining their activities, enhance customer relations, and financial management.

With technology still transforming the way goods are sold and consumed, e-invoicing will not be an exception in the retail industry of Saudi Arabia.