What is a tax invoice?
Published
A tax invoice is the statutory document evidencing a supply subject to VAT. Its function is not only to request payment - it is the document on which the buyer's right to deduct input VAT rests, which is why a defective invoice damages your customer before it damages you.
The two types
| Standard tax invoice | Simplified tax invoice | |
|---|---|---|
| Used for | Business and government (B2B / B2G) | End consumers (B2C) |
| Buyer details | Full, including VAT number if registered | Abbreviated |
| QR code | Per applicable requirements | Mandatory |
| Enables buyer deduction | Yes | Not ordinarily |
Core mandatory fields
- Supplier name, address, and VAT registration number
- Buyer details, and VAT number if registered
- Invoice issue date, and supply date where different
- A unique sequential invoice number
- Description of goods or services, quantity, and unit price
- The taxable amount excluding tax, per line
- The VAT rate applied, per line
- The VAT amount, shown separately
- Total payable including VAT
Language: Arabic is mandatory. A bilingual invoice (Arabic plus another language) is permitted, but omitting Arabic is not.
The standard rate is 15% on taxable supplies, in effect since July 2020.
A worked invoice
Al-Waha invoicing a registered customer:
| Line | Qty | Unit price | Net | VAT 15% | Total |
|---|---|---|---|---|---|
| Executive office chair | 20 | 1,200 | 24,000 | 3,600 | 27,600 |
| Meeting table | 2 | 3,000 | 6,000 | 900 | 6,900 |
| Total | 30,000 | 4,500 | 34,500 |
This invoice is the source document for the entry on the journal entry page: receivables 34,500 debit, sales 30,000 credit, output VAT 4,500 credit.
Phase 1 and Phase 2
Phase 1 (generation and storage) began 4 December 2021: invoices generated and stored electronically through a compliant system, with the mandatory fields, and a QR code required on simplified invoices.
Phase 2 (integration) began progressively from 1 January 2023 in waves based on revenue size. It requires the invoicing system to connect directly to the Fatoora platform, with invoices issued in XML or PDF/A-3 with embedded XML, carrying a unique identifier, cryptographic stamp, digital signature, and sequential numbering.
Your wave is determined by your taxable revenue in the reference years. Waves have continued to extend to progressively smaller revenue bands, and the applicable wave and its date must be verified directly with ZATCA.
Why a defective invoice is a problem
| Defect | Effect |
|---|---|
| Wrong or missing VAT number | The customer may lose the right to deduct input VAT |
| Non-sequential or duplicate numbering | A breach of numbering requirements and a gap in the audit trail |
| VAT not shown separately | The invoice is not valid as a deduction document |
| Arabic missing | A breach of the language requirement |
| Non-compliant format under Phase 2 | The invoice may not be accepted at all |
Frequently asked questions
When should the invoice be issued?
At the point of supply, within the statutory window. Delay affects which tax period the tax falls into.
Can I edit an issued invoice?
It is neither edited nor deleted. Correction is made through a credit or debit note linked to the original invoice.
What is the difference between an invoice and a quotation?
A quotation is a non-binding proposal that creates neither revenue nor tax. An invoice is a statutory document that creates both.
Do I need a tax invoice for every transaction?
Every taxable supply requires a tax invoice of the appropriate type - standard or simplified, depending on the customer and the nature of the transaction.