Cross-Border Transactions and E-Invoicing: What Saudi Exporters Should Know

As Saudi Arabia advances its digital transformation agenda, businesses are being impacted across every sector — and cross-border trade is no exception. One of the most significant regulatory changes is the rollout of e-invoicing in Saudi Arabia, led by the Zakat, Tax and Customs Authority (ZATCA).

While the focus of e-invoicing in its early stages has primarily been on domestic transactions, exporters and businesses involved in cross-border trade also need to understand how this system applies to them — especially with the introduction of Phase 2 (Integration Phase) of e-invoicing.

In this article, we’ll break down how cross-border transactions are handled under ZATCA’s e-invoicing framework, what Saudi exporters need to comply with, and how to stay ahead of potential challenges.

What Are Intra-border Transactions?

Cross-border transactions are the wondering matter in reference to any commercial trade that involves the sale or purchase of goods or the services of other parties not in Saudi Arabia. These may comprise:

• Exports: It is the sale of goods or services produced in Saudi Arabia to foreign customers
• Imports: Items or products bought by Saudi firms with international providers

Although the taxation of exports and imports may be different, e.g. exports are typically zero-rated in terms of VAT, they are all equally applicable to the e-invoicing requirements.

Are E-Invoices Issued by Exporters?

Yes, the exporters in Saudi Arabia must submit e-invoices in cross-border (export) transactions as regulated by ZATCA specific mechanism e-invoicing. However, several significant details exist between how such invoices are treated in comparison with domestic invoices.
Some Important Export E-Invoices Requirements:

• Export invoices should be issued through an export invoice that needs to be a ZATCA-compliant e-invoicing solution.
• All these invoices should be written in XML where all its required fields (such as buyer information, product description, VAT and so on) should be given.
• Even though exports are zero-rated in respect to the VAT, the VAT still must be present on the invoice with the breakdown of the VAT therein showing 0% in the application.
• Export invoices are not to be cleared at ZATCA but, unlike B2B invoices on the local level, they must be reported to ZATCA.

The QR code must be added to the invoices and they should be able to meet the technical and security issues that would require digital signature and unique identifiers (UUID) according to the requirements of the ZATCA.

E-Invoicing Phase 2 ZATCA

The implementation of ZATCA Phase 2 means that Saudi companies must connect their systems to that of ZATCA, the FATOORA platform. This impacts receipt and storage of invoices including export invoices.

In the export transactions, businesses are supposed to:

• Send export invoices, in real or near-real time, to ZATCA via API integration.
• Make sure that all invoices are according to the new technical format such as use of XML and digital signature.
• Retain a copy of invoice as part of audit and compliance.
• Export invoices are exempt of clearance; however, the real-time or some batch reporting is to be considered obligatory, which implies that the business is to be integrated technically.

Problems of Exporters

The following issues are some of the problems that Saudi exporters may encounter during the switch to e-invoicing to make cross border transactions:

• Technical Complexity: Making sure that the internal ERP or invoicing systems that your company uses can compose and send the XML invoices according to the standards of ZATCA.
• Zero-Rated VAT treatment : There should be proper formatting of the invoices to indicate VAT as 0 per cent and yet they still fall under the reporting structuring.
• Language & Currency Support: The export transactions may have to use invoices in foreign currencies or languages and this must be precisely transferred in the invoice along with XML.
• Customs and Documentation Alignment: Making sure consistency between the paperwork used in customs clearance procedures (commercial invoices, bills of lading, etc.) and e-invoices.

Best Practices on Compliance

In order to remain compliant without receiving any penalty, Saudi exporters are advised to do the following:

• An e-invoicing system should be implemented, which can support export specific functionalities as well as API, and be approved by ZATCA.
• Use the sandbox of ZATCA to test invoices so they may correct any formatting or transmission problems prior to going live.
• Educate the train finance and logistics departments how to use the new structure of invoices, with their transmission components.
• Documentation should be maintained and it should have consistency between e-invoices and other exports documentation.

Speed of implementation can also be reduced by partnering with a local e-invoicing provider who knows Saudi regulations, and export scenarios to create end-to-end and end-to-end compliance.

Final Thoughts

E-invoicing is not only the process of converting paper receipts to electronic data -it is all about transparent and compliant and real-time business reporting to the Government of Saudi Arabia. In the case of exporters, e-invoicing will create a situation where exporters will need to familiarize with the new method of documenting and reporting international sales.

Though the ZATCA designed a systematized process and stated rules, managing e-invoicing when it comes to the cross-border transaction remains a complicated process that needs to be planned; it requires the appropriate tools and consistent tracking of compliance. Once adopted, Saudi exporters that adopt the changes early will be at a better position to compete in a more integrated and controlled global market.