Two types of invoice, and one cannot replace the other
The VAT system in the Kingdom defines two main types of invoice: the tax invoice (Standard Tax Invoice), usually issued when selling to a business or government entity (B2B / B2G), and the simplified tax invoice (Simplified Tax Invoice), usually issued when selling to an individual consumer (B2C). Choosing the right type is not a formality; it determines the data required, how the invoice is handled with the FATOORA platform, and whether the buyer can deduct input VAT.
Clearance vs. Reporting in Phase 2
After integration with the FATOORA platform, each type follows a different path:
- Tax invoice – Clearance: The invoice is sent to the platform, which validates and clears it, and it is delivered to the customer only after it is cleared. If it is rejected, it is not valid and must not be delivered.
- Simplified tax invoice – Reporting: It is delivered to the customer immediately at the time of sale, and then the technical solution reports it to the platform within 24 hours of issue.
The reason is that sales to individuals happen quickly at the point of sale and cannot wait, while the buyer relies on a business invoice to deduct VAT, so it needs to be validated in advance.
Comparison table
| Item | Tax invoice | Simplified tax invoice |
|---|---|---|
| Typical customer | Business or government entity | Individual consumer |
| Phase 2 mechanism | Clearance before delivery | Reporting within 24 hours |
| Buyer details | Required: name, address and VAT number if registered | Usually not required |
| Form delivered to the customer | Cleared XML; a human-readable copy can be provided | Printed or electronic copy with a QR code |
| QR code | Shown on the human-readable copy | Mandatory on the invoice |
Generally required fields
Both invoices share basic fields such as: issue date, a unique sequential number, the seller's name, address and VAT number, a description of the goods or services, the taxable amount, the VAT rate, the VAT amount, and the total including VAT. The tax invoice adds detailed buyer information, and a breakdown of each line with unit price, quantity, discount, VAT rate and VAT amount.
Example from a spare parts shop:
1) The shop sold parts worth 4,000 SAR before VAT to a VAT-registered repair workshop. The right invoice: tax invoice.
- Taxable amount: 4,000 SAR
- VAT 15%: 600 SAR
- Total: 4,600 SAR
The invoice is sent to the platform, cleared, and then delivered to the workshop, and the workshop can deduct 600 SAR as input VAT.
2) An individual bought engine oil at a displayed price of 230 SAR including VAT. The right invoice: simplified.
- Amount before VAT: 230 ÷ 1.15 = 200 SAR
- VAT: 30 SAR
It is delivered to the customer immediately, and the system reports it within 24 hours.
Common mistakes
- Issuing a simplified tax invoice to a business customer who wants to deduct VAT; the customer comes back asking for a correct invoice, and the seller has to cancel the first one with a credit note and issue a new invoice.
- A wrong VAT number for the buyer; this is one of the most common reasons tax invoices are rejected in Phase 2.
- Delivering the tax invoice before it is cleared; this breaches the Clearance mechanism.
- Late Reporting of simplified tax invoices because the point of sale lost internet for a long period without anyone following up; so monitor the queue of unreported invoices daily.
Special cases that need attention
Selling to a business not registered for VAT: Some small business customers are not registered. In this case the buyer has no VAT number, but it is better to issue a tax invoice showing its name, address and other identification details such as the commercial registration, because the relationship is between two businesses and this keeps a clear record of the transaction.
An individual customer asks for an invoice in their name: Writing an individual's name on the invoice does not necessarily turn it into a tax invoice; the criterion is the nature of the customer and their need to deduct VAT, not simply writing the name.
Points of sale in restaurants and pharmacies: Most of their sales are to individuals, so simplified tax invoices dominate. But when supplying a company that orders meals for its employees, or a hospital buying medicines, the cashier must be able to issue a tax invoice from the same point of sale, and know when to do so.
VAT-inclusive prices: When the price is shown including VAT, calculate the taxable amount by dividing the price by 1.15, and the VAT as the difference. For example, a price of 92 SAR including VAT means 80 SAR before VAT and 12 SAR VAT. Watch for rounding differences when there are many items, and check whether your solution rounds at line level or at total level.