The Core Rule — One Test, Two Invoice Types
A Tax Invoice is issued for supplies to VAT-registered buyers (B2B and B2G). A Simplified Tax Invoice is issued for supplies to consumers and non-registered buyers (B2C). The classification flows from the nature of the transaction — not preference — and determines the Phase 2 compliance model: clearance before sharing (Tax Invoice) or reporting within 24 hours after sharing (Simplified Tax Invoice).
| Feature | Tax Invoice | Simplified Tax Invoice |
|---|---|---|
| Issued to | VAT-registered buyers, government entities | Individuals, consumers, non-VAT-registered buyers |
| Phase 2 compliance model | Clearance — FATOORA must stamp before sharing | Reporting — share immediately, report within 24 hours |
| Buyer VAT number required | Yes — mandatory | No |
| Buyer name and address required | Yes — mandatory | No |
| Supports buyer input tax deduction | Yes | No |
| B2B supplies below SAR 1,000 | Seller may optionally issue simplified — but buyer can request Tax Invoice | Permitted — buyer loses input tax recovery |
Issuing a Simplified Tax Invoice to a VAT-registered business customer means that buyer cannot deduct input VAT. If they claim it anyway, they face a VAT adjustment on audit. The problem compounds over months before anyone notices. Classification must be correct at system configuration stage — not fixed retrospectively.
Mandatory Field Differences — Phase 2
The fields where the two types diverge most significantly relate to buyer identification. Phase 2 adds additional fields beyond Phase 1 — including UUID, invoice issue time (HH:mm:ss), cryptographic stamp, and Previous Invoice Hash — to both types.
| Field | Tax Invoice | Simplified Tax Invoice |
|---|---|---|
| Buyer name | Mandatory | Not required |
| Buyer VAT registration number | Mandatory | Not required |
| Buyer address (street, building, city) | Mandatory | Not required |
| Invoice issue time (HH:mm:ss) | Mandatory | Mandatory |
| UUID | Mandatory | Mandatory |
| Cryptographic stamp (EGS-applied) | Mandatory | Mandatory |
| ZATCA cryptographic stamp (after clearance) | Mandatory — applied by FATOORA | Not applicable (reporting model) |
| 9-field TLV QR code | Mandatory | Mandatory |
| Exemption reason code (zero-rated / exempt) | Mandatory where applicable | Mandatory where applicable |
Buyer address is mandatory on Tax Invoices in Phase 2: street address, building number, and city. Many businesses never collected or stored structured buyer address data. Collecting this from existing customers before go-live is an operational task that must be planned — not assumed. Discovery of this gap six weeks before a wave deadline is a very different problem from six months out.
Worked Example — Two Invoice Types, One Business
Al Noor Medical Supplies Co., Jeddah, distributes to hospitals (VAT-registered, B2B) and operates a retail pharmacy for walk-in patients (B2C). For every hospital delivery, Al Noor issues a Tax Invoice — submitted for clearance before the delivery is dispatched. For every over-the-counter pharmacy sale, Al Noor issues a Simplified Tax Invoice — stamped and printed at the cash register, then reported to FATOORA in automated batches within 24 hours.
Al Noor’s EGS must be configured to handle both workflows. The system must prompt for a buyer VAT number at transaction initiation — if one is provided, the transaction routes to the Tax Invoice workflow. If not, it routes to the Simplified Invoice workflow. Getting this classification right at configuration stage is everything; getting it wrong means 18 months of invoices requiring correction.
Credit and Debit Notes — They Follow the Original Invoice
Credit notes and debit notes must follow the same classification as the invoice they are issued against. A credit note against a Tax Invoice is a Tax Invoice credit note — it must go through clearance. A credit note against a Simplified Tax Invoice follows the reporting model.
Both types must reference the original invoice. The Invoice Reference Number of the original must appear in the reference fields. A credit note without a valid reference fails FATOORA validation. Where a single credit note covers multiple original invoices, a range reference is permitted.
Credit note handling is the most frequently misconfigured element of Phase 2 implementations. Systems that default all credit notes to the simplified reporting workflow — regardless of original invoice type — will pass Tax Invoice credit notes through reporting when they should be cleared. Test credit notes against both invoice types explicitly during sandbox testing. It will not surface in standard testing unless you specifically test for it.
Edge Cases
Supplies below SAR 1,000 to a registered business buyer
For B2B supplies below SAR 1,000, the seller has the option to issue a Simplified Tax Invoice. The buyer accepts this — unless they need to claim input tax, in which case they can request a Tax Invoice. The rule permits — it does not force. A business that always issues Tax Invoices for B2B transactions, including low-value sales, is fully compliant.
Businesses serving both B2B and B2C customers
Both workflows must be configured in the EGS. Classification should be driven by whether the buyer provides a VAT registration number — and your system should prompt for this at transaction initiation, not as an afterthought.
Self-billed invoices
In B2B scenarios, a buyer may issue an invoice on behalf of the supplier (self-billing). Self-billed invoices are only applicable in B2B contexts — they are always Tax Invoices subject to clearance. The invoice must carry a self-billing flag, but the format and compliance model are identical to a standard Tax Invoice.
Frequently Asked Questions
- Invoice type is determined by buyer status — VAT-registered business gets a Tax Invoice; consumer or unregistered buyer gets a Simplified Tax Invoice. This is a tax rule, not a design preference.
- A Simplified Tax Invoice does not support a business buyer’s input tax deduction. Issuing simplified invoices to registered business customers silently invalidates their VAT deductions — a problem that compounds over months.
- Credit notes follow the type of the original invoice. Configure this explicitly in your EGS and test it — it does not default correctly without specific setup.
- For B2B transactions below SAR 1,000, sellers may issue simplified invoices — but buyers can request a Tax Invoice to support their input tax claim.
- Getting invoice type classification right at system configuration costs a few hours. Fixing it retrospectively — reissuing invoices, handling VAT adjustments, explaining to customers — costs significantly more.
Also in this series
This article reflects ZATCA’s E-Invoicing Regulation (December 2020) and the Controls, Requirements, Technical Specifications and Procedural Rules Resolution (May 2023). For informational purposes only — not legal or tax advice. Confirm with zatca.gov.sa or a qualified Saudi tax advisor. dariba.co is an independent platform.