Product markup for electronic invoicing

Coding products is an essential step to ensure compliance with Saudi Arabia's e-invoicing requirements. This coding aims to improve data accuracy, facilitate tax audits, and ensure integration with Zakat, Tax, and Customs Authority (ZATCA) systems. In this article, we will review the concept of product coding, the standards adopted by ZATCA, and the practical steps to apply it in a simplified way for a non-niche audience.

What is product coding for electronic invoicing?

Product coding is the process of assigning unique identifiers to goods and services listed in electronic invoices, based on specific criteria. This coding helps standardize data, reduce errors, and improve tax and inventory management. In Saudi Arabia,  the Global Commercial Commodity Number (GTIN)  standard issued by GS1  International is adopted, enabling accurate tracking of products across the supply chain and enhancing financial reporting.

Product Coding Standards in Saudi Arabia

To comply with e-invoicing requirements, the Zakat, Tax, and Customs Authority (ZATCA)  has defined the following standards for product coding:

1.  Universal Commercial Item Number (GTIN): An international system that uses bar codes that facilitate the seamless exchange of data.

2.  Internal coding system: For companies that do not have a  GTIN, they can develop their own coding system, provided that each product has a unique identifier.

3.  Integration with Fatora gateway: Codes must be electronically readable to comply with the e-invoicing requirements set by ZATCA.

How to apply product markup for e-invoicing

To properly implement product coding and ensure compliance, it is advisable to follow these steps:

1.  Prepare a detailed inventory:

Start by creating a comprehensive list of all products, including product names, categories, pricing, and vendor details. This structured inventory will help streamline the coding process and avoid duplication.

2.  Choosing the right coding system:

Decide whether to use a GTIN system or develop an internal coding system. If your company deals with or plans to deal with international suppliers, GTIN  adoption ensures compliance with global standards.

3.  Assign unique identifiers:

Give each product a token according to the chosen system. These codes should be stored in a central database for easy access and updating.

4.  Integrate codes into the billing system:

Make sure that the coding system is integrated into your electronic invoicing and accounting software. For companies that use enterprise resource planning (  ERP)  systems, coding should be linked to sales and inventory processes. We at Digital Business Company offer you the advanced accounting program Digital Pro.

5.  System testing for compliance:

Before full execution, verify that invoices contain the correct product codes. Automated audit tools can help detect and correct errors before invoices are sent.

6.  Team training on product coding:

Provide training to relevant staff to ensure accurate data entry and avoid manual errors that may affect compliance.

7.  Constantly updating product codes:

Review product codes and update them regularly to comply with the latest requirements of  ZATCA, especially when adding new products or modifying existing products.

Common challenges and how to overcome them

Companies may face some challenges when applying product coding, most notably:

1.  Moving old inventory: A step-by-step approach can help gradually integrate the new system, reducing disruptions in day-to-day operations.

2.  Manage large product catalogs: Using specialized software can simplify the process of managing large and complex product catalogs.

3.  Ensure accuracy: Automated verification tools can help prevent errors and ensure data accuracy.

 

Product coding is an essential part of the electronic invoicing process in Saudi Arabia. By following the above steps and complying with the standards set by ZATCA, companies can improve the efficiency of their processes, ensure regulatory compliance, and deliver a better customer experience. Investing in an effective coding system is not only a legal requirement, it is also a step towards improving internal processes and increasing market competitiveness.