ZATCA Compliance Observation for Foreign Customer Address – Is CityName Expected to Contain Only the City Name?

Clearance and Reporting
1

Hi everyone,

We recently received a ZATCA compliance observation stating:

  1. Incorrect use of Tax Exemption Exception Reason Code.
  2. Incorrect supplier or customer address information.

After reviewing the affected invoices, we noticed that multiple export invoices use the same tax configuration:

  • Tax Category: Z (Zero Rated)
  • Tax Exemption Reason Code: VATEX-SA-32
  • Tax Exemption Reason: Export of goods

Some invoices using this exact configuration have not raised any observations, which makes us suspect that the issue may be related to the customer address rather than the tax code.

For example, one of the affected invoices contains:

<cac:PostalAddress>
    <cbc:CitySubdivisionName>SLB</cbc:CitySubdivisionName>
    <cbc:CityName>Abu Dhabi Utd.Arab Emir</cbc:CityName>
    <cbc:PostalZone>4020</cbc:PostalZone>
    <cac:Country>
        <cbc:IdentificationCode>AE</cbc:IdentificationCode>
    </cac:Country>
</cac:PostalAddress>

Whereas another export invoice that did not receive any observation contains:

<cac:PostalAddress>
    <cbc:CitySubdivisionName>Manama</cbc:CitySubdivisionName>
    <cbc:CityName>Manama</cbc:CityName>
    <cac:Country>
        <cbc:IdentificationCode>BH</cbc:IdentificationCode>
    </cac:Country>
</cac:PostalAddress>

My question is:

For foreign customers, does ZATCA expect cbc:CityName to contain only the city name (e.g. Abu Dhabi) while the country is provided exclusively through cac:Country/IdentificationCode?

Could values such as:

<cbc:CityName>Abu Dhabi Utd.Arab Emir</cbc:CityName>

or

<cbc:CitySubdivisionName>SLB</cbc:CitySubdivisionName>

trigger the “incorrect address information” compliance observation?

Has anyone encountered a similar observation for foreign customer addresses?

Thanks.