Saudi Arabia announces eighth wave of Phase 2 e-invoicing integration

Executive summary

On 18 August 2023, the Saudi Arabia Zakat, Tax and Customs Authority (ZATCA) announced on its website that taxpayers resident in Saudi Arabia, with a taxable turnover exceeding 40m Saudi Riyal (SAR40m) during calendar year 2021 or 2022, will fall within the eighth wave of Phase 2 e-invoicing integration and should comply with the Phase 2 requirements. The ZATCA will notify the impacted taxpayers in preparation for linking and integrating their electronic invoicing systems with the ZATCA's e-invoicing platform (Fatoora).

Further, the ZATCA Governor has issued Decision No. 3930 dated 01/22/1445 AH, which was published in the Official Gazette on 18 August 2023 and mentions that the taxpayers coming under the eighth wave should comply with the Phase 2 e-invoicing requirements between 1 March 2024 and 30 June 2024, inclusive of both dates.

Detailed discussion

Background

On 4 December 2020, the ZATCA introduced e-invoicing in Saudi Arabia, releasing the E-Invoicing Regulation. E-invoicing in Saudi Arabia is being implemented in two phases:

• Phase 1, effective from 4 December 2021, mandates generation of e-invoices and e-notes, including related processing and record keeping.
• Phase 2, effective from 1 January 2023, mandates integration of a taxpayer's system with the ZATCA, along with the transmission of e-invoices and e-notes to the ZATCA. This phase is being implemented in waves. The criteria and timelines for the first seven waves, which were previously announced, are:

The ZATCA has already notified resident businesses falling under the above waves to comply with Phase 2 of e-invoicing as per their applicable timelines.

ZATCA announcement

Based on the latest announcements, the ZATCA will begin notifying taxpayers who fall within the eighth wave of Phase 2 e-invoicing integration, to go live within the period between 1 March 2024 and 30 June 2024, inclusive of both dates.

Implications

Resident businesses should comply with the obligations of Phase 2 e-invoicing integration based on the ZATCA notification and undertake the relevant steps in making the required changes in their information technology systems. Taxpayers should comply with the Phase 2 requirements in line with the e-invoicing regulation to preclude possible penalties.

Taxpayers who do not fall within the first eight waves of Phase 2 e-invoicing integration should monitor future announcements from the ZATCA on the integration timeline period applicable to them in subsequent waves.

For additional information with respect to this Alert, please contact the following:

EY Consulting LLC, Dubai

• Aamer Bhatti, MENA Indirect Tax Leader

Ernst & Young Professional Services (Professional LLC), Riyadh

• Mohammed Bilal Akram, Indirect Tax
• Peter Dylewski, Indirect Tax

Ernst & Young Professional Services (Professional LLC), Jeddah

• Mohsin Rehmani, Indirect Tax

Ernst & Young Professional Services (Professional LLC), Al Khobar

• Sanjeev Fernandez, Saudi Arabia Indirect Tax Leader

Ernst & Young — Middle East, Bahrain

• Ali Almahroos, Indirect Tax
• Adrian Smith, Indirect Tax

Ernst & Young LLP (United States), Middle East Tax Desk, New York

• Asmaa Ali

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.