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

Executive summary

On 16 June 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 SAR70m during calendar year 2021 or 2022 will fall within the sixth 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 (Fatoorah).

Further, the ZATCA Governor has issued Decision No. (69877) dated 24/11/1444 AH, which was published in the Official Gazette on 16 June 2023, and mentions that the taxpayers coming under the sixth wave should comply with the Phase 2 e-invoicing requirements between 1 January 2024 and 30 April 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 five waves, which were previously announced, are:

* See EY Global Tax Alert, Saudi Arabia releases final e-invoicing regulations for Phase 2, dated 24 June 2022.

** See EY Global Tax Alert, Saudi Arabia announces second wave of Phase 2 e-invoicing integration, dated 28 December 2022.

*** See EY Global Tax Alert, Saudi Arabia announces third wave of Phase 2 e-invoicing integration, dated 24 March 2023.

**** See EY Global Tax Alert, Saudi Arabia announces fourth wave of Phase 2 e-invoicing integration, dated 2 May 2023.

***** See EY Global Tax Alert, Saudi Arabia announces fifth wave of Phase 2 e-invoicing integration, dated 30 May 2023.

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

ZATCA announcement

Based on the latest announcements, the ZATCA will begin notifying taxpayers who fall within the sixth wave of Phase 2 e-invoicing integration to go live within the period between 1 January 2024 and 30 April 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 the possible imposition of penalties.

Taxpayers who do not fall within the first six 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

• Adrian Smith, Indirect Tax
• 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

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.