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June 24, 2022

Saudi Arabia releases final e-invoicing regulations for Phase 2

Executive summary

On 24 June 2022, the Saudi Arabia Zakat, Tax and Customs Authority (ZATCA or Authority) issued the final Controls, Requirements, Technical Specifications and Procedural Rules for Implementing the Provisions of the E-Invoicing Regulation (including the xml implementation standards, e-invoice security features implementation standard and data dictionary) for Phase 2 (Phase 2 Regulations), which would be effective from 1 January 2023.

Phase 2 Regulations will form an important base for taxpayers to complete e-invoicing implementation under Phase 2 which is also called the Integration Phase. Under this phase, the relevant businesses must integrate their systems with the Authority's system in order to obtain a clearance for Tax Invoices (including the corresponding debit and credit notes) and report the transactions for which Simplified Tax Invoices (including the corresponding debit and credit notes) have been issued.

The Integration Phase will be implemented in waves and based on the announcement on the ZATCA portal dated 24 June 2022, resident businesses with a taxable turnover of more than SAR3 billion in the calendar year 2021 are part of the first wave and should comply with the e-invoicing Phase 2 requirements between the period 1 January 2023 to 30 June 2023.

The final Phase 2 Regulations have now crystallized both the operational and technical requirements mandated as part of Phase 2 of the e-invoicing system in Saudi Arabia based on which the impacted businesses should start taking the relevant actions.

Detailed discussion


On 4 December 2020, the ZATCA introduced e-invoicing in Saudi Arabia, through the release of the Electronic Invoicing Regulation, which had been planned to be implemented in the following two phases:

  • Phase 1 was to be effective from 4 December 2021.This phase mandates generation of e-invoices and e-notes, including provisions related to its processing, and record keeping.

  • Phase 2 will be effective from 1 January 2023. This phase mandates integration of the taxpayer’s system with the ZATCA along with transmission of e-invoices and e-notes and sharing them with ZATCA. This will be implemented by the ZATCA notifying the criteria for the resident taxpayers along with the effective date for them, the earliest being 1 January 2023.

Electronic Invoicing was introduced in Saudi Arabia as an extension of the economic renaissance and digital transformation that Saudi Arabia has been witnessing with the intention of achieving positive results of raising the level of consumer protection and reducing hidden economy transactions.

The Phase 2 Regulations which were previously released on 28 May 2021 contained requirements to be complied with under Phase 1 and Phase 2, respectively, by resident businesses. However, the ZATCA had mentioned that the requirements listed under Phase 2 of e-invoicing would be reviewed and the regulation amended in due course. Accordingly, ZATCA released on 24 June 2022 the amended and final Phase 2 Regulations.

Overview of the key amendments to the updated e-invoicing legislation

The key changes noted in the Phase 2 Regulations are meant to address the feedback received from the taxpayers who have participated in the ZATCA’s Phase 2 e-invoicing pilot testing program and to reflect certain changes in the ZATCA’s IT model.

Some of the key changes made by the ZATCA in the xml implementation standards and the data dictionary are:

  • Amendments to the requirement to mention certain data fields between mandatory, conditional or optional

  • Amendments to the business rules for validation of the xml invoices

  • Revisions to the process with respect to authentication of the taxpayer’s EGS with ZATCA by adding a secret value component

  • Removal of categorization of a Value Added Tax Identification Number (VAT ID) into a Group VAT number and individual VAT number

  • Inclusion of Fields for the Purchase Order and Contract Identification Numbers

With the release of the Phase 2 Regulations, the ZATCA will commence notifying certain taxpayers who are mandated to go-live with Phase 2 from 1 January 2023 (i.e., the first wave of the phase 2 e-invoicing regime). It is expected that more notifications will be sent in the coming weeks to taxpayers, based on their turnover, together with their respective go live dates under Phase 2.


All resident businesses who are registered for VAT in Saudi Arabia and have taxable supplies above SAR3 billion for the calendar year 2021 are required to implement Phase 2 of e-invoicing between 1 January 2023 to 30 June 2023. Non-compliant resident businesses will be subject to penalties as prescribed in the VAT legislation.

Resident businesses should comply with obligations under the Phase 2 Regulations based on the notification sent to them by the ZATCA and undertake the relevant steps in making the required changes in their business and information technology landscape.


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

EY Consulting LLC, Dubai

Ernst & Young Professional Services, Riyadh

Ernst & Young Professional Services, Jeddah

Ernst & Young Professional Services, Al Khobar

Ernst & Young - Middle East, Bahrain

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


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