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30 May 2023

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

  • The Saudi Arabia Zakat, Tax and Customs Authority has announced the criteria for taxpayers to be included in the fifth wave of Phase 2 e-invoicing integration.
  • Taxpayers that are resident in Saudi Arabia, with a taxable turnover above SAR100m during the year 2021 or 2022, should comply with the Phase 2 e-invoicing requirements beginning 1 December 2023.

Executive summary

On 26 May 2023, the Saudi Arabia Zakat, Tax and Customs Authority (ZATCA) announced on its website that taxpayers resident in Saudi Arabia that have a taxable turnover exceeding SAR100m during calendar year 2021 or 2022 will fall within the fifth wave of Phase 2 e-invoicing integration and should comply with the Phase 2 requirements. The ZATCA will notify affected taxpayers so they can begin linking and integrating their electronic invoicing systems with the ZATCA's e-invoicing platform (Fatoora).

Further, the ZATCA Governor has issued Decision No. (63692) dated 10/25/1444 AH, which was published in the Official Gazette on 26 May 2023 and mentions that the fifth wave of affected taxpayers should comply with the Phase 2 e-invoicing requirements between 1 December 2023 and 31 March 2024.

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 transmission of e-invoices and e-notes to the ZATCA. This phase is being implemented in waves. The criteria and timelines for the first four waves, which were previously announced, are:

Wave

Criteria

Timeline

1*

Turnover of more than SAR3b during calendar year 2021

1 January 2023 to 30 June 2023

2**

Turnover of more than SAR500m up to SAR3b during calendar year 2021

1 July 2023 to 31 December 2023

3***

Turnover of more than SAR250m during calendar year 2021 or 2022

1 October 2023 to 31 January 2024

4****

Turnover of more than SAR150m during calendar year 2021 or 2022

1 November 2023 to 29 February 2024

*See Tax Alert 2022-5611.

**See Tax Alert 2022-6263.

***See Tax Alert 2023-5357.

****See Tax Alert 2023-0793.

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

ZATCA announcement

Based on the latest announcements, the ZATCA will begin notifying taxpayers who fall within the fifth wave of Phase 2 e-invoicing integration to go live between 1 December 2023 and 31 March 2024.

Implications

Resident businesses should comply with the obligations of Phase 2 e-invoicing integration based on the ZATCA notification they received 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 that do not fall within the first five waves of Phase 2 e-invoicing integration should monitor future announcements from the ZATCA to learn when the integration timeline period applicable to them arises as part of subsequent waves.

____________________________

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

EY Consulting LLC, Dubai

Ernst & Young Professional Services (Professional LLC), Riyadh

Ernst & Young Professional Services (Professional LLC), Jeddah

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

Ernst & Young — Middle East, Bahrain

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

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

Document ID: 2023-0959

 
 

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