The latest announcement indicates that businesses with annual revenues exceeding SAR 7 million during the calendar years 2022 or 2023 are now included in the e-invoicing mandate. Businesses in Saudi Arabia must integrate their e-invoicing solutions with the Fatoora platform starting from 1 January 2025.
The Zakat, Tax and Customs Authority (ZATCA) is leading this significant initiative in Saudi Arabia. This e-invoicing initiative marks a major step towards digital transformation and modernization of the country’s tax system – from paper-based to a modern, secure, and efficient electronic system. It;
- Reduces Costs: E-invoicing eliminates the need for paper invoices, printing, and storage, leading to cost savings for businesses.
- Enhances Accuracy: Electronic invoicing minimizes human errors in the invoicing process, improving data accuracy.
- Combats Fraud: The system helps prevent commercial fraud by ensuring the authenticity and integrity of invoices.
How It Started?
Phase 1: Laying The Foundation (December 4th, 2021)
Phase 1 marked the official launch of e-invoicing regulations in Saudi Arabia. Key aspects of this phase include:
- Mandate for VAT-registered Taxpayers: All businesses registered for Value Added Tax (VAT) are required to generate and store e-invoices.
- ZATCA Compliance: E-invoices must be created using electronic systems compliant with ZATCA specifications.
- Essential Data and QR Codes: Invoices must include mandatory data elements and a QR code for easy access to invoice details.
- Ban on Manual Methods: Handwritten invoices and those generated by text-editing software are no longer permitted.
How Was It Until Last Year?
Phase 2: Integration with Fatoora Platform (Rolling Waves Starting January 1st, 2023)
Phase 2 focuses on integrating e-invoicing solutions with ZATCA’s Fatoora portal. This involves:
- Wave-based Rollout: ZATCA implements Phase 2 in waves, targeting different business groups based on their annual turnover. Each wave has a specific start date for integration.
- Fatoora Portal Integration: Businesses must integrate their e-invoicing software with the Fatoora platform for seamless communication.
- Additional Invoice Fields: Certain additional fields are required to be included in e-invoices as per ZATCA’s specifications.
- Standardized Format: E-invoices must be issued in a specific format established by ZATCA.
- Advance Notice: ZATCA announces the applicability of each wave to businesses at least six months before the integration deadline.
Implementation Waves (Status as of July 5th, 2024):
- Wave 1: Businesses exceeding SAR 3 billion turnover in 2021 began integration on January 1st, 2023.
- Wave 2: Businesses with SAR 500 million to SAR 3 billion turnover in 2021 started on July 1st, 2023.
- Waves 3-9: These waves targeted businesses with progressively lower annual turnovers.
- Wave 10: Businesses with SAR 25 million to SAR 30 million turnover in 2022 or 2023 started integration on October 1st, 2024.
- Wave 11: VAT-registered businesses with a turnover exceeding SAR 15 million in 2022 or 2023 need to integrate their systems by November 1st, 2024.
However, the threshold has been further lowered to SAR 7 million, effectively bringing a wider range of businesses under the e-invoicing umbrella. This change is expected to enhance tax compliance and simplify record-keeping for both businesses and authorities.For more such updates and to ensure tax compliance in Saudi Arabia keep following our website Safari Star or connect with one of our tax experts in the region.
