ZATCA Announces the 17th Wave Criteria for Phase 2 E-Invoicing Integration

The Zakat, Tax, and Customs Authority (ZATCA) in Saudi Arabia has announced the details of the 17th wave in the Phase 2 e-invoicing project, known as the "Integration Phase." According to ZATCA, the 17th wave includes all businesses with VAT-taxable revenue exceeding SAR 2.5 million during either 2022 or 2023. This announcement is part of ZATCA's ongoing efforts to promote digital transformation and increase tax compliance across the Kingdom.

ZATCA has confirmed it will notify the targeted businesses within this group to facilitate their integration with the Fatoora platform before the final compliance date on July 31, 2025. This step involves additional technical requirements compared to the initial phase.

Overview of E-Invoicing Phases

The e-invoicing project by ZATCA has been implemented in two phases, with the second phase rolled out in successive waves according to revenue thresholds. Below is a summary of each phase:

Phase 1 - Generation Phase (Effective December 4, 2021):

Requires all VAT-registered taxpayers to issue and store electronic invoices and notes using compliant digital solutions. This phase prohibited the use of handwritten invoices or basic text-editing software, ensuring invoices meet certain standards, including the addition of a QR code.

Phase 2 - Integration Phase (Effective January 1, 2023):

This phase mandates the integration of taxpayers' invoicing systems with ZATCA's Fatoora platform, requiring real-time electronic invoice transmission in a structured format. The phase is rolled out gradually based on turnover, with each group notified at least six months before their compliance deadline.

Learn more: How VAT work at Wafeq? 

Summary of Previous Waves:

The integration waves began in January 2023, starting with companies with revenues exceeding SAR 3 billion in 2021, progressively extending to businesses with revenues above SAR 2.5 million in 2022 or 2023 in this current 17th wave.

Compliance Requirements for Businesses in the 17th Wave

Businesses included in the 17th wave are advised to take the following steps to ensure compliance:

• System Updates: Update their invoicing systems to meet ZATCA’s technical standards, including additional fields and a specific e-invoice format for integration with the Fatoora platform.
• Staff Training: Train personnel involved in invoicing on the new protocols to ensure smooth and accurate issuance and submission of e-invoices.
• System Testing: Conduct thorough system testing to verify readiness for integration with Fatoora before the compliance deadline, ensuring any real-time transmission issues are resolved in advance.

Penalties for Non-Compliance and Future Waves

ZATCA has warned that businesses failing to meet Phase 2 requirements may incur penalties. Therefore, businesses not included in the first 17 waves are encouraged to stay updated on future ZATCA announcements regarding upcoming waves to ensure timely preparation and compliance.

Importance of the Project and its Role in Digital Transformation

The second phase of e-invoicing represents a significant step in Saudi Arabia’s economic and digital transformation journey, building on the success of Phase 1. E-invoicing has contributed to consumer protection and enhanced transparency in commercial transactions across the Kingdom. ZATCA has praised the high level of responsiveness and awareness demonstrated by taxpayers during Phase 1, which has paved the way for the seamless transition to Phase 2 and supports the continued success of this initiative.

Unlock Tax Efficiency: How Wafeq Can Help You Minimize Your VAT Burden.

The e-invoicing project in Saudi Arabia represents an important step toward enhancing efficiency and transparency within the tax system, aligning with the Kingdom’s vision for comprehensive digital transformation. ZATCA encourages all businesses affected by Phase 2 to ensure compliance with the new requirements, thereby ensuring seamless operations and avoiding penalties. This move ultimately contributes to improved service quality and helps businesses adapt to the evolving market demands.