taxnews.ey.comPrint

02 May 2023

Saudi Arabia announces fourth 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 fourth wave of Phase 2 e-invoicing integration.
  • Taxpayers that are resident in Saudi Arabia, with a taxable turnover above SAR150m during the year 2021 or 2022, should comply with the Phase 2 e-invoicing requirements beginning 1 November 2023.

Executive summary

On 28 April 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 above SAR150m during the calendar year 2021 or 2022 will fall within the fourth 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 (Fatoora).

Further, the ZATCA Governor has issued Decision No. (58897) dated 09/22/1444 AH, which was published in the Official Gazette on 28 April 2023 and mentions that the fourth wave of affected taxpayers should comply with the Phase 2 e-invoicing requirements within the period 1 November 2023 through 29 February 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 three 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

*See Tax Alert 2022-5611.

**See Tax Alert 2022-6263.

***See Tax Alert 2023-5357.

Resident businesses falling under the above waves have already been notified by the ZATCA to comply with Phase 2 of e-invoicing as per their applicable timelines.

Overview of the ZATCA announcement

Based on the latest announcements, the ZATCA will begin notifying taxpayers who fall within the fourth wave of Phase 2 e-invoicing integration, to go live within the period 1 November 2023 to 29 February 2024.

Implications

Resident businesses should comply with the obligations of Phase 2 e-invoicing integration based on the notification received from the ZATCA and undertake the relevant steps in making the required changes in their IT systems. Taxpayers should comply with the Phase 2 requirements in line with the e-invoicing regulation to preclude possible penalties.

Taxpayers that do not fall within the first four waves of Phase 2 e-invoicing integration should monitor future announcements by 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: 2023-0793

 

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

 

Copyright © 1996 – 2024, Ernst & Young LLP

 

All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.

 

EY US Tax News Update Master Agreement | EY Privacy Statement