Executive summary

On 16 June 2023, the Saudi Arabia Zakat, Tax and Customs Authority (ZATCA) announced on its website that taxpayers resident in Saudi Arabia, with a taxable turnover exceeding SAR70m during calendar year 2021 or 2022 will fall within the sixth 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 (Fatoorah).

Further, the ZATCA Governor has issued Decision No. (69877) dated 24/11/1444 AH, which was published in the Official Gazette on 16 June 2023, and mentions that the taxpayers coming under the sixth wave should comply with the Phase 2 e-invoicing requirements between 1 January 2024 and 30 April 2024, inclusive of both dates.

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

* See Tax Alert 2022-5611.

** See Tax Alert 2022-6263.

*** See Tax Alert 2023-5357.

**** See Tax Alert 2023-0793.

***** See Tax Alert 2023-0959.

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

ZATCA announcement

Based on the latest announcements, the ZATCA will begin notifying taxpayers who fall within the sixth wave of Phase 2 e-invoicing integration to go live within the period between 1 January 2024 and 30 April 2024, inclusive of both dates.

Implications

Resident businesses should comply with the obligations of Phase 2 e-invoicing integration based on the ZATCA notification 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 who do not fall within the first six waves of Phase 2 e-invoicing integration should monitor future announcements from the ZATCA on the integration timeline period applicable to them in subsequent waves.

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

EY Consulting LLC, Dubai

• Aamer Bhatti, MENA Indirect Tax Leader | aamer.bhatti@ae.ey.com

Ernst & Young Professional Services (Professional LLC), Riyadh

• Mohammed Bilal Akram, Indirect Tax | mohammedbilal.akram@sa.ey.com
• Peter Dylewski, Indirect Tax | peter.dylewski@sa.ey.com

Ernst & Young Professional Services (Professional LLC), Jeddah

• Adrian Smith, Indirect Tax | adrian.smith2@bh.ey.com
• Mohsin Rehmani, Indirect Tax | mohsin.rehmani@sa.ey.com

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

• Sanjeev Fernandez, Saudi Arabia Indirect Tax Leader | sanjeev.fernandez@sa.ey.com

Ernst & Young — Middle East, Bahrain

• Ali Almahroos, Indirect Tax | ali.almahroos@bh.ey.com

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

• Asmaa Ali | asmaa.ali1@ey.com

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