Phase 2 of e-invoicing in Saudi Arabia commenced on January 1, 2023, under the oversight of the Zakat, Tax and Customs Authority (ZATCA). This phase targeted Value Added Tax (VAT) registered taxpayers whose annual revenue surpassed 3 billion SAR for the year ending in 2021. These taxpayers were mandated to integrate their Enterprise Resource Planning (ERP) or accounting systems with the e-invoicing platform to facilitate compliance with the new regulations.
ZATCA’s announcement on June 24, 2022, served as a precursor to Phase 2, providing clarity on the taxpayer categories affected and the implementation timeline. Applicable businesses were required to prepare for e-invoicing by ensuring the integration of their ERP/accounting systems well ahead of the January 1, 2023 deadline.
Recognizing the potential concerns and uncertainties surrounding Phase 2, ZATCA addressed common queries through a dedicated blog post featuring Frequently Asked Questions (FAQs) and corresponding answers. These FAQs aimed to assist taxpayers in understanding the requirements and procedures associated with e-invoicing, thereby facilitating a smooth transition to the new system.
Overall, Phase 2 of e-invoicing represented a crucial step towards modernizing tax administration in Saudi Arabia, fostering greater efficiency, transparency, and compliance in financial transactions.
Phase 1 required businesses to issue simplified tax invoices with QR codes, while Phase 2 mandates integration with the Fatoora Portal for invoice transmission to ZATCA’s system.
E-invoicing Phase 2 applies to both B2C and B2B businesses, necessitating integration with the Fatoora Portal.
ZATCA’s Phase 2 e-invoicing mandate began in January 2023, implemented in phases based on business turnover.
| Wave Number |
VAT Turnover | Which year turnover to be considered | e-Invoicing to be implemented from |
| Wave 1 | More than SAR 3 billion |
2021 | 01.01.2023 |
| Wave 2 | More than SAR 500 million and less than SAR 3 billion |
2021 | 01.07.2023 |
| Wave 3 | More than SAR 250 million and less than SAR 500 million |
2021 or 2022 |
01.10.2023 |
| Wave 4 | More than SAR 150 million and less than SAR 250 million |
2021 or 2022 |
01.11.2023 |
| Wave 5 | More than SAR 100 million and less than SAR 150 million |
2021 or 2022 |
01.12.2023 |
| Wave 6 | More than SAR 70 million and less than SAR 100 million |
2021 or 2022 |
01.01.2024 |
| Wave 7 | More than SAR 50 million and less than SAR 70 million |
2021 or 2022 |
01.02.2024 |
| Wave 8 | More than SAR 40 million and less than SAR 50 million |
2021 or 2022 |
01.03.2024 |
E invoicing Phase 2 technical requirements in KSA
The technical requirements for e-invoicing Phase 2 in KSA entail several key components to ensure compliance and seamless integration with the Fatoora Portal and ZATCA’s system. Here’s a breakdown of the essential technical requirements:
- Integration with Fatoora Portal: Businesses must integrate their existing IT systems, including Point of Sale (POS), accounting software, and Enterprise Resource Planning (ERP) systems, with the Fatoora Portal. This integration facilitates the automatic transmission of tax invoices to ZATCA’s system.
- Automated Invoice Generation: The integrated systems should be capable of generating tax invoices in compliance with ZATCA’s e-invoicing standards. These invoices must include all required details and adhere to the specified format.
- Daily Invoice Upload: Once an invoice is generated, it must be automatically uploaded to the Fatoora Portal on a daily basis. This ensures timely submission of invoices to ZATCA’s system for tax computation and other regulatory purposes.
- Validation and Authentication: The Fatoora Portal validates and authenticates each uploaded invoice to ensure accuracy and compliance with regulatory requirements. Any discrepancies or errors should be flagged for resolution.
- Digital Signatures and QR Codes: Upon successful validation, each invoice is digitally signed and assigned a unique QR code. These security features help prevent tampering and ensure the authenticity of the invoice during transmission and processing.
