Saudi Arabia - New Requirements According to the E-Invoicing Timeline

Value-added tax (VAT) is a relatively new type of tax in Saudi Arabia, introduced in 2018. In December 2021, Saudi Arabia Introduced an e-invoicing regime with an implementation plan divided into two phases. Phase one, or Initial Rollout, was initiated in December 2021, whereas the implementation of phase two, known as the Integration phase, started on January 1, 2023.

Implementation of the Mandatory E-Invoicing 

The first phase, Initial Rollout, included all VAT-registered businesses, with an exemption for non-resident taxpayers. This phase introduced an obligation for all taxpayers to stop issuing manual invoices, such as handwritten and written invoices, using text editing tools, and start generating and storing e-invoices and electronic notes, such as credit and debit notes, for B2B, B2C, and B2G transactions, including exports.

The establishment of the Zakat Tax and Customs Authority (ZATCA) on January 1, 2023, was a crucial step in the second phase of the roll-out. This phase mandates taxpayers to integrate their systems with the Authority’s system FATOORA following the clauses set forth under the Resolution on the Controls, Requirements, Technical Specifications, Procedural Rules, and any subsequent resolutions. 

The Integration phase is implemented in several phases, whereas the time period for introduction is dependable on the group to whom the taxable person belongs. The creation of distinctive taxpayer groups, is based upon the annual turnover. 

On June 28, 2024, ZATCA announced the criteria for the thirteenth group of taxpayers required to comply with the second phase of the e-invoicing system. This group refers to the taxpayers with VAT-liable revenues exceeding SAR 7 million in 2022 or 2023. 

Taxpayers who meet this criteria have six months, until January 1, 2025, to prepare for integrating their e-invoicing solutions with the FATOORA Platform. 

The new e-invoicing system introduced two types of invoices:

1. Tax Invoices for B2B transactions,

2. Simplified Tax Invoices​ for B2C transactions.

The buyer's VAT registration number is mandatory for Tax Invoices if the buyer is a registered VAT taxpayer, while the QR code is optional. In contrast, generating a QR code by the taxpayer's E-Invoicing solution based on ZATCA's specifications is mandatory for Simplified Tax Invoices​. 

Conclusion

Implementing the FATOORA Platform and the e-invoicing rules are all part of the VISION 2030 government program, which, among other things, aims to achieve the goal of increased economic diversification.

As each group is included in phase two of the implementation plan, businesses should ensure that their e-invoicing system meets the requirements for integration with the FATOORA Platform and that the invoices they issue include the required elements.

Source: Zakat, Tax and Customs Authority (ZATCA)