Your Guide to the Electronic Invoicing – Phase Two (Integration and Connectivity Phase)

What is Phase Two of Electronic Invoicing?

Phase Two is part of the implementation of the electronic invoicing system in Saudi Arabia. It aims to integrate the electronic invoicing systems of taxpayers with the “Fatoora” platform of the Zakat, Tax and Customs Authority (ZATCA).

What are the Requirements of Phase Two?

• Ensure the technical solution complies with the authority’s requirements: This includes ensuring the technical solution can:
  • Issue electronic invoices in the approved formats (XML or PDF/A-3 with embedded XML).
  • Add the additional fields required in the electronic invoice for Phase Two.
  • Connect to the “Fatoora” system online.
  • Integrate the issuer’s technical solution with the “Fatoora” platform, enabling direct exchange of information and data between the issuer’s system and the platform.
  • Issue electronic invoices and send them to buyers.
  • Send copies of all electronic invoices to the ZATCA periodically via the “Fatoora” platform.

What are the Benefits of Phase Two?

• Improved efficiency of issuance and auditing.
• Reduction of errors and fraud.
• Enhanced tax transparency.
• Facilitation of tax compliance.
• Improved supply chains.

When Will Phase Two Be Implemented?

Phase Two will be applied gradually to different groups of taxpayers based on their annual VAT taxable revenue.

Phase Two, also known as the Integration Phase, requires integrating taxpayers’ electronic invoicing systems with the ZATCA platform (Fatoora) and issuing invoices in the required format. The ZATCA will notify taxpayers at least 6 months in advance before they need to comply.

Implementation Timeline:

• Group One: From January 1, 2023, for entities with annual revenues over SAR 3 billion.
• Group Two: From July 1, 2023, for entities with annual revenues over SAR 500 million until December 31, 2023.
• Group Three: From October 1, 2023, to January 31, 2024, for entities with revenues over SAR 250 million.
• Group Four: From November 1, 2023, to February 29, 2024, for entities with revenues over SAR 150 million.
• Group Five: From December 1, 2023, to March 31, 2024, for entities with revenues over SAR 100 million.
• Group Six: From January 1, 2024, to April 30, 2024, for entities with revenues over SAR 70 million.
• Group Seven: From February 1, 2024, to May 31, 2024, for entities with revenues over SAR 50 million.
• Group Eight: From March 1, 2024, to September 30, 2024, for entities with revenues over SAR 40 million.
• Group Nine: From June 1, 2024, to September 30, 2024, for entities with revenues over SAR 30 million.
• Group Ten: From October 1, 2024, to December 31, 2024, for entities with revenues over SAR 25 million.
• Group Eleven: From November 1, 2024, to January 31, 2025, for entities with revenues over SAR 15 million.
• Group Twelve: From December 1, 2024, to February 28, 2025, for entities with revenues over SAR 10 million.
• Group Thirteen: From January 1, 2025, to March 31, 2025, for entities with revenues over SAR 7 million.

Remaining Groups: Details will be announced later.