On January 1, 2023, Wave 2 of the Zakat, Tax, and Customs Authority e-invoicing was launched. It targets businesses with revenues above SAR 500,000,000. The compliance requirements that were introduced in Wave 1 were extended to a larger segment of medium-large businesses. The aim was to embed tax compliance, digitalization and transparency in the Saudi Arabian economic ecosystem.
Target Groups and Focus
Wave 2 was for enterprises that generate substantial revenue but are smaller than those covered by Wave 1. The businesses should have a technological infrastructure that can adapt to the requirements of e-invoicing. This wave focused on enhancing digital readiness and preparing business for interoperability.
Mandatory Compliance Requirements
- E-Invoice generation and structuring:
- Businesses had to produce e-invoices, and documents related (credit/debit note) in formats such as XML, PDF/A-3 or embedded XML.
- Include mandatory fields like VAT registration numbers and invoice dates. Line item details as well as tax amounts are also important.
- QR Code Implementation:
- Inclusion of QR codes in simplified invoices has become mandatory. This allows customers and ZATCA to verify the authenticity.
- The QR code encodes key information such as VAT number, invoice dates, and tax amounts.
- Data Integrity and security:
- It was necessary to store e-invoices securely for future audits, in order to ensure data accuracy and access.
Introduction of Interoperability Standards
Wave 2 included a requirement that businesses integrate their E-invoicing systems with ZATCA Fatoora. This ensured the:
- Easy submission of e-invoices: To submit and verify invoices in real time, businesses had to connect with ZATCA’s system.
- Error detection and prevention: Integration enabled ZATCA’s database to check invoices, minimising non-compliance risk.
Digital Features Available
Wave 2 reinforced the use of digital signatures for invoice authentication and security. The invoices are now legally binding and tamper proof.
Impact and Benefits
Wave 2 widened the compliance framework of ZATCA, covering a greater portion of the sector and contributing towards Vision 2030 for the Kingdom. Inclusion of medium-large businesses further streamlined the tax collection process and increased transparency.
This phase also prepared businesses to move on to wave 3 where revenue thresholds would be lowered and new industries targeted. Wave 2 consolidated the foundations for e-invoicing in Saudi Arabia by focusing on system readiness and interoperability.