Wave 3 of the Zakat, Tax, and Customs Authority electronic-invoicing initiative began on July 1 2023, aimed at businesses with revenues that exceed SAR 250,000,000. This phase was a crucial step on Saudi Arabia’s path to a transparent and fully digital tax system. It included medium-sized businesses into the compliance framework.
Target group and Objectives
Wave 3 concentrated on medium-sized businesses, which are important to the Saudi economy. Due to their technological and operational maturity, these businesses were considered ready to adopt e-invoicing software. This phase had the following key objectives:
- Extending e-invoicing to a wider variety of businesses.
- Assuring seamless integration of these companies into the digital tax ecosystem.
- Transparency and compliance in financial transactions.
Mandatory Compliance Requirements
- E-Invoice Generation:
- Businesses had to produce structured electronic invoices, related documents (credit/debit note) and other formats in XML and PDF/A-3 embedded with XML.
- The invoices must include certain mandatory fields such as the seller and buyer’s details, VAT registration number, invoice dates and line item details.
- QR code Implementation:
- QR Codes with essential invoice data such as VAT numbers, invoice totals and invoice summaries were required on simplified invoices. It allowed ZATCA and customers to verify invoices quickly.
- Secure storage:
- Businesses had to store electronic invoices securely, in order to ensure data integrity and accessibility.
System Integration with ZATCA
Wave 3 focused on the integration of ZATCA Fatoora platform with business systems, enabling:
- Real Time Data Exchange: Businesses need to send invoices to ZATCA to validate and approve.
- Error detection: integration allowed ZATCA’s invoice details to be compared with regulatory requirements. This reduced the possibility of discrepancies.
Digital Security Enhancements
Wave 3 emphasized the importance of digital signatures in authenticating e-invoices, and ensuring their legal validity. This step protected invoices from unauthorized access or tampering.
Impact on Businesses
Wave 3 targeted medium-sized businesses, bringing a large portion of the sector in compliance with ZATCA’s electronic-invoicing framework. This phase:
- The government can streamline the tax collection process.
- Transparency and accountability can increase trust in transactions.
- Businesses are encouraged to adopt new technologies and contribute to their digital transformation.
Alignment with Vision 2030
The third wave played a crucial role in the achievement of the goals set out by Vision 2030 to diversify Saudi Arabia’s economy and modernize the financial system. This phase’s success laid the foundation for wave 4. It ensures a smooth transition of smaller businesses and specific industries to the E-invoicing ecosystem.