ZATCA Sets E-Invoicing Criteria for 14th Group Linking Phase by 2025

The Zakat, Tax, and Customs Authority (ZATCA) has announced the criteria for selecting establishments in the 14th group to implement the second phase of e-invoicing, known as the ‘linking and integration’ phase. According to an official statement released via the Saudi Press Agency, this group includes all establishments with revenues subject to value-added tax exceeding SAR 5 million during either 2022 or 2023. ZATCA will notify all targeted establishments in preparation for linking their e-invoicing systems with the Fatura system, starting from February 1, 2025.

Context and Background

The e-invoicing initiative is a cornerstone of the Kingdom’s broader digital transformation agenda, aligned with Vision 2030’s goal to modernize the economy and enhance transparency. The first phase, known as the ‘issuance and preservation phase,’ was successfully implemented, raising consumer protection standards across the Kingdom. ZATCA commended taxpayers for their awareness and rapid response during this initial stage, which laid the groundwork for the more advanced requirements of the second phase.

Key Details of the 14th Group

The 14th group specifically targets medium-to-large enterprises, defined by their value-added tax revenues exceeding SAR 5 million in either 2022 or 2023. ZATCA will notify these establishments at least six months before the February 1, 2025, deadline. The second phase imposes additional requirements beyond the first, including linking taxpayers’ electronic billing systems with the Fatura system, issuing invoices based on a specific formula, and embedding several new elements in each invoice. This gradual, group-based implementation ensures a smooth transition for businesses.

Implications for Businesses and the Economy

The shift to the linking and integration phase marks a significant step in enhancing fiscal transparency and compliance across Saudi Arabia. By automating invoice data flow to ZATCA, the system reduces tax evasion risks and streamlines auditing processes. For businesses, this means adopting standardized billing formats and investing in compliant software. The move also strengthens the Kingdom’s position as a leader in digital governance within the region, reflecting a proactive approach to economic reform and financial integrity.

Vision 2030 Alignment

The e-invoicing system’s advancement directly supports Vision 2030’s pillars of economic diversification, digital innovation, and efficient government services. By digitizing financial transactions, Saudi Arabia is fostering a transparent business environment that attracts foreign investment and empowers local enterprises. The success of the first phase and the planned rollout of the second phase demonstrate the Kingdom’s commitment to building a world-class digital economy, driving long-term sustainable growth in line with its national ambitions.

20 Questions

Q1. What is the main objective of ZATCA’s new criteria for the 14th group?

A1. The main objective is to select establishments for the linking and integration phase of e-invoicing, ensuring they meet revenue thresholds and are prepared to connect their systems with the Fatura platform by February 2025.

Q2. Which establishments are included in the 14th group for e-invoicing?

A2. The 14th group includes all establishments whose revenues subject to value-added tax exceeded SAR 5 million during either 2022 or 2023, as specified by ZATCA.

Q3. When will the linking and integration phase begin for the 14th group?

A3. The phase will start on February 1, 2025, with ZATCA notifying targeted establishments at least six months in advance to prepare for integration.

Q4. What is the Fatura system in the context of e-invoicing?

A4. Fatura is Saudi Arabia’s official electronic invoicing system, managed by ZATCA, designed to centralize and automate invoice data for improved tax compliance and transparency.

Q5. How does the second phase differ from the first phase of e-invoicing?

A5. The second phase adds requirements like linking billing systems to Fatura, using a specific invoice formula, and including extra data fields, whereas the first phase focused on issuance and preservation of invoices.

Q6. Why is ZATCA implementing the e-invoicing system in groups?

A6. Gradual group implementation allows businesses sufficient time to adapt, reduces disruption, and ensures a smooth transition toward full compliance with the linking and integration requirements.

Q7. What benefits did the first phase of e-invoicing bring to Saudi Arabia?

A7. The first phase raised consumer protection standards, improved tax transparency, and demonstrated high taxpayer awareness, contributing to the Kingdom’s digital transformation and economic renaissance.

Q8. How will businesses be notified about their inclusion in the 14th group?

A8. ZATCA will directly notify all targeted establishments in the 14th group through official channels, providing clear instructions and timelines for the integration process.

Q9. What are the additional elements required in invoices during the second phase?

A9. The second phase requires invoices to include standardized fields, such as a unique identifier and specific transaction codes, based on a formula defined by ZATCA for consistency.

Q10. How does e-invoicing support Vision 2030’s digital transformation goals?

A10. E-invoicing digitizes financial processes, reduces paperwork, and enhances data accuracy, aligning with Vision 2030’s aim to modernize the economy and improve government efficiency.

Q11. What happens if a business in the 14th group fails to comply by the deadline?

A11. ZATCA may impose penalties for non-compliance, as per tax regulations, but the authority provides advance notice and support to help businesses meet requirements on time.

Q12. Are all businesses in Saudi Arabia required to adopt e-invoicing?

A12. The system is being rolled out in phases, targeting groups based on revenue thresholds. Eventually, all VAT-registered businesses will need to comply with the linking and integration phase.

Q13. How does the linking phase improve tax compliance in Saudi Arabia?

A13. By connecting billing systems directly to ZATCA, the phase automates data submission, reduces errors and evasion, and allows real-time verification of transactions for better compliance.

Q14. What was the taxpayer response to the first phase of e-invoicing?

A14. ZATCA praised taxpayers for their great awareness and rapid response, which contributed to the success of the first phase and set a positive tone for subsequent implementations.

Q15. Can businesses outside the 14th group voluntarily join the e-invoicing system?

A15. While the rollout is group-based, ZATCA may allow voluntary early adoption for businesses ready to comply, but official criteria for such cases have not been detailed in this announcement.

Q16. How does e-invoicing affect consumer protection in Saudi Arabia?

A16. E-invoicing ensures accurate transaction records, reduces fraud, and provides consumers with verified invoices, thereby enhancing trust and protection in commercial exchanges.

Q17. What technical preparations are needed for businesses to integrate with Fatura?

A17. Businesses require compliant billing software capable of generating invoices in the specified format and establishing a secure link to ZATCA’s Fatura system for real-time data exchange.

Q18. Is there any support available for businesses transitioning to the second phase?

A18. ZATCA provides guidance, notifications, and at least six months’ lead time to help businesses prepare, along with resources for technical and compliance assistance.

Q19. How does the e-invoicing initiative attract foreign investment to Saudi Arabia?

A19. A transparent, digitized tax system reduces administrative burdens and risks for investors, signaling a modern business environment that aligns with global best practices and Vision 2030 goals.

Q20. What is the long-term vision for e-invoicing in Saudi Arabia beyond the 14th group?

A20. ZATCA aims to achieve full nationwide adoption of integrated e-invoicing, supporting a fully digital economy, enhancing fiscal governance, and positioning Saudi Arabia as a leader in tax technology.

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