ZATCA announces Wave 11 of the Integration Phase 2

The path to e-invoicing starts with the implementation of ZATCA's Phase 1, known as "Generation Phase," on December 4 2021. This phase required companies to produce and store electronic invoices by using systems that are compliant. This was a major change in the way that companies are able to document their transactions. It helps to reduce tax evasion, simplify tax collection, and increase the compliance of regulatory authorities.

How it started

After the successful completion of the Phase 1, ZATCA introduced Phase 2 which is also referred to in"the "Integration Phase," on January 1 2023. The erp software in saudi Arabia requires companies to connect their e-invoicing system in ZATCA's central platform. This will allow businesses to send e-invoices as well as associated information in real-time to the authorities. Phase 2 is rolling out in a gradual manner, with each one focusing on a specific group of taxpayers based upon factors like the thresholds for revenue, business size or type of industry.

What Wave 11 Entails

Wave 11 is the latest in ZATCA's systematic strategy for implementing Integration Phase 2. The wave targets taxpayers who earn the annual revenue that is SAR 70 million or greater for the fiscal years 2021 and 2022. In this case, businesses ensure that their electronic invoice systems meet ZATCA's security. They need to comply with it within the timeframe specified.

For taxpayers who are part of Wave 11, compliance involves:

1. Systems Integration: Companies must make sure that their systems for invoicing are compatible with ZATCA's FATOORA platform, which allows the exchange of electronic invoices and associated information in XML format.

2. Technical specifications: Respect for ZATCA's specific specifications, including the creation of invoices that are compliant and distinctive UUIDs (Universally Unique Identifiers) QR codes, as well as that all fields are included. required fields.

3. Security measures: The implementation of security measures that are robust, such as digital signatures to safeguard the integrity of data and to prevent tampering.

4. Reliable Time: Reporting Transmitting bills and notes (credit and debit) to ZATCA's platform in real-time or in close proximity to real time.

Wave 11 is set for July 1st 2025. Companies that fail to meet the requirements within the specified timeframe could risk being penalized, which could include penalties, as well as limitations on business activities.

Key Objectives of Wave 11

Wave 11 serves several strategic goals, such as:

• Enhancing compliance: By targeting businesses that have significant annual revenues, ZATCA is aiming to improve tax compliance for taxpayers. The larger size makes a significant contribution to the Kingdom's revenues.

• Standardizing Methods: Encouraging uniformity in the practice of invoicing ensures a standard process across different industries, which will make it easier to conduct audits and regulate oversight.

• Enhancing the level of economic transparency: Real-time data submission lets ZATCA monitor economic activity more efficiently, preventing fraud and tax evasion.

• Promoting the digital Transformation: The VAT Calculator in Saudi Arabia helps  improve efficiency in operations and encourage sustainable growth.

Challenges and Opportunities for Businesses

Although the advantages of electronic invoices are evident, businesses have difficulties in achieving compliance. The technical demands, integration challenges and allocation of resources required for upgrading systems can be overwhelming for certain organizations. Companies must also provide employees with education to use the new systems efficiently.

On the other hand Wave 11 presents several opportunities:

• Streamlining operations: E-invoicing reduces manual mistakes, improves accuracy of data and speeds up the invoicing processes.

• Improved Financial Management: Real-time reports provide companies with greater insight of their fiscal health, which allows more informed decisions.

• Stronger Relations in conjunction with ZATCA: Proactive compliance creates a positive rapport with the tax authority. It reduces the possibility of audits and penalties.

• Global Competitivity: Affiliating with best practice international standards in the field of electronic invoices places Saudi companies as global players.

Conclusion

ZATCA's Wave 11 Integration Phase 2 marks another important step in Saudi Arabia's progress towards digital transformation and transparency. With a focus on businesses with high revenues, ZATCA aims to enhance tax compliance, enhance efficiency of operations. Although there are challenges, the potential for businesses to streamline their operations, improve the financial management process.