Starting January 1, 2025, businesses in Saudi Arabia with VATable income over 7 million Saudi Rials in 2022 or 2023 must integrate their e-Invoicing systems with the FATOORAH platform. This mandatory electronic invoicing initiative by the Zakat, Tax and Customs Authority (ZATCA) aims to enhance tax compliance and streamline invoicing processes for B2B, B2C, and B2G transactions.
Overview of FATOORAH Implementation
Phase 1: Initial Rollout (December 2021)
- Mandatory electronic invoicing for all domestic taxpayers, covering B2B, B2C, and B2G transactions.
- Focus on digital transformation and standardization of invoicing.
Phase 2: Full Integration (January 2025)
- Businesses with significant VATable income must integrate with the FATOORAH platform.
- Ensures comprehensive compliance and efficient tax reporting across a wider range of transactions.
Scope and Technical Requirements
Applicability and Exemptions:
- Applies to all resident taxpayers and third parties issuing invoices on behalf of VAT-liable entities.
- Excludes foreign companies without a physical presence in Saudi Arabia.
Technical Standards:
- E-invoices must meet specific standards for authenticity, integrity, and readability.
- Businesses must upgrade their IT systems to integrate with the FATOORAH platform.
Benefits of the FATOORAH System
Improved Compliance and Efficiency:
- Simplifies adherence to VAT regulations, reducing administrative burdens.
- Enhances accuracy in VAT reporting and minimizes tax evasion.
Enhanced Tax Administration:
- Enables real-time tracking and verification of transactions, improving tax system efficiency.
Economic Impact:
- Supports Saudi Arabia’s Vision 2030 by promoting a transparent and efficient business environment.
- Aligns with global trends towards digital tax administration, fostering economic growth.
Steps to Ensure Compliance
- System Evaluation: Assess current invoicing systems for compatibility with FATOORAH.
- Infrastructure Upgrade: Update IT systems to meet ZATCA’s technical requirements.
- Training and Support: Train staff on the new e-invoicing system and compliance requirements; seek support from ZATCA or third-party providers.
The FATOORAH project marks a significant advancement in Saudi Arabia’s tax administration. Businesses must prepare for this transition to comply with new regulations and benefit from streamlined invoicing processes.
