Key Announcements from ZATCA in Saudi Arabia
1. Extended Penalty Waiver Initiative:
- On June 29, 2026, ZATCA extended its initiative to cancel fines and exempt financial penalties for taxpayers under all Saudi tax regimes, effective from July 1, 2026, through December 31, 2026. (zatca.gov.sa)
- Exemptions apply to: late registration, late filing, late payment, VAT return corrections. Not included are fines for tax evasion, certain VAT field control violations, or returns due after June 30, 2026. (zatca.gov.sa)
2. Expansion of E-Invoicing Phase Two (“Integration Phase”):
- ZATCA has identified Wave 25 taxpayers as those with annual VAT-able supplies exceeding SAR 187,500 in any recent year (2022-2025) to join Phase Two starting February 1, 2027. (zatca.gov.sa)
- Phase Two requires full integration: systems must link directly to ZATCA’s Fatoora portal, ensure technical compliance, include required invoice data fields, QR codes, etc. (zatca.gov.sa)
Practical Steps for Businesses
- Check your registration status under ZATCA for VAT, excise, withholding, etc.
- Submit all outstanding returns by June 30, 2026, to benefit from the penalty waiver. Apply for installment plans if needed, while the waiver is active. (zatca.gov.sa)
- Upgrade invoicing systems now to be ready for the Phase Two technical and integration requirements.
- Review internal processes to ensure automatic inclusion of required fields in invoices and secure connectivity with Fatoora.
Compliance Considerations and Risks
- Failure to meet integration technical requirements could expose businesses to fines once the grace period ends.
- Missing the deadline of February 1, 2027 for Phase Two could lead to non-compliance penalties.
- Not all waivers cover every type of fine—evading taxes and certain violations are excluded from relief initiatives. Be sure to understand what’s covered.
Hypothetical Case Study
XYZ Trading Co. has SAR 200,000 in VATable supplies in 2024. It didn’t file its VAT return for Q2. With the penalty waiver initiative, if XYZ files by June 30, 2026, pays its underlying VAT, and applies for installment if needed, it’ll be exempt from penalties for late filing.
But because it exceeds SAR 187,500, from Feb 1, 2027, it must ensure its billing software is integrated with Fatoora to issue compliant e-invoices. If it doesn’t, it loses relief from Phase Two requirements and may face enforcement.
Guidelines for Action Now
- Immediately inventory all outstanding returns and fines.
- Plan system updates with tech providers for e-invoicing integration.
- Train finance and operations teams on the new invoice fields and QR obligations.
- Consult a tax adviser to ensure you leverage waivers appropriately and avoid being caught off guard.
These dual moves by Saudi authorities—relief for past non-compliance and mandating digital transformation ahead—offer both opportunity and obligation. Businesses that act now can protect themselves and gain long-term efficiency.