ZATCA E-Invoicing Phase 2 in Saudi Arabia: The Complete Guide
Mukhlid Al-Qahtani — CEO, Motaded Limited
Article Body
Quick Brief ▸ Phase 1 (Generation): applied to all taxpayers since 4 December 2021. ▸ Phase 2 (Integration): rolled out in waves since 1 January 2023. ▸ ZATCA notifies targeted businesses at least 6 months in advance. ▸ Latest Wave 24: businesses with revenues exceeding SAR 375,000 — deadline 30 June 2026. ▸ Requirements: XML or PDF/A-3, cryptographic stamp, UUID, QR Code, digital signature, API integration. ▸ Penalties start at SAR 5,000 and may reach SAR 50,000 per single violation. ▸ Fines cancellation initiative active until 30 June 2026. |
What is E-Invoicing in Saudi Arabia?
Electronic invoicing (Fatoora) is a national system launched by the Zakat, Tax and Customs Authority (ZATCA) as part of the Saudi Vision 2030 digital transformation. It replaces the paper invoicing system with a unified digital framework linking all VAT-registered businesses to a central platform that monitors tax invoices, credit notes, and debit notes.
The framework consists of two phases: Phase 1 (Generation Phase) and Phase 2 (Integration Phase). Motaded Limited assists its foreign clients and government relations clients in assessing their readiness for each wave and ensuring their accounting systems comply with ZATCA requirements.
Key Differences Between the Two Phases
| Item | Phase 1 | Phase 2 |
|---|---|---|
| Name | Generation Phase | Integration Phase |
| Start Date | 4 December 2021 — all taxpayers | 1 January 2023 — in waves |
| ZATCA Integration | No platform linkage | Direct API connection to Fatoora |
| Format | No specific technical format | XML or PDF/A-3 with embedded XML — mandatory |
| Security | QR Code only for simplified invoices | Cryptographic stamp + UUID + digital signature |
| Submission | Local storage only | Real-time clearance or 24-hour reporting |
The Wave System: How to Know if Your Business is Targeted
Phase 2 is rolled out in successive waves, each defined by a minimum revenue threshold subject to VAT. ZATCA lowers the threshold with each new wave to gradually include more businesses, ultimately achieving complete coverage.
ZATCA directly notifies the targeted business at least six months before the integration date. Do not wait for the notification — review the wave schedule below and compare your annual VAT-taxable revenues in 2022, 2023, or 2024.
Major Waves Schedule
| Wave | Threshold (Annual Revenues) | Integration Date |
|---|---|---|
| 1st | SAR 3 billion or more | 1 January 2023 |
| 4th | SAR 150 to 250 million | 1 November 2023 |
| 8th | SAR 40 to 50 million | 1 March 2024 |
| 12th | SAR 10 to 15 million | 1 December 2024 |
| 16th | SAR 3 to 4 million | 1 April 2025 |
| 20th | SAR 1.5 to 1.75 million | 31 October 2025 |
| 23rd | SAR 750,000 to 1 million | 31 March 2026 |
| 24th | SAR 375,000 to 750,000 | 30 June 2026 |
Wave 24 is the lowest threshold in the project's history and represents the largest segment of small and medium-sized enterprises ever included.
Phase 2 Technical Requirements
A targeted business must ensure its invoicing system meets the following technical requirements before the integration date:
▸ Format: UBL 2.1 XML or PDF/A-3 with embedded XML file. Other formats such as regular PDF, Word, or scanned invoices are completely rejected.
▸ Cryptographic Stamp: ensures the authenticity of the invoice source and protects it from tampering.
▸ Universally Unique Identifier (UUID): a globally unique identification number for each invoice.
▸ QR Code: mandatory on simplified invoices (B2C), optional on tax invoices (B2B).
▸ Digital Signature: linked to a certificate accredited by ZATCA.
▸ Real-time API Integration: direct connection to the Fatoora platform through approved programming interfaces.
▸ Anti-Tampering: the technical solution must include a mechanism that detects any tampering attempt by the user or third parties.
▸ Continuous Internet Connection: required to send invoices to ZATCA in real-time.
The Two Invoice Types in Phase 2
ZATCA distinguishes between two invoice types in Phase 2, each with a different submission mechanism:
Standard Tax Invoice
Used in business-to-business (B2B) transactions and with government entities (B2G). Subject to real-time clearance — the invoice is sent to ZATCA before being shared with the buyer, and the Authority verifies its validity and approves it before it becomes legally valid.
Simplified Tax Invoice
Used in business-to-consumer (B2C) transactions. The invoice is issued to the customer first, then reported to ZATCA within 24 hours of issuance. It must contain a mandatory QR Code.
Non-Compliance Penalties
ZATCA has published a clear penalty schedule. Penalties are applied according to the type of violation and the number of repeats within a 12-month period, with fines escalating with each repeat:
| Violation | Penalty |
|---|---|
| Failure to issue invoices electronically | SAR 5,000 |
| Failure to store invoices electronically | SAR 5,000 |
| Deletion or modification of an invoice after issuance | SAR 10,000 |
| Issuing a simplified invoice without QR Code | Warning then financial penalty |
| Failure to report a malfunction preventing issuance | Warning then financial penalty |
| Maximum per violation under Article 45 of VAT Law | Up to SAR 50,000 |
Fines Cancellation Initiative
ZATCA has extended the Fines Cancellation and Financial Penalties Exemption Initiative until 30 June 2026. The initiative allows businesses to correct past violations without financial penalties, provided compliance requirements are met within the period. Notably, this date coincides with the Wave 24 integration deadline and represents the last opportunity before full enforcement without exceptions.
Motaded's Role in Phase 2 Compliance
Motaded Limited works with foreign businesses operating in Saudi Arabia and clients from international advisory firms and HR services. We follow a defined methodology to help clients navigate Phase 2 smoothly:
▸ Technical Readiness Assessment: review of the existing accounting system (ERP/POS) and measuring its capability to meet Phase 2 requirements.
▸ Wave Coverage Verification: review of VAT-taxable revenues in 2022, 2023, and 2024 to identify the targeted wave.
▸ Coordination with Approved Solution Providers: liaising with ZATCA-registered technical companies.
▸ Compliance Monitoring: tracking issued invoices and notes and ensuring real-time submission and correct clearance.
▸ Notification Response: handling any notification from ZATCA within the specified timeframe.
To access Motaded's tax compliance services package, clients may book a consultation at motaded.com.sa/services/consultation-services.
ZATCA Official Channels
▸ Official Website: zatca.gov.sa
▸ Fatoora Platform: fatoora.zatca.gov.sa
▸ Contact Center: 19993
▸ Email: info@zatca.gov.sa
Official References
This guide draws exclusively on official Saudi government sources:
▸ Zakat, Tax and Customs Authority — zatca.gov.sa: E-Invoicing Regulation, wave announcements, and penalties.
▸ Fatoora Platform — fatoora.zatca.gov.sa: official platform for technical integration.
▸ Detailed E-Invoicing Guidelines — Third Edition (May 2026).
▸ Resolution on Controls, Technical Requirements and Procedural Rules for E-Invoicing Implementation.
▸ Value Added Tax Law — Article 45 (Penalties).
▸ Bureau of Experts at the Council of Ministers — laws.boe.gov.sa: Official Gazette and decisions.
Motaded Limited — Your Partner for Tax Compliance and E-Invoicing
motaded.com.sa | Commercial Registration 7009358164