The short answer

VAT-registered businesses in Saudi Arabia must issue electronic invoices that meet the Zakat, Tax and Customs Authority (ZATCA) rules. Phase 1 has applied since December 2021. Phase 2, which connects your invoicing system to ZATCA’s Fatoora platform, is being introduced in waves.

ZATCA tells each business its wave date at least six months ahead. Always confirm your own date and duties in your ZATCA account, or with your tax adviser.

Phase 1: generation

Phase 1 started on 4 December 2021. Since then, invoices must be created and stored electronically by a compliant system. Handwritten invoices, and invoices typed into a simple word processor, are no longer acceptable.

Phase 1 invoices need set fields, such as the seller’s VAT number. Simplified invoices, the kind given to consumers, also need a QR code.

Phase 2: integration with Fatoora

Phase 2 began on 1 January 2023. In this phase, your invoicing system connects to ZATCA’s Fatoora platform and shares invoices with it as they are issued. The two main invoice types work differently.

  • Standard tax invoices, mainly between businesses, are sent to ZATCA for clearance before you give them to the buyer.
  • Simplified tax invoices, mainly to consumers, are reported to ZATCA within 24 hours of being issued.

Credit and debit notes follow the same rules as the invoices they relate to.

How the waves work

ZATCA brings businesses into Phase 2 in groups, called waves. Each wave is based on VAT-taxable turnover in reference years that ZATCA names. Larger businesses came first, and the turnover threshold has dropped with each wave.

Under ZATCA’s published plans, wave 25 covers VAT-registered taxpayers with VAT-taxable turnover above SAR 187,500 in the named years. Integration for that wave is due from 1 February 2027. Thresholds and dates can change, so treat this as a guide and check ZATCA’s current announcements.

ZATCA notifies each business at least six months before its integration date. If you have not had a notice, check your ZATCA account and ask your adviser whether you fall into a wave.

What makes an e-invoice compliant

  • The right format. Phase 2 invoices are produced in a structured XML format, or as a PDF with the XML embedded. ZATCA’s technical guides set out the details.
  • A QR code on the invoice, with the details ZATCA requires.
  • A unique ID and a link to the previous invoice, so invoices cannot be changed or removed without a trace.
  • A cryptographic stamp, produced using a certificate your system receives when it is registered, or “onboarded”, with ZATCA.
  • A compliant solution. The system that issues invoices must meet ZATCA’s requirements and be connected to Fatoora.

How to prepare

  1. Confirm your wave and date in your ZATCA account, and note it in your plans.
  2. List every place invoices are created. Your ERP, your online shop, a branch system, or a spreadsheet someone uses for one-off sales.
  3. Choose your e-invoicing solution. Some systems connect to Fatoora directly. Others connect through a specialist e-invoicing provider.
  4. Check your data. Customer VAT numbers, addresses and product details must be complete and correct, or invoices will be rejected.
  5. Onboard and test. Register each invoicing unit with ZATCA and test clearance and reporting before your date.
  6. Train your team on what to do if an invoice is rejected or the connection is down.

Common pitfalls

  • Invoices made outside the main system. A spreadsheet for one-off sales or a branch tool that nobody remembered.
  • Missing buyer details. Standard invoices need the buyer’s VAT number and address in the right fields.
  • Leaving testing too late. Onboarding and testing take longer than expected, especially with several invoicing units.
  • No plan for rejections. If an invoice fails clearance, someone must notice, fix it and send it again quickly.
  • Changing too much at once. A new ERP and a new e-invoicing link in the same month adds risk.

Where EsquireTec can help

Many businesses already have the right e-invoicing provider in mind. The harder part is getting their own systems to produce clean, compliant invoice data and pass it on reliably.

We make ERP systems, online shops and custom business software produce compliant e-invoices and connect them through your chosen e-invoicing solution. That includes mapping your data, building the connection, handling rejected invoices and testing. See ERP software development and our page for businesses in Saudi Arabia. We also support firms in the United Arab Emirates and Oman, where similar rules are on the way.

We do not give tax advice. Your tax adviser and ZATCA remain the right sources for what applies to you. To talk through your systems, book a free call.