ZATCA e-invoicing — known in Saudi Arabia as Fatoora — is the mandate from the Zakat, Tax and Customs Authority that requires every VAT-registered business in the Kingdom to issue invoices electronically from a compliant system, and eventually to connect that system directly to ZATCA. It arrived in two phases: Phase 1 (generation) has applied to everyone since December 2021, and Phase 2 (integration) has been rolling out in waves, from the largest companies down. For years that meant small businesses could watch from the sidelines. That's over: Wave 24 pulled in businesses above SAR 375,000 in VAT-liable revenue with a 30 June 2026 deadline, and Wave 25 — announced on 24 July 2026 — halves the threshold to SAR 187,500 with a 1 February 2027 deadline. If you run a small VAT-registered business in Saudi Arabia, this guide is for you.
What is ZATCA e-invoicing, exactly?
At its simplest: paper invoices, handwritten invoices, and invoices typed in Word or Excel are no longer valid. Invoices must be generated by an electronic system that meets ZATCA's requirements — tamper-proof, with the required fields, and (for customer-facing receipts) a QR code.
The point, from the government's side, is closing the VAT gap: when invoices are structured data instead of paper, underreporting gets much harder. From your side, the practical question is narrower: is my invoicing tool compliant, and when do I have to connect it to ZATCA?
Phase 1 vs Phase 2 — what's the difference?
The two phases are often blurred together in vendor marketing, but they ask very different things of you.
| Phase 1 — Generation | Phase 2 — Integration | |
|---|---|---|
| In force since | 4 December 2021, all VAT-registered businesses | January 2023, rolling out in waves by revenue |
| What it requires | Issue invoices from a compliant e-invoicing system; QR code on simplified invoices; no deleting or editing issued invoices | Connect your system to ZATCA's Fatoora platform; invoices exchanged in structured XML with additional security fields |
| Does ZATCA see your invoices? | No — invoices stay in your system | Yes — standard (B2B) invoices are cleared through ZATCA, simplified (B2C) invoices are reported after issuance |
| Who it applies to | Everyone VAT-registered | Your wave, once ZATCA notifies it |
If you're VAT-registered at all, Phase 1 already applies to you today. Phase 2 applies when your wave's deadline arrives.
Which wave am I in?
ZATCA announces waves by revenue threshold, working downward. The recent waves are the ones that matter for small businesses:
| Wave | Revenue threshold (VAT-liable) | Integration deadline |
|---|---|---|
| Earlier waves (1–23) | From SAR 3bn down to SAR 1.25M+ | 2023 – early 2026 (passed) |
| Wave 24 | Above SAR 375,000 (in 2022 or 2023) | 30 June 2026 |
| Wave 25 | Above SAR 187,500 | 1 February 2027 |
Deadline check: if your VAT-liable revenue exceeded SAR 375,000 in 2022 or 2023, your integration deadline has already passed (30 June 2026) — and ZATCA has been enforcing penalties for non-integration since 1 July 2026. If you're in the SAR 187,500–375,000 band, your deadline is 1 February 2027. Don't wait for the notification letter to start.
Note what the Wave 25 threshold means: SAR 187,500 is the voluntary VAT registration floor. In plain terms, ZATCA is signalling that essentially every VAT-registered business in the Kingdom will end up integrated.
Standard vs simplified tax invoices
Saudi VAT has two invoice types, and Phase 2 treats them differently:
| Standard tax invoice | Simplified tax invoice | |
|---|---|---|
| Typical use | B2B — your customer is a business that reclaims VAT | B2C — retail sales, walk-in customers |
| Key fields | Full details of both seller and buyer, including the buyer's VAT number | Seller details, itemised amounts, VAT — buyer details not required |
| QR code | Required in Phase 2 | Required since Phase 1 |
| Phase 2 handling | Cleared — sent to ZATCA for validation before it reaches your customer | Reported — issued to the customer immediately, reported to ZATCA shortly after |
If you sell to other businesses, the clearance model is the big change: an invoice that fails validation doesn't count as issued. Which is exactly why you want software handling this, not a manual process.
What does "integrating with Fatoora" actually require?
Stripped of jargon, integration means your invoicing system can do four things:
- Produce invoices in ZATCA's structured XML format (a human-readable PDF alone is not enough).
- Register itself with the Fatoora portal — you log in with your VAT credentials and onboard the device/solution, which links your system to your VAT number.
- Transmit invoices to ZATCA — in near-real time for standard invoices (clearance), within a short window for simplified ones (reporting).
- Apply the required security features — each invoice carries identifiers and anti-tampering fields (UUID, hash chain, cryptographic stamp) that your software generates automatically.
Here's the honest good news for a small business: you should never touch any of this directly. These are software vendor problems. Your job is to pick a system that is compliant, onboard it through the Fatoora portal, and keep issuing invoices the way you always have.
From the platform: Staks issues clean, itemised VAT invoices from five professional templates, keeps every issued document immutable in your books, and posts each invoice into a real double-entry ledger automatically — so when your accountant or your integration deadline asks for structured, consistent invoice data, it's already there instead of scattered across Word files.
A six-step readiness plan
- Confirm your wave. Check your VAT-liable revenue for the relevant years against the thresholds above. If ZATCA has emailed or messaged your registered contact, the notification names your deadline — but the obligation applies even if you missed the message.
- Audit how you invoice today. Word, Excel, and paper books fail Phase 1, let alone Phase 2. If that's you, fixing it is step one regardless of your wave.
- Choose compliant software. Ask the vendor two direct questions: Are you compliant with ZATCA Phase 2 requirements? and Do you handle clearance and reporting, or do I need an add-on? Get the answer in writing.
- Clean your master data. Standard invoices need your customers' correct legal names and VAT numbers. Chasing 40 customers for VAT numbers the week before your deadline is the classic failure mode.
- Onboard via the Fatoora portal. Once your software is ready, onboarding is an administrative step — budget an afternoon, not a month.
- Run parallel for a billing cycle. Issue real invoices through the new flow while watching that totals, VAT amounts, and QR codes come out right. Fix issues while stakes are low.
What happens if I miss the deadline?
ZATCA has generally led with education first — warnings and correction windows before fines. But since 1 July 2026 it has been enforcing penalties for Wave 24 non-integration, and published penalty ranges for e-invoicing violations run from SAR 5,000 up to SAR 50,000 depending on the violation and repetition. Non-compliant invoices can also create problems downstream: a B2B customer whose input VAT claim rests on your invoice will not stay a customer for long.
The risk isn't only the fine — it's scrambling to change systems in a panic, mid-quarter, with revenue on the line. The businesses that had easy Phase 2 transitions are the ones that were already invoicing cleanly from software.
FAQ
I'm below SAR 187,500 in revenue. Can I ignore all this?
If you're not VAT-registered, e-invoicing doesn't apply to you yet. If you are registered (voluntarily), Phase 1 already applies — your invoices must come from a compliant system — and the wave pattern strongly suggests integration will eventually reach every registered business. Building on compliant software now costs nothing extra.
Do I need to buy a special ZATCA device?
No. Compliance lives in software. Cloud invoicing systems, POS systems, and accounting platforms can all be compliant solutions — what matters is the vendor's Phase 2 capability and your onboarding through the Fatoora portal.
What's the QR code on my invoices for?
It encodes the invoice's key data (seller, VAT number, timestamp, amounts) so it can be verified — customers and inspectors can scan it with the ZATCA app. Your software generates it; you never build it yourself.
Does e-invoicing change how much VAT I pay?
No. The 15% rate, your filing cadence, and your VAT math are unchanged. What changes is the format and transmission of invoices — and, in practice, the difficulty of getting VAT wrong, which is rather the point.
We also sell in the UAE. Is it the same system?
No — the UAE is rolling out its own e-invoicing mandate on a different model and timeline (pilot from July 2026, small businesses from July 2027). If you invoice in both countries, read our UAE e-invoicing guide.
Get compliant without the drama
The pattern across every ZATCA wave is the same: businesses with clean, software-issued invoices had a painless transition; businesses invoicing from Word had a bad quarter. If you're in the second group, the deadline is a good excuse to fix a workflow that was costing you time anyway.
Related reading: how to track expenses without a bookkeeper and quote, proforma, or invoice — what to send and when.
Staks gives you compliant, professional invoicing, expense tracking, and real double-entry accounting in one place — built for businesses in Saudi Arabia and the Gulf. Start your 14-day free trial →