ZATCA e-invoicing in Saudi Arabia: phases, requirements and software

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ZATCA e-invoicing, known as FATOORA, requires VAT-registered businesses in Saudi Arabia to issue invoices electronically in a specified format and, in the integration phase, to connect their invoicing systems directly to the Zakat, Tax and Customs Authority. Businesses are brought into integration in waves based on revenue, so the obligation reaches more small and mid-sized businesses each year. This guide explains the phases, the technical requirements in plain terms, how standard and simplified invoices are handled, and how to choose compliant software.

What ZATCA e-invoicing is

ZATCA e-invoicing is Saudi Arabia's mandatory electronic invoicing system for VAT. It aims to reduce tax evasion, improve transparency and modernise invoicing. Invoices must be generated by compliant electronic solutions, contain specific fields, and, in the second phase, be shared with ZATCA in real time or near real time.

VAT in Saudi Arabia is charged at 15% standard, with zero-rated supplies such as exports. Any business registered for VAT is within the scope of e-invoicing, whatever its size.

Phase 1: generation

Phase 1 began on 4 December 2021. From that date, VAT-registered businesses had to issue tax invoices and notes using an electronic solution, stop using handwritten invoices and simple editable formats, and include required fields such as the seller's VAT number and, for simplified invoices, a QR code. Phase 1 did not require connection to ZATCA's systems, but it established the electronic format and banned non-compliant practices such as invoices that can be edited after issue without trace.

Phase 2: integration

Phase 2, the integration phase, started on 1 January 2023 and is rolled out in waves. ZATCA notifies taxpayers in each wave, based on their VAT-subject revenue in a reference year, giving at least six months' notice before their integration date. Each wave has brought in businesses with lower revenue thresholds, so many small and mid-sized businesses are now in scope or will be soon.

In Phase 2, invoices must be produced in XML format (UBL 2.1), include a cryptographic stamp and specific technical fields, and be sent to ZATCA's FATOORA platform through an API, either for clearance before issue or for reporting after issue.

Standard vs simplified tax invoices

Saudi e-invoicing distinguishes two types:

• Standard tax invoices are issued for B2B and B2G transactions. In Phase 2 they follow the clearance model: the invoice is sent to ZATCA, validated and stamped before it is shared with the buyer.
• Simplified tax invoices are issued for B2C transactions, such as retail sales. They follow the reporting model: the seller issues the invoice to the customer and reports it to ZATCA within 24 hours.

Credit and debit notes follow the same model as the invoice type they relate to. Your software must handle both types correctly.

What an e-invoice must contain

Required fields include the seller's name, address and VAT number, the invoice number and a unique identifier (UUID), the issue date and time, a description of goods or services, quantities and prices, the VAT rate and amount, and totals. Standard invoices also need the buyer's name, address and VAT number. In Phase 2, invoices carry technical elements: a cryptographic stamp, a hash linking each invoice to the previous one, and, for simplified invoices, a QR code containing key data that customers can scan.

Invoices must be in Arabic, and may include another language alongside. Amounts should be shown in Saudi riyals, with conversion where another currency is used.

Prohibited practices

ZATCA rules prohibit invoicing solutions that allow invoices to be modified or deleted without trace, multiple invoice sequences that can hide sales, issuing invoices with the solution's time set incorrectly, and tampering with logs. Solutions must keep an audit trail and protect data integrity. Using a non-compliant solution can lead to penalties even if the invoices look correct.

Onboarding your solution

In Phase 2, each device or unit that generates invoices must be onboarded to ZATCA's system. The process typically involves generating a one-time password on the FATOORA portal, using it in your invoicing solution to request a cryptographic stamp identifier (a certificate), running compliance checks with sample invoices, and then switching to production. Your software vendor usually guides you through this. Multiple branches or point-of-sale terminals may each need onboarding.

Choosing compliant software

Choose invoicing, ERP or POS software that is compliant with ZATCA's Phase 2 requirements and supports your integration wave. Ask vendors to show:

• Phase 2 compliance for both standard and simplified invoices.
• Clearance and reporting through the FATOORA API.
• Onboarding support for each device or branch.
• Arabic invoice templates.
• Handling of credit and debit notes.
• Audit trail and data retention.
• Offline handling for POS terminals, with reporting within 24 hours.

See our Saudi Arabia page for global tools with prices in riyals, and the invoicing ranking and accounting software ranking for wider comparisons.

Preparing for your wave

1. Check ZATCA notifications and the FATOORA portal for your integration date.
2. List every system that issues invoices: accounting, ERP, POS, e-commerce, billing.
3. Confirm each system's Phase 2 readiness with the vendor, or plan replacements.
4. Clean customer data: VAT numbers, addresses and Arabic names.
5. Run onboarding and compliance tests well before the deadline.
6. Train staff on new processes for credit notes and corrections.
7. Monitor rejections and warnings after go-live.

Penalties

ZATCA can impose penalties for failing to issue e-invoices, issuing invoices without required fields, using prohibited solutions, failing to report or integrate on time, and failing to notify ZATCA of technical problems. Early in the rollout, ZATCA has generally issued warnings before fines, but businesses should not rely on that. Keep records showing your preparation and testing in case questions arise.

VAT returns and record keeping

VAT returns are filed monthly for businesses with annual taxable supplies above a threshold, and quarterly for others, with the return and payment due by the last day of the month following the period. E-invoicing data helps ZATCA cross-check returns, so make sure returns match your invoicing records. Keep invoices and records for the period required by law, which is several years. Our Saudi Arabia VAT calculator helps with quick sums.

Foreign businesses in Saudi Arabia

Non-resident businesses making taxable supplies in Saudi Arabia may need to register for VAT, often through a tax representative, and then e-invoicing rules apply to their invoices. Businesses selling into Saudi Arabia from abroad should get local advice. For invoicing international clients more generally, see how to invoice international clients. For hiring in the Gulf, see payroll in the UAE for the neighbouring market.

Common mistakes

• Assuming e-invoicing applies only to large companies.
• Missing ZATCA's notification of your integration wave.
• Onboarding only the main system and forgetting POS terminals or e-commerce.
• Invoices without Arabic text or required buyer details.
• Editing issued invoices instead of using credit notes.
• Leaving testing until the final weeks before the deadline.

Example: a small retailer in Riyadh

A small retailer with two shops and an online store in Riyadh issues simplified tax invoices for most sales and occasional standard invoices to business customers. When its integration wave was announced, it listed every invoicing point: two POS terminals per shop, the e-commerce platform and the accounting software used for B2B invoices. The POS vendor provided a Phase 2 update and onboarding for each terminal; the e-commerce platform used an integration partner; the accounting software already supported clearance for standard invoices.

The retailer ran compliance tests a few months before the deadline and found that some product names lacked Arabic text and some business customers' VAT numbers were missing. Fixing master data took longer than the technical setup. After go-live, staff checked the reporting status daily for the first weeks to make sure simplified invoices were reported within 24 hours, including those issued when the internet was down.

Offline sales and connectivity

Point-of-sale terminals sometimes lose connection. For simplified invoices, the reporting model allows the invoice to be issued to the customer and reported later, within 24 hours. Your POS must store invoices securely while offline and report them automatically once connected. For standard invoices under clearance, the invoice must be cleared before being shared, so plan for connectivity in locations that issue B2B invoices. If a technical failure prevents compliance, ZATCA expects to be notified, so know how to report problems.

E-invoicing for service businesses

Consultancies, agencies and software companies usually issue standard tax invoices to business clients, which require clearance. If you invoice from accounting software, make sure the vendor supports Phase 2 clearance, Arabic templates and credit notes. If you bill through a subscription billing platform, check whether it issues ZATCA-compliant invoices or whether you need to generate invoices in a separate compliant system. Many international billing tools do not support ZATCA natively, so an integration may be required. See how to invoice international clients if you also bill customers abroad.

Costs of compliance

Costs include software upgrades or new subscriptions, integration services if your system lacks native support, onboarding time for each device, staff training, and time to clean master data. Small businesses using cloud accounting or POS tools that already support Phase 2 often pay little extra beyond their subscription. Businesses with older or custom systems may face higher integration costs. Budget early, because vendors and integrators are busiest just before each wave's deadline. Compare tool prices in riyals on our Saudi Arabia page and recent changes in the software price tracker.

How ZATCA compares with other e-invoicing systems

Saudi Arabia's clearance model for B2B invoices is similar in spirit to systems in Egypt and India, where invoices are validated by the authority before or at issue. See e-invoicing in Egypt and GST e-invoicing in India for comparison. The UAE is introducing its own e-invoicing framework based on the Peppol model. Businesses operating across the Gulf and North Africa should choose systems that can handle several countries' requirements, or plan separate integrations.

Keeping invoices after go-live

After integration, keep monitoring. Review rejected or warning invoices daily at first, then weekly. Reconcile your VAT return with invoices cleared and reported to ZATCA. Keep onboarding certificates current, since they expire and must be renewed. When you add a branch, terminal or new system, onboard it before it issues invoices. Treat e-invoicing as an ongoing process, not a one-off project.

Data you need ready before integration

• Your VAT registration details and commercial registration number.
• Branch and device list with locations.
• Customer master data with VAT numbers and addresses for B2B customers, ideally in Arabic and English.
• Product and service names in Arabic.
• Invoice numbering rules per device or branch.
• Credit note and refund procedures.

Having this ready shortens onboarding and testing considerably.

Training your team

Staff who issue invoices need to understand three things: which invoice type to use for which customer, what details are required before an invoice can be issued, and how to handle returns and corrections through credit notes. Cashiers need to know what to do when the terminal is offline. Finance staff need to know how to read rejection messages and fix them. A short training session before go-live, plus a one-page guide at each terminal, prevents most early problems.

Questions