ZATCA e-invoicing Phase 2: a guide for Saudi businesses

What is ZATCA e-invoicing?

ZATCA e-invoicing is Saudi Arabia’s national e-invoicing system, run by the Zakat, Tax and Customs Authority (ZATCA). Under it, invoices, credit notes and debit notes are generated, exchanged and stored as structured electronic data, through an e-invoicing system that meets ZATCA’s requirements, rather than on paper or as editable documents. ZATCA is explicit that a paper invoice scanned or copied into electronic form isn’t an e-invoice.

The rules distinguish two kinds of invoice:

• Tax invoice: usually issued business to business (B2B) or to government, carrying every element a full tax invoice needs, including the buyer’s details.
• Simplified tax invoice: usually issued to consumers (B2C), with a shorter set of required elements.

ZATCA has rolled e-invoicing out in two phases: Phase 1 (generation) and Phase 2 (integration). Phase 1 applies to every resident VAT-registered business today. Phase 2 arrives business by business, in waves.

Phase 1 and Phase 2 at a glance

What is ZATCA e-invoicing Phase 2?

ZATCA e-invoicing Phase 2, the integration phase, connects your e-invoicing system directly to ZATCA. From your integration date, each invoice is issued as structured XML with additional fields, and ZATCA sees it either before or after the buyer does, depending on the type of invoice.

Before it can clear or report anything, each invoicing unit (a server, a till or a branch system) is onboarded with ZATCA and receives a cryptographic stamp identifier (CSID). The unit uses it to sign simplified invoices and to connect to ZATCA. Credit and debit notes follow the same route as the invoice they relate to.

Who is in scope for Phase 2, and when?

ZATCA brings businesses into Phase 2 in waves. For each wave it publishes a revenue threshold and the years it looks at, notifies the taxpayers in the wave directly, and gives them at least six months before their integration date.

Wave 25 was announced on 24 July 2026. Its threshold is half of wave 24’s, and it adds 2025 to the years ZATCA looks at.

To check where you stand, take your VAT-subject revenue for each calendar year from 2022 to 2025. If any single year exceeds SAR 187,500, plan for 1 February 2027 and look out for ZATCA’s notice. If you run more than one VAT-registered company, check each one separately.

What changes for your business in Phase 2?

Phase 1 changed how invoices are produced. Phase 2 changes when an invoice becomes valid, and who has to see it first.

• Every invoice and note goes through ZATCA. Standard tax invoices can’t be sent to a customer until ZATCA has cleared them; simplified tax invoices are reported within 24 hours.
• Each invoicing system is registered. Every unit that issues invoices is onboarded with ZATCA and holds its own CSID.
• The format is stricter. Invoices carry additional fields in ZATCA’s structured format, and ZATCA validates them against its rules.
• Exceptions need an owner. Someone has to deal with a rejected invoice or a connection problem quickly, because a B2B invoice isn’t valid until it’s cleared.
• Customer data matters more. A tax invoice carries the buyer’s details, so incomplete or badly formatted customer records stop invoices, not just reports.

Your Phase 1 obligations continue: invoices and notes are still generated and stored electronically.

How to prepare for your integration date

Use these lists to plan the months before your wave. Tick items as you go; your progress stays in this browser, and Print gives you a paper copy.

What should you ask an ERP or e-invoicing vendor?

Ask for demonstrations, not assurances. A vendor that already handles Phase 2 can show each of these in a test environment.

1. Show me a standard tax invoice cleared by ZATCA and a simplified tax invoice reported, end to end.
2. How is each invoicing unit onboarded, and who manages its CSID when it needs renewing?
3. Which documents are covered: tax invoices, simplified tax invoices, credit notes and debit notes?
4. What happens when ZATCA rejects an invoice, or when its platform doesn’t respond?
5. Does the e-invoice come from the same invoice that posts to the ledger, or from a copy in a separate tool?
6. Who updates the integration when ZATCA changes its specifications, and how quickly?
7. Is e-invoicing included in the price, or charged per invoice, per unit or per company?

For a wider set of questions, read how to choose an ERP. If you also trade in the UAE, its rules work differently: see our guide to the UAE e-invoicing mandate.

How 1flux fits