What is e-invoicing?
E-invoicing means issuing and storing invoices, credit notes and debit notes in a structured electronic format through a technical solution, instead of paper invoices, handwritten invoices, or invoices prepared in editable text files. The Zakat, Tax and Customs Authority (ZATCA) has implemented it in two phases: the first covers how the invoice is generated and stored, and the second covers integration with ZATCA's platform, known as FATOORA.
The practical goal for a business is not only regulatory compliance, but also a single sales record that is hard to manipulate and makes it easier to prepare and reconcile the VAT return.
Phase 1: generation and storage
Phase 1 took effect on 4 December 2021 for all taxpayers registered for Value Added Tax (VAT). Its main requirements are:
- Issue invoices from an electronic solution, and do not rely on handwritten invoices or general text-editing programs.
- Include the mandatory fields on the invoice, and show a QR code on the simplified tax invoice.
- Prevent editing or deleting an invoice after it is issued; corrections are made with a credit note or debit note.
- Protect the solution against tampering, and store invoices securely so they can be retrieved.
Phase 2: integration with the FATOORA platform
Phase 2 started on 1 January 2023 and is being rolled out in successive waves, set by taxable revenue in reference years. In this phase it is not enough to issue the invoice electronically; the invoice must also:
- Be generated in XML format according to the UBL 2.1 standard.
- Carry a cryptographic stamp using a certificate issued by ZATCA for each generation unit (CSID).
- Include an invoice counter (ICV) and the hash of the previous invoice (PIH) to guarantee an unbreakable sequence.
- Be sent to the platform for approval before delivery if it is a tax invoice (Clearance); a simplified tax invoice is reported within 24 hours of issue (Reporting).
Waves 24 and 25: are you included?
As a general rule, ZATCA defines each wave by a revenue threshold and reference years, then notifies the targeted businesses of their integration date in advance. The two most recently announced waves are:
| Wave | Selection criterion | Integration date |
|---|---|---|
| 24 | Taxable revenue above 375,000 SAR in 2022, 2023 or 2024 | From 1 April to 30 June 2026 |
| 25 | Taxable revenue above 187,500 SAR in any year from 2022 to 2025 | No later than 1 February 2027 |
Worked example: A pharmacy had taxable revenue of 290,000 SAR in 2023, 340,000 SAR in 2024 and 410,000 SAR in 2025, and was not notified for an earlier wave.
- Does Wave 24 apply? No, because its revenue in 2022–2024 did not exceed 375,000 SAR (the highest was 340,000).
- Does Wave 25 apply? Yes, because its revenue exceeded 187,500 SAR in more than one year within 2022–2025.
- Result: it must complete its readiness and integration before 1 February 2027.
A spare parts shop that made 520,000 SAR in 2024 and was not part of an earlier wave, on the other hand, falls within Wave 24 and had to integrate between April and June 2026.
Readiness checklist before the deadline
- Make sure your technical solution actually supports the Phase 2 requirements, not just printing a QR code.
- List your generation units: every point of sale, branch or device that issues invoices needs its own certificate.
- Update the details of your business customers, especially the VAT number and national address, because the tax invoice will not be cleared without them.
- Train staff to handle rejected invoices and credit notes.
- Make sure invoices are kept for no less than 6 years inside the Kingdom.
Starting early gives you time to test difficult cases such as returns, discounts and customers without a VAT number, instead of discovering them on your first day of live operation.
Questions business owners often ask
Are printed paper invoices prohibited? Printing is not what is prohibited; you can print the invoice and hand it to the customer, but it must originally be issued from an electronic solution and stored in it, and carry the required data and QR code. What is prohibited is an invoice written by hand or prepared in an editable file outside the solution.
Is updating my current software enough? That depends on whether the software can generate an XML file, apply the cryptographic stamp, connect to the platform, and process its responses. Ask your provider for a live demonstration of a tax invoice being cleared and a credit note being reported before you accept that the solution is ready.
What does delay cost? Missing the deadline exposes the business to penalties as determined by ZATCA, in addition to operational disruption if it has to switch over in a short time. So set yourself an internal deadline at least two months before the official one, and use those two months for testing, training and fixing issues.
Who is responsible inside the business? It is best to assign one person to follow the project from start to go-live, someone who understands both accounting and how the system works, and who acts as the link with the provider and ZATCA.