What is E-Invoicing “Phase Two” in Saudi Arabia?
Saudi Arabia’s Zakat, Tax and Customs Authority (ZATCA) has been rolling out Phase Two (Integration Phase) of its Electronic Invoicing (“Fatoora”) regulation in incremental waves—requiring qualifying taxpayers to integrate their invoice-generation systems with ZATCA’s platform, comply with specific technical standards, and include additional invoice data fields. (zatca.gov.sa)
Key Update: Wave 25 Criteria & Deadlines
- Criteria: Taxpayers with VAT-subject revenues exceeding SAR 187,500 during any of years 2022-2025 are included in Wave 25. (zatca.gov.sa)
- Deadline: All entities in Wave 25 must be fully integrated by 1 February 2027. (zatca.gov.sa)
- Requirements: Integration means connecting the taxpayer’s invoicing solution to ZATCA’s Fatoora platform, issuing invoices in the required format, with additional fields like relevant metadata and compliance with technical specs. (zatca.gov.sa)
Who is Affected?
- Small and medium businesses whose revenues exceed SAR 187,500 in any assessment year between 2022-2025.
- Businesses currently under Phase One (Generation Phase) but not yet integrated.
- VAT agents and providers of invoicing or POS systems—to ensure their tools comply with Fatoora specs.
What to Do Now: Action Plan
- Identify revenue status: review your VAT-liable supplies in each of years 2022 through 2025 to see if you hit SAR 187,500.
- Assess current invoicing solution: determine if your system can connect to Fatoora; evaluate whether you comply with required fields, format, and technical/IT infrastructure.
- Plan integration timeline: build or procure integration during the months ahead; aim to complete all testing well before 1 February 2027.
- Train staff & update workflows: invoice issuance, returns, archiving, audit trails—ensure internal teams understand new fields, timing, format.
- Monitor ZATCA updates and guidance: phases may come with technical specifications, training materials, or adjustment windows. Stay informed via the official portal.
Compliance Risks & Incentives
- Penalties for non-compliance** can include fines for failing to issue e-invoices, or failing to integrate on time—and could lead to broader regulatory scrutiny.
- Enforcement is increasing: ZATCA recently conducted over 61,000 inspection visits in Q2 2026, uncovering failures related to electronic invoicing and VAT collection. (zatca.gov.sa)
- Digital readiness will increasingly correlate with tax compliance. Early adopters benefit from smoother operations and lower risk of audit issues.
Example Scenarios
- A retailer whose sales in 2022 were SAR 200,000 but jumped to SAR 300,000 in 2025 must comply with Wave 25 integration by Feb 1 2027.
- A small shop with revenues of SAR 150,000 throughout 2022-2025 stays in Phase One but may get included in later waves.
- A software provider for POS systems can adjust its product line to include Fatoora-compliant tools, offering integration services to clients and gaining competitive edge.
Takeaway for Digital Nomads and Cross-Border Businesses
Digital nomads working with Saudi clients should invoice according to Phase Two standards if their clients are subject to ZATCA requirements and provide services on a VAT-liable basis. For cross-border entities, invoice integrations might require additional localization or addressing multiple tax jurisdictions.
Bottom line: Wave 25 is real, with revenue thresholds and a fixed deadline. Assess where you stand, act ahead, and avoid penalties by integrating early and doing internal readiness work.