What the generation phase and the integration phase of ZATCA e-invoicing each require, and how a newly registered company should prepare for both.
ZATCA's e-invoicing programme, known as FATOORA, has two phases. Phase one, the generation phase that began in December 2021, requires VAT-registered businesses to issue invoices electronically from a compliant system. Phase two, the integration phase that started in 2023, requires invoices to be connected to ZATCA's platform, and it is being applied to taxpayers in waves that ZATCA announces. A new company faces phase one from day one and should build for phase two before it is called.
Phase one (generation) at a glance
Invoices and credit and debit notes must be generated and stored electronically through a compliant solution, with the required fields and, for simplified invoices, a QR code. Handwritten invoices and editable documents such as word-processor files are not accepted. There is no real-time connection to ZATCA in this phase.
Phase two (integration) at a glance
Invoices must be produced in the prescribed structured format and the solution must be integrated with ZATCA's FATOORA platform. Standard tax invoices issued to businesses go through clearance before they are shared with the buyer, while simplified invoices issued to consumers are reported within a set period after issue. Taxpayers are notified of their wave in advance.
Who it applies to
Phase one (generation): All resident VAT-registered persons from the start of the programme, with limited exceptions set by ZATCA.
Phase two (integration): Taxpayers selected in waves, largely by revenue in a reference period, each notified by ZATCA with a go-live date.
Technical requirement
Phase one (generation): A compliant electronic solution that prevents tampering, stores invoices and prints the required fields and QR code.
Phase two (integration): A solution that produces structured XML invoices, applies cryptographic stamps, and connects through ZATCA's interfaces after onboarding each device or unit.
Invoice flow
Phase one (generation): Invoice issued by the seller to the buyer directly; ZATCA sees the data only through returns and reviews.
Phase two (integration): Business invoices cleared by ZATCA before delivery to the buyer; consumer invoices reported to ZATCA shortly after issue.
Effort for a new company
Phase one (generation): Low, provided the chosen software is on the compliant list or meets the published specifications.
Phase two (integration): Moderate to high: onboarding, testing on the sandbox, and integration with ERP or point-of-sale systems.
Failure risk
Phase one (generation): Non-compliant invoices expose the company to penalties and can cause buyers to reject input VAT claims.
Phase two (integration): Invoices that fail clearance cannot be validly issued, which can stop billing until the issue is fixed.
Vendor choice
Phase one (generation): Most local accounting and retail systems cover it as a standard feature.
Phase two (integration): Requires a provider with proven integration; ask for references of clients already live in earlier waves.
When phase one (generation) wins
- Applies to every VAT-registered resident taxpayer, so it is the baseline for any new company.
- Can be met by many off-the-shelf accounting and point-of-sale systems.
- Requires no onboarding with ZATCA systems beyond using a compliant solution.
- Lets a small new company comply quickly while volumes are low.
When phase two (integration) wins
- Gives ZATCA near real-time visibility of invoices, which reduces disputes about what was issued.
- Forces clean master data for customers and products, which improves reporting.
- Is increasingly expected by larger Saudi buyers and government entities.
- Prepares the company for a future in which all taxpayers are integrated.
- Reduces manual reconciliation between issued invoices and VAT returns.
How to decide
A new company does not choose between the phases: phase one applies immediately, and phase two applies when ZATCA notifies it. The real decision is whether to buy a system that only meets phase one and replace it later, or buy one that is integration-ready now. If the company expects to reach the revenue levels of recent waves within a few years, or sells to large buyers, buying integration-ready software avoids a second migration.
Check ZATCA's e-invoicing pages for the current wave criteria, the list of notified taxpayers' timelines and the technical specifications, and ask any software vendor to demonstrate an invoice passing clearance in the sandbox. A licensed adviser can confirm whether any exception applies to your activity.
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Frequently Asked Questions
Does a new company in Saudi Arabia need e-invoicing from the start?
Yes, once registered for VAT, a resident company must issue invoices through a compliant electronic solution under phase one. Integration under phase two applies when ZATCA includes the company in a wave. Choosing software that is already capable of integration usually saves a costly system change later, particularly for companies expecting rapid growth.
How do I know when my company must join FATOORA phase two?
ZATCA selects taxpayers for each integration wave, largely by revenue in a reference period, and notifies them directly with a go-live date and a preparation window. Watch the notices on your ZATCA portal account and the published wave announcements. If you are unsure whether you have been selected, ask ZATCA directly or have your adviser check.
What is the difference between clearance and reporting in Saudi e-invoicing?
Clearance applies to standard tax invoices between businesses: the invoice is sent to ZATCA's platform, validated and stamped before it is shared with the buyer. Reporting applies to simplified invoices for consumers: the seller issues the invoice immediately and reports it to ZATCA within a set period. Both are part of phase two integration.
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