If your business in Saudi Arabia had VAT-able revenue above SAR 187,500 in any year from 2022 to 2025, the Zakat, Tax and Customs Authority (ZATCA) expects your invoicing system to be connected to its Fatoora platform by 1 February 2027. That is Wave 25 of Phase 2, announced in July 2026, and it pulls thousands of smaller businesses into full e-invoicing integration for the first time.
This guide explains what Phase 2 means in practice, how to check whether you are included, and what to do in the months before the deadline.
Phase 1 and Phase 2 in one minute
Phase 1, generation, started on 4 December 2021. Since then, VAT-registered businesses have had to issue invoices electronically, with the required fields and a QR code, and stop using handwritten or edited invoices.Phase 2, integration, goes further. Your invoicing system must connect to Fatoora, issue invoices in ZATCA's structured XML format, and either get each invoice cleared or report it to ZATCA. ZATCA brings businesses into Phase 2 in waves, usually by revenue, and notifies each wave at least six months before its deadline.Am I in Wave 25?
You are in Wave 25 if your revenue subject to VAT exceeded SAR 187,500 in 2022, 2023, 2024 or 2025. The threshold is half the previous wave's, so many small businesses, clinics, shops and service firms that were outside earlier waves are now included. ZATCA notifies taxpayers directly, so check the messages in your ZATCA account.
Clearance and reporting: the two flows
- Standard tax invoices (business to business) are cleared. Your system sends each invoice to Fatoora, which validates it and stamps it before you share it with your customer.
- Simplified tax invoices (business to consumer) are reported. You give the invoice to the customer straight away and report it to Fatoora within 24 hours.
Both flows need a cryptographic stamp on every invoice, a QR code and a chain linking each invoice to the one before it. This is why Phase 2 is about your software, not just your invoice template.
A checklist for the months before the deadline
- Confirm your wave from ZATCA's notification and note the deadline.
- Check your invoicing system. Ask your provider whether it is Phase 2 compliant and supports both clearance and reporting.
- Onboard every device or system that issues invoices. This means generating a cryptographic stamp identifier through the Fatoora portal, passing ZATCA's compliance checks, then switching to production.
- Clean your master data. Customer VAT numbers, addresses and product tax categories must be right, or B2B invoices will be rejected at clearance.
- Test with ZATCA's sandbox before you go live, including credit notes and debit notes.
- Train the people who issue invoices on what happens when an invoice is rejected and how to correct it.
Common mistakes
The most common problems are wrong or missing customer VAT numbers on B2B invoices, editing an invoice after it has been issued instead of raising a credit note, and leaving one branch or point of sale on an old system. Each of these breaks the invoice chain ZATCA expects.
Phase 2 is not a new invoice design. It is a new way for your system to talk to ZATCA.
How Smartacy handles it
Smartacy, our AI-native ERP for GCC businesses, has ZATCA e-invoicing built into its core, so every invoice it issues, from shop sales to auction winner invoices, follows the same compliant path. You can try it against ZATCA's sandbox during the trial, and live e-invoicing is part of every paid plan. AI takes care of the routine checks, and anything that needs a decision comes to a person.
This article is general guidance, not tax advice. Always confirm your obligations with ZATCA or your tax adviser.