ZATCA E-Invoicing and VAT Compliance in Saudi Arabia: The Complete Guide
On 24 July 2026, ZATCA cut the e-invoicing threshold in half, to SAR 187,500 in annual VAT-subject revenue. Businesses that watched twenty-four waves pass over them without being caught are now in scope, with a deadline of 1 February 2027.
ZATCA e-invoicing, known as Fatoora, requires every resident VAT-registered business in Saudi Arabia to issue invoices electronically in a prescribed format. Phase 1 has applied to all taxpayers since December 2021. Phase 2 adds direct integration with ZATCA's platform and is rolling out in waves by revenue, now down to SAR 187,500.
Where ZATCA e-invoicing stands right now, in 2026
Wave 24 closed on 30 June 2026, covering businesses whose VAT-subject revenue exceeded SAR 375,000. Wave 25 was announced on 24 July 2026 and covers taxpayers whose revenue exceeded SAR 187,500 in 2022, 2023, 2024 or 2025. Those businesses must integrate with the Fatoora platform by 1 February 2027.
The threshold movement is the story. Wave 25 sits below the mandatory VAT registration threshold of SAR 375,000, which means it now reaches into the voluntary registration band. A business that registered for VAT voluntarily to reclaim input tax on its purchases is suddenly facing a full Phase 2 integration project.
ZATCA notifies affected taxpayers directly, and has committed to giving each wave at least six months' notice before its integration date. Waiting for that notification to arrive is a common and expensive choice. Six months is not a long runway for connecting an ERP or point-of-sale system to a government API, testing it in a sandbox environment, and moving it into production without breaking your invoicing.
If your VAT-subject revenue crossed SAR 187,500 in any single one of 2022, 2023, 2024, or 2025, assume you are in Wave 25 and start now.
Working through your Wave 25 position?
Greenloom's Zakat and VAT agent is in closed beta with finance teams in Saudi Arabia and the UAE. Join the beta list.
What is ZATCA e-invoicing (Fatoora), and who has to comply
Fatoora is Saudi Arabia's mandatory electronic invoicing system, run by the Zakat, Tax and Customs Authority. It applies to every VAT-registered taxable person resident in the Kingdom, and to third parties issuing tax invoices on their behalf. Non-resident taxable persons are exempt from issuing e-invoices.
An electronic invoice, under ZATCA's definition, is a tax invoice generated in a structured digital format through a compliant electronic system. A scanned paper invoice is not an e-invoice. A PDF typed up in a word processor is not an e-invoice. The distinction is the machine-readable structure, not the fact that a digital file exists somewhere.
The mandate runs in two phases, and the difference between them is where most of the confusion sits. This guide covers e-invoicing and VAT specifically; for Zakat, corporate income tax, withholding tax and RHQ incentives, see the full Zakat and business compliance guide.
Phase 1, the Generation phase, has been enforceable since 4 December 2021 for all taxpayers other than non-residents. It requires you to generate and store tax invoices and notes through a compliant electronic solution. Handwritten invoices and invoices produced in text editors or spreadsheets are prohibited. No connection to ZATCA is required at this stage.
Phase 2, the Integration phase, began on 1 January 2023 and is rolling out in waves by taxpayer revenue. It requires your e-invoicing solution to connect directly to ZATCA's Fatoora platform, issue invoices in a specified format, and carry additional mandatory fields.
Every resident VAT-registered business is already in Phase 1. Whether you are in Phase 2 depends on your wave.
Which wave am I in?
Your wave is set by VAT-subject revenue in specific reference years, not by your current turnover. Wave 23 covered revenue above SAR 750,000 and closed 31 March 2026. Wave 24 covered revenue above SAR 375,000 and closed 30 June 2026. Wave 25 covers revenue above SAR 187,500 and runs to 1 February 2027.
It adds 2025 as a reference year. Waves 23 and 24 both stopped at 2024. A business whose revenue only crossed the line in 2025 was outside every previous wave and is inside this one.
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And the criterion is a floor, not a band. ZATCA's wording is that the wave includes all taxpayers whose VAT-subject revenues exceeded SAR 187,500 in any of those four years. There is no upper limit that lets you out of it. If you somehow escaped the earlier waves, Wave 25 catches you.
Waves 1 through 22 ran from January 2023 to December 2025 and stepped the threshold down from SAR 3 billion to SAR 1 million, per ZATCA's own roll-out phases record. If any of those applied to you, your integration deadline passed some time ago.
What Phase 2 integration actually requires
Phase 2 adds six technical requirements on top of Phase 1: an API connection to Fatoora, a UUID on every invoice, a cryptographic stamp, a digital signature, a sequential invoice counter, and anti-tampering controls. Standard invoices must be cleared by ZATCA before they reach the buyer. Simplified invoices must be reported within 24 hours.
Clearance is the requirement that changes how a business operates, rather than just what its software does. For the field-by-field setup walkthrough, see our e-invoicing implementation guide.
A standard tax invoice is issued business to business or business to government. It carries the VAT registration numbers of both parties and it entitles the buyer to claim input VAT. Under Phase 2, it must be submitted to ZATCA and cleared in real time before it is legally valid and can be sent to the buyer.
A simplified tax invoice is issued business to consumer. It carries a QR code and does not entitle the buyer to an input VAT deduction. Under Phase 2 it is reported to ZATCA within 24 hours of issuance rather than cleared in advance.
Which one you issue depends on the transaction, not on preference.
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Type of supply Value Invoice type Taxable or zero-rated sales SAR 1,000 or more Standard Taxable or zero-rated sales Below SAR 1,000 Standard or simplified Intra-GCC sales and exports Any Standard Nominal sales Any Standard B2C sales Any Simplified Exempt supplies, imports, reverse charge Any Not applicable
Where a sale below SAR 1,000 goes to a business that wants to reclaim input VAT, it has to be a standard invoice. Retailers with mixed customer bases get this wrong routinely, and the cost lands on the buyer, who loses the deduction.
Invoices must be issued in XML, or in PDF/A-3 with the XML embedded. A plain PDF does not meet the requirement under any circumstances.
Arabic is mandatory on every invoice. Other languages may be added alongside it, but Arabic is the binding legal requirement rather than a preference, and it applies whether your customer reads it or not.
VAT in Saudi Arabia at a glance
Saudi Arabia's standard VAT rate is 15%, in effect since 1 July 2020 after being raised from the 5% introduced in January 2018. Registration is mandatory for businesses with annual taxable supplies above SAR 375,000 and voluntary for those above SAR 187,500. Non-residents making taxable supplies must register regardless of turnover. Use our VAT calculator to check any invoice or price instantly.
Not every supply sits at the standard rate, and the two exceptions are frequently confused. For VAT fundamentals from first principles, see our guide to what VAT is in Saudi Arabia.
Zero-rated supplies, including exports, are taxed at 0%. You charge no VAT, and you can still recover the input VAT you paid on related purchases.
Exempt supplies, including certain financial services and residential real estate, fall outside VAT entirely. You charge no VAT, and you cannot recover input VAT on related purchases.
The difference is not cosmetic. Treating an exempt supply as zero-rated inflates your recoverable input tax and produces an incorrect return.
On registration, ZATCA issues a 15-digit VAT registration number that must appear on every tax invoice you issue. That number is publicly checkable through our VAT registration lookup, and verifying a supplier's number before you claim input VAT on their invoice is worth the thirty seconds it takes. An invoice carrying an invalid registration number puts your deduction at risk.
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Returns are filed electronically through ZATCA's portal. Businesses with annual supplies above SAR 40 million file monthly. Everyone else files quarterly. Your filing frequency is set by annual supplies and does not change because a given month was busy. For the full filing walkthrough, see our VAT return filing guide.
Penalties, and what the fines waiver does not cover
ZATCA's fines waiver initiative was extended on 29 June 2026 for a further six months, running from 1 July 2026 to 31 December 2026. It excludes penalties on any tax return due for submission after 30 June 2026. ZATCA has stated that any future extension will carry the same exclusion.
This is the detail that most published summaries drop, and it changes what the waiver is actually worth.
The window is open until the end of December 2026. The returns it protects are frozen at 30 June 2026. A business filing a Q3 or Q4 2026 return gets no penalty relief from this initiative, no matter how many further times it is extended.
The waiver covers fines for late registration across all tax systems, late payment, late filing of returns, and corrections to VAT returns. To qualify, you must be registered with ZATCA, have submitted all outstanding returns, and have paid the full principal tax owed on them. Instalment plans are available if the application is made while the initiative is still running.
It does not cover penalties for tax evasion, fines imposed under Article 45 of the VAT Law, or fines already paid before the initiative took effect.
E-invoicing violations run on a separate track with their own logic. ZATCA has applied a warning-first principle since January 2022. Where a field inspection turns up an e-invoicing violation for the first time, the business receives a warning and guidance rather than a fine, along with a correction period.
The amounts differ by violation type. Failing to issue electronic invoices starts at SAR 5,000. A missing QR code on a simplified invoice, a missing buyer VAT number on a B2B invoice, or a failure to notify ZATCA of a malfunction that prevents e-invoicing all start with a warning. Fines escalate on repetition within a rolling twelve-month window, and the general ceiling under Article 45 of the VAT Law is SAR 50,000, per ZATCA's own violations and fines schedule.
The twelve-month window works in your favour if you fix the problem. Where a violation is not repeated within twelve months of the original notice, the cycle resets, and a later instance is treated as a fresh first violation.
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How Greenloom handles Zakat and VAT compliance
Greenloom's Zakat and VAT agent reads transaction data from your accounting system, prepares the VAT treatment for each line, and holds every filing and every clearance submission behind a confirmation gate. A named person on your finance team approves before anything reaches ZATCA. The agent never files on its own authority.
The confirmation gate is the design decision that shapes everything else, so it is worth being specific about how it behaves.
- Ingest. The agent connects to your ledger in Odoo, Zoho Books, or Tally and reads new transactions on a schedule you set.
- Classify. Each line is assigned a VAT treatment: standard-rated, zero-rated, exempt, or out of scope. Where the classification is unambiguous, the agent proceeds. Where it is not, the line is held.
- Flag rather than guess. A held line is surfaced with the reason it was held and the treatments that could apply. The agent states which one it would choose and why. It does not apply that choice.
- Assemble. Cleared lines are assembled into the invoice payload or the return, carrying the fields ZATCA requires: UUID, sequential counter, cryptographic stamp, and digital signature.
- Confirmation gate. The assembled output is presented for approval. A person reviews it, sees every held line and every assumption the agent made, and either approves, edits, or rejects. Nothing moves past this point without that action.
- Submit and record. On approval, the submission goes to Fatoora or the returns portal. The agent records what was sent, when, who approved it, and what came back.
- Learn within bounds. A treatment a person confirms is remembered and applied to matching future lines. It is shown as a remembered decision with the date it was set, so it can be reviewed or reversed at any time.
The gate exists because tax filing is not a domain where an autonomous system should hold the final action. A wrong classification that a person approved is a correctable error with a name attached to it. A wrong classification nobody saw is a liability that surfaces during an audit, years later, with no record of how it got there.
Greenloom is in closed beta and is not yet generally available.
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Want to see the confirmation gate working on your own ledger?
Greenloom's Zakat and VAT agent is in closed beta with finance teams in Saudi Arabia and the UAE. Beta members get early access and shape what we build next. Join the beta list.
Frequently asked questions
Am I in Wave 25 if my revenue was only above SAR 187,500 in one of the reference years?
Yes. The Wave 25 criteria published by ZATCA on 24 July 2026 apply to taxpayers whose VAT-subject revenue exceeded SAR 187,500 during 2022, 2023, 2024 or 2025. Crossing the threshold in any single one of those four years brings you into scope, even if your revenue has fallen since. There is no upper limit on the criterion.
What happens if I missed the Wave 24 deadline on 30 June 2026?
You are non-compliant and exposed to e-invoicing penalties. Start the integration now rather than waiting to be contacted. ZATCA's practice on a first inspection is generally a warning with a correction period rather than an immediate fine, but that is discretionary and not a guarantee. Confirm your specific position with a tax adviser.
Does the fines waiver cover my Q3 2026 VAT return?
No. The initiative running to 31 December 2026 excludes penalties on any tax return due for submission after 30 June 2026, and ZATCA has said the same exclusion will carry into any further extension. The waiver window and the returns it covers are two different dates, and most published summaries only report the first.
Do I need Arabic on my invoices if all my customers read English?
Yes. Arabic is a binding requirement under the VAT Implementing Regulations for every tax invoice, standard or simplified. You may add English or any other language alongside it, but an invoice without Arabic is non-compliant regardless of who receives it or where they are based.
What is the difference between clearance and reporting?
Clearance applies to standard B2B and B2G invoices under Phase 2. The invoice goes to ZATCA and must be cleared before it is legally valid and can be sent to the buyer. Reporting applies to simplified B2C invoices, which are issued to the customer first and transmitted to ZATCA within 24 hours of issuance.
Will ZATCA tell me when I am in scope?
ZATCA notifies targeted taxpayers directly and has committed to at least six months' notice before a wave's integration date. Relying on that notification is risky. Six months is a short window for connecting a live billing system to a government API, completing sandbox testing, and going into production without disrupting the invoicing your business runs on.
Can my existing accounting software handle Phase 2, or do I need something new?
It depends on the version and the vendor. Phase 2 requires an API connection to Fatoora, UUID generation, cryptographic stamping, a digital signature, and a sequential invoice counter. Many established platforms support this in current releases or through a certified middleware layer. Confirm with your vendor which specific version is Phase 2 capable rather than assuming an upgrade covers it.
Does e-invoicing apply to exports and intra-GCC sales?
Yes. Exports and intra-GCC sales require a standard tax e-invoice regardless of value. Zero-rating a supply removes the VAT charge, not the e-invoicing obligation. Exempt supplies, imports, and transactions under the reverse charge mechanism sit outside the e-invoicing requirement entirely.
Sources
- ZATCA, "ZATCA Determines the Criteria for Selecting the Targeted Taxpayers in Wave 25 for Integration Phase of E-invoicing," 24 July 2026.
- ZATCA, "ZATCA Determines the Criteria for Selecting the Targeted Taxpayers in Wave 24 for Integration Phase of E-invoicing," 26 September 2025.
- ZATCA, "ZATCA Announces the Minister of Finance's Decision to Extend the Exemption of Fines Initiative," 29 June 2026. zatca.gov.sa/en/MediaCenter/News/Pages/Cancellation-of-fines-Dec-2026.aspx
- ZATCA, "Roll-out phases." zatca.gov.sa/en/E-Invoicing/Introduction/Pages/Roll-out-phases.aspx
- ZATCA, "ZATCA releases the Violations and Fines related to E-invoicing." zatca.gov.sa/en/MediaCenter/News/Pages/News_465.aspx
- EY, "Saudi Arabia announces 23rd wave of Phase 2 e-invoicing integration," 27 June 2025. ey.com/en_gl/technical/tax-alerts/saudi-arabia-announces-23rd-wave-of-phase-2-e-invoicing-integration