If you run a VAT-registered business in Saudi Arabia, you have almost certainly heard about ZATCA e-invoicing — the FATOORA programme run by the Zakat, Tax and Customs Authority. It rolled out in two phases, and the difference between them trips up a lot of business owners. This 2026 guide explains Phase 1 (Generation) and Phase 2 (Integration) in plain language: what each one requires, the key dates, and what actually changes for your day-to-day invoicing.
One quick note: Xrero (اكسريرو) is a cloud ERP and accounting platform — it is not the same company as Xero. We make no claim to be “ZATCA certified”; instead Xrero offers ZATCA Phase-2 support to help you produce compliant e-invoices.
Takeaway: Phase 1 was about generating and storing structured electronic invoices in the right format. Phase 2 adds integrating your system directly with ZATCA’s Fatoora platform — real-time clearance for B2B invoices and 24-hour reporting for B2C — plus a cryptographic stamp, UUID and QR code. Phase 2 is rolling out in waves through 2026, and the revenue thresholds keep stepping down to catch smaller businesses.
The two phases at a glance
ZATCA confirms there are exactly two phases. Phase 1 made e-invoicing mandatory for all resident taxpayers; Phase 2 connects your invoicing system to ZATCA itself. Here is how they compare.
| Aspect | Phase 1 — Generation | Phase 2 — Integration |
|---|---|---|
| What it means | Generate and store compliant electronic invoices | Connect your system to ZATCA’s Fatoora platform via API |
| Start date | 4 December 2021 | 1 January 2023, rolled out in waves |
| Who it applies to | All resident taxpayers (non-residents excluded) | Taxpayers grouped into waves by revenue threshold |
| Connection to ZATCA | None — no real-time transmission | Direct API integration with the Fatoora platform |
| Invoice format | Structured XML, or PDF/A-3 with embedded XML | XML with cryptographic stamp, UUID, QR code, sequential numbering |
| Standard (B2B) invoices | Generated and stored only | Cleared by ZATCA in real time before they are legally valid |
| Simplified (B2C) invoices | Generated and stored only | Given to the customer immediately, then reported to ZATCA within 24 hours |
Phase 1 (Generation): the foundation
Phase 1 started on 4 December 2021 and applies to all resident taxpayers. The idea was simple: stop issuing handwritten or free-form PDF invoices and move to a structured, machine-readable electronic format that is generated and stored by compliant software.
In practice, a Phase 1 invoice has to include required fields such as the seller name, VAT registration number, a timestamp, the total VAT and the total amount including VAT. Crucially, there is no real-time link to ZATCA in Phase 1 — you generate the invoice, hand it to your customer, and keep it on file. Think of Phase 1 as getting your house in order.
Phase 2 (Integration): connecting to ZATCA
Phase 2 began rolling out on 1 January 2023, and this is where things get more technical. Your invoicing system must integrate directly with ZATCA’s Fatoora platform through an API. Each invoice now carries additional security and tracking elements: a cryptographic stamp (digital signature), a UUID, a QR code and sequential numbering.
Phase 2 also splits the workflow by invoice type:
Standard tax invoices (B2B): clearance
Business-to-business standard invoices are submitted to ZATCA for clearance. They become legally valid only after ZATCA clears them and applies its cryptographic stamp. In effect, ZATCA approves the invoice in real time before you can rely on it.
Simplified invoices (B2C): reporting
Business-to-consumer simplified invoices work the other way around. You give the invoice to the customer immediately, and then report it to ZATCA within 24 hours of issuance. (You may see some blogs invert this — describing B2C as “cleared” and B2B as “reported.” That is incorrect: clearance = standard/B2B, reporting within 24 hours = simplified/B2C.)
Phase 2 waves and 2026 deadlines
ZATCA does not move every business to Phase 2 at once. Instead it announces waves, grouping taxpayers by their VAT-subject revenue and giving each group at least six months’ advance notice. The thresholds step down with each wave, gradually bringing smaller businesses into scope.
- Wave 23 — deadline 31 March 2026, for taxpayers whose revenues exceeded SAR 750,000 in 2022, 2023 or 2024.
- Wave 24 — deadline 30 June 2026, for taxpayers whose revenues exceeded SAR 375,000 in 2022, 2023 or 2024.
New waves are announced periodically, so treat the “latest wave” as a moving target. Always confirm your own wave and deadline on the official ZATCA site at zatca.gov.sa — if your revenue is approaching one of these thresholds, you may be next.
A quick word on Saudi VAT
E-invoicing sits on top of Saudi Arabia’s VAT system. The standard VAT rate is 15% (in force since July 2020), alongside zero-rated and exempt supplies. Your e-invoices must reflect VAT correctly regardless of which phase you are in.
Where Xrero fits
Xrero is an all-in-one cloud ERP and accounting platform built for the UAE and KSA, with full bilingual Arabic and English support. For Saudi businesses, Xrero offers ZATCA Phase-1 and Phase-2 support: it helps you produce ZATCA-compliant e-invoices (structured XML, QR code, cryptographic stamp and UUID) and integrate with the Fatoora platform.
To be clear about what that means: Xrero is not “ZATCA certified.” No vendor is, in a binding sense — ZATCA publishes only an indicative list of solution providers, and compliance is ultimately the taxpayer’s responsibility, verified through ZATCA’s own onboarding tools. What Xrero does is give you the software plumbing to meet the Phase-2 requirements without building it yourself. If your business is already deep in a Saudi-native, ZATCA-focused tool that fits you well, stay with what works — the honest answer is that the best choice depends on your setup.
See how Xrero supports ZATCA Phase-2 e-invoicing for your business.
Book a demoFrequently asked questions
What is the main difference between ZATCA Phase 1 and Phase 2?
Phase 1 (Generation) requires you to create and store invoices in a compliant structured electronic format, with no link to ZATCA. Phase 2 (Integration) requires your system to connect directly to ZATCA’s Fatoora platform via API, adding a cryptographic stamp, UUID and QR code, with real-time clearance for B2B invoices and 24-hour reporting for B2C invoices.
When did each phase start?
Phase 1 started on 4 December 2021. Phase 2 began rolling out on 1 January 2023 in waves grouped by revenue, with each wave given at least six months’ notice.
What is the difference between clearance and reporting?
Clearance applies to standard (B2B) invoices: they are submitted to ZATCA and become legally valid only after ZATCA clears them and applies its cryptographic stamp. Reporting applies to simplified (B2C) invoices: you give them to the customer immediately and report them to ZATCA within 24 hours of issuance.
Which Phase 2 wave applies to my business in 2026?
It depends on your VAT-subject revenue. Wave 23 (deadline 31 March 2026) covers revenues above SAR 750,000, and Wave 24 (deadline 30 June 2026) covers revenues above SAR 375,000 in 2022, 2023 or 2024. Thresholds keep stepping down, so verify your specific wave and deadline on zatca.gov.sa.
Is Xrero ZATCA certified?
No — and no software vendor is certified in a binding way. ZATCA publishes only an indicative list of solution providers, and compliance is the taxpayer’s responsibility. Xrero offers ZATCA Phase-2 support: it helps you produce compliant e-invoices (XML, QR code, cryptographic stamp, UUID) and integrate with the Fatoora platform.
What is the Saudi VAT rate?
The standard Saudi VAT rate is 15%, in force since July 2020, alongside zero-rated (0%) and exempt supplies.
This is general information, not tax/legal or purchasing advice — verify current details with the vendor and with ZATCA (zatca.gov.sa).