What is ZATCA e-invoicing?
ZATCA — the Zakat, Tax and Customs Authority (هيئة الزكاة والضريبة والجمارك) — runs Saudi Arabia's national e-invoicing programme, known as FATOORA or نظام الفاتورة الإلكترونية. It requires businesses to issue invoices in a structured digital format instead of paper, Word files or ordinary PDFs. The goal is simple: a tamper-proof invoice trail that the Authority can verify in real time.
Compliance is mandatory for every VAT-registered taxpayer in Saudi Arabia, and the programme runs in two phases.
Phase 1 (Generation) vs Phase 2 (Integration & Clearance)
| Phase 1 — Generation | Phase 2 — Integration | |
|---|---|---|
| Started | 4 December 2021 (large taxpayers) | 1 January 2023, rolled out in waves |
| What it requires | Generate e-invoices, add a QR code, prevent alteration after issue | Connect to the FATOORA portal via API, submit for clearance/reporting, cryptographically stamp and hash-chain every invoice |
| Format | XML or PDF/A-3 with TLV QR | UBL 2.1 XML with cryptographic stamp |
| Who it applies to | All taxpayers subject to the mandate | Every VAT-registered business, wave by wave |
Which wave is my business in?
ZATCA onboarded taxpayers in waves, starting with the largest revenue bands. The threshold has fallen steadily — from SAR 3 billion in wave 1 to SAR 375,000 by wave 24 in 2026. If you are VAT-registered and above the current threshold for your wave, Phase 2 applies to you. The safest assumption for any active Saudi business: prepare for Phase 2 now.
What Phase 2 technically demands
- UBL 2.1 XML — invoices must be generated in the standard UBL 2.1 format ZATCA specifies.
- TLV QR code — Phase 1 tags (seller name, VAT number, timestamp, invoice total, VAT total) encoded as a scannable TLV QR on every invoice.
- Cryptographic stamping — each invoice is signed with a certificate issued after your EGS (e-invoice generation solution) is onboarded.
- Invoice hashing — every invoice carries the hash of the previous one, forming a chain that makes retroactive edits detectable.
- Clearance vs reporting — B2B invoices are cleared by ZATCA before you issue them; B2C invoices are reported after issue.
- API integration — your software talks to the FATOORA portal through authenticated APIs, with compliance reporting back to your system.
Penalties for non-compliance
Fines for issuing non-compliant invoices start at SAR 5,000 for the first violation and double for repeats, plus the cost of unwinding incorrect invoices. Beyond fines, non-compliant businesses can face blocked VAT refund claims and reputational damage with auditors and enterprise buyers.
How to become compliant — a practical checklist
- Confirm your wave and deadline on the ZATCA portal.
- Register for the e-invoicing service and obtain your EGS onboarding credentials.
- Choose software that generates UBL 2.1 XML, TLV QR codes and cryptographic stamps natively.
- Test everything in the ZATCA sandbox before switching to production clearance.
- Train your team on credit notes, refunds and the clearance workflow.
- Keep an archive of cleared invoices — ZATCA expects them to remain accessible.
Where DMIndex Software fits
DMIndex Software is an accounting, POS and e-invoicing suite built for Saudi businesses: Phase 1 and Phase 2 out of the box, UBL 2.1 XML, TLV QR, cryptographic chaining, a sandbox simulation test suite and API integration logs — plus Arabic + English, 15% VAT handling and WhatsApp support. Request a free demo on WhatsApp or read our ZATCA compliance page for the full technical detail.
Frequently asked questions
Is ZATCA e-invoicing mandatory for small businesses in Saudi Arabia?
Yes — if you are VAT-registered and your revenue is above the threshold for your wave, e-invoicing applies. With wave 24's threshold at SAR 375,000, most operating businesses are covered.
Can I keep using PDF invoices?
Not as your system of record. Phase 2 requires structured UBL 2.1 XML cleared through FATOORA; a PDF with a pasted QR code is specifically not compliant.
How long does onboarding take?
Most small businesses go live in under 48 hours once VAT details and EGS registration are confirmed — our team handles the registration steps with you.