What Is ZATCA Phase 2? Fatoora and E-Invoicing Explained
A plain-language explainer of Saudi Arabia’s Phase 2 e-invoicing: what it is, how Fatoora works, and what your business actually has to do.
If you run a business in Saudi Arabia, you’ve heard of ZATCA Phase 2 and the Fatoora platform, but the details can be confusing, and the language is technical. This is the plain version: what ZATCA Phase 2 is, how it works, where the waves come in, and exactly what it requires of you.
ZATCA Phase 2 is the “Integration Phase” of Saudi e-invoicing: businesses must connect their billing systems to ZATCA’s Fatoora platform so invoices are validated electronically, in a structured format, in near real time.
What is ZATCA, and what is Fatoora?
ZATCA is the Zakat, Tax and Customs Authority: the Saudi government body responsible for tax, including VAT and e-invoicing. Fatoora is the platform businesses connect to in order to clear and report their electronic invoices. The whole programme is part of a national digital-tax modernization effort aimed at reducing fraud and improving VAT collection.
What changed between Phase 1 and Phase 2?
Phase 1 (the “Generation Phase”), which began in December 2021, required businesses to stop issuing handwritten or simple PDF invoices and start generating structured electronic invoices with required fields and a QR code. Phase 2 (the “Integration Phase”), which began rolling out from January 2023, goes much further: your system must integrate directly with ZATCA so invoices are transmitted, validated and returned electronically. Phase 1 changed how invoices are made; Phase 2 changes who has to approve them, and when.
How do clearance and reporting work?
There are two flows, depending on the transaction:
- Standard invoices (B2B/B2G) go through clearance, submitted to ZATCA and validated before they’re shared with the buyer. Until ZATCA clears it, the invoice isn’t valid.
- Simplified invoices (B2C) go through reporting: issued to the consumer immediately, then reported to ZATCA within 24 hours.
Every Phase 2 invoice carries a structured XML format, a unique identifier (UUID), a cryptographic stamp and a QR code, the elements that let ZATCA verify authenticity automatically.
What are the ZATCA waves?
ZATCA brought businesses into Phase 2 in waves, defined by annual turnover: largest first, then progressively smaller businesses. Each wave receives a notification with a window of at least six months before its compliance date. As the waves continue, the turnover threshold keeps dropping, pulling in ever-smaller businesses. Which is why companies that felt out of scope a year ago are now being notified. The single most important thing for any business is to know which wave it falls into and when its date is.
What does your business actually need to do?
- Confirm your wave, check ZATCA’s notification and your compliance date.
- Use a compliant system: an ERP or e-invoicing solution that can integrate with Fatoora and produce the required XML, stamp and QR.
- Integrate and test: connect to ZATCA in the sandbox, then validate formats, clearance and reporting end to end.
- Go live, issue cleared (B2B) and reported (B2C) invoices in production before your date.
How long does Phase 2 integration take?
It depends on your starting point. A business already on a modern, Fatoora-ready ERP may only need configuration and testing; one on legacy or disconnected systems needs an integration layer built and tested first. Because each wave gives a fixed window, the risk isn’t difficulty. It’s leaving it until the deadline is close. For the practical side of choosing and connecting a compliant system, see our guide to a ZATCA-compliant ERP in Riyadh and how to choose an ERP. If you also operate in Egypt, compare the regimes in ZATCA vs ETA.
At Watan First Solutions, we treat Phase 2 as an integration project, because that’s what it is.
Phase 2 isn’t paperwork. The work is connecting your systems to ZATCA before your wave lands.
Frequently asked questions
What is ZATCA Phase 2 in simple terms?
It’s the “Integration Phase” of Saudi e-invoicing: your billing system must connect directly to ZATCA’s Fatoora platform so invoices are generated in a structured format and validated electronically in near real time, rather than just produced as PDFs.
What is the difference between clearance and reporting?
Clearance applies to standard B2B/B2G invoices. They’re validated by ZATCA before being shared with the buyer. Reporting applies to simplified B2C invoices: issued to the consumer immediately, then reported to ZATCA within 24 hours.
What are ZATCA waves?
Waves are how ZATCA phases businesses into Phase 2, grouped by annual turnover: largest first, then progressively smaller ones, each with at least six months’ notice. The threshold keeps dropping over time, so smaller businesses keep entering scope.
When did ZATCA Phase 2 start?
Phase 1 (generation) began in December 2021; Phase 2 (integration) began rolling out from January 2023, with the largest businesses first and subsequent waves bringing in progressively smaller ones.
Do I need a new system for ZATCA Phase 2?
Not necessarily. You need a system that can integrate with Fatoora. That may mean configuring your existing ERP, adding a compliant connector, or adopting an e-invoicing solution, depending on what you run today.
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Need to connect your system to Fatoora before your wave? Let’s assess your setup and integrate in time.
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