ZATCA E-Invoicing in Saudi Arabia: Your Complete 2025 Compliance Guide
Introduction
Saudi Arabia is transforming its tax and business environment at a speed. Maybe the biggest accomplishment along the way is to have the ZATCA e-invoicing, or FATOORA. Not only does it make business easier to do, but it raises transparency, reduces fraud, and puts the Kingdom on the world's best practice level. If you are a financial professional, accountant, or Saudi Arabian businessperson, knowledge of ZATCA e-invoicing is now a must.
What is ZATCA E-Invoicing?
ZATCA e-invoicing is mandatory by the government, and companies are required to generate, store, and send invoices digitally. ZATCA introduced it to eliminate paper invoices and replace them with secure, standardized electronic invoices. The system can record all taxable transactions precisely and traceable.
E-invoicing in Saudi Arabia is being implemented in two stages:
Generation Phase (Phase 1): From December 4, 2021, all VAT-registered companies are required to generate and keep invoices electronically using compatible software.
Integration Phase (Phase 2): As of January 1, 2023 (in phases based on annual revenues), companies are required to integrate their billing systems with the FATOORA system of ZATCA to clear and report bills in real-time.
Types of E-Invoicing in Saudi Arabia
There are two main types of e-invoices known to ZATCA:
| Type | Use Case | Key Requirements |
|---|---|---|
| Tax Invoice | B2B and B2G transactions | Buyer VAT number, line items with information, voluntary QR code |
| Simple Tax Invoice | B2C sales (retail, services) | QR code needed, vendor data, VAT split, subtotal amount |
Furthermore, credit and debit notes related to these invoices need to be issued electronically as well as in ZATCA format.
E-Invoicing Scope in Saudi Arabia
E-invoicing applies to:
- Throughout Saudi Arabia, all VAT-registered Saudi Arabian businesses, including sole traders and practitioners.
- Third-party issuers of tax invoices for and on behalf of VAT-registered parties.
- Exemptions: Non-resident enterprises are exempted except where they charge in the name of resident taxpayers.
E-Invoicing Scope in Saudi Arabia
ZATCA is implementing Phase 2 in waves on a yearly basis based on taxable income. For instance, companies with more than SAR 1 million must meet the requirement by December 31, 2025 (Wave 22). Small businesses are already affected by earlier waves.
ZATCA E-Invoicing Advisory Guidelines
- Utilize ZATCA-approved invoice software that can print invoices in the stipulated XML format (PDF/A-3 with XML embedded is also acceptable).
- Complete all of the required fields of the invoice: buyer VAT number and seller VAT number, invoice date and time, one-of-a-kind invoice number (UUID), digital signature, and, if the invoice is B2C, a QR code.
- Issue ZATCA invoices for real-time clearing (Phase 2) in such a manner that every invoice is stamped and cryptographically witnessed.
- Preserve all electronic invoices for at least six years.
- Don’t make handwritten corrections on invoices at the time of releasing them since it is strictly prohibited.
Standard Compliance Process
- Prepare the invoice on compliant software.
- Digitally sign and generate a unique identifier.
- Pass the invoice to ZATCA’s platform to be cleared (Phase 2).
- Confirm and present the invoice to the customer.
- Archive the invoice securely.
Benefits of ZATCA E-Invoicing
E-invoicing outsourcing has some advantages for firms
- Improved Efficiency: Streamlines invoice processing with fewer errors and less manual intervention.
- Cost Savings: Conserves paper, printing, and storage expense.
- Enhanced Accuracy: Real-time verification assures accuracy of the assistantcdot.
- Protection from fraud: Invoices are rendered tamper-proof by virtue of QR codes and digital signatures.
- Environmental Sustainability: Reduces paper usage and encourages environmentally friendly operations.
- Simplified Audits: Computerized records are simpler to search, retrieve, and send to auditors or regulatory bodies.
E-Invoicing Penalties for Non-Compliance
It has rigorous default sanctions, which are:
| Offense | Fine (SAR) |
|---|---|
| Non-issue/non-maintenance of e-invoices | 5,000–50,000 |
| Absence of QR code in simplified bills | 5,000–50,000 |
| Unauthorized invoice modifications | 10,000–50,000 |
| Neglect to report system faults | Warning to 50,000 |
There are penalties imposed per infraction and can escalate on repeated infractions.
Conclusion: How PACT Can Help
It is difficult to handle ZATCA e-invoicing compliance, particularly when legislations are being updated and deadlines are looming. PACT provides a powerful, ZATCA-compliant e-invoicing solution that automates the entire process, from invoice generation and real-time dispatching to safe storage and reporting. With PACT, your company can prioritize growth with the assurance that your invoicing operations are efficient, accurate, and completely compliant.
Find out more about PACT's ZATCA e-invoicing solution and how it can enable your organization to be at the forefront of compliance.
PACT Saudi E-Invoicing Solution
Frequently Asked Questions (FAQs)
How do you best identify what ZATCA wave or phase my business is in?
Verify your taxable income and check ZATCA’s official publication or website for the new wave assignments and deadline.
Are QR codes obligatory to print on all invoices?
Simple B2C invoices need QR codes, but tax B2B invoices do not.
Do non-resident corporations have to comply?
No, except for the preparation of invoices on behalf of resident VAT-registered traders.
How long must I keep e-invoices?
All electronic invoices shall be kept electronically for a minimum of six years.
What if I am late in complying?
Non-compliance may result in enormous financial fines and potential disruption to business. Remain compliant, effective, and penalty-free—welcome e-invoicing with confidence
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