If you’re running a business in Saudi Arabia in 2025, you must have heard about e-invoicing—especially since the Zakat, Tax, and Customs Authority (ZATCA) rolled it out. The idea was initiated back in 2020 when they first introduced the draft. Now, it’s become a must for businesses to follow these new digital invoicing rules.

ZATCA declared previously, from January 1, 2023, businesses must fully connect their invoicing systems with their platform. This change is happening in phases based on how big your business turnover is. And recently, they just announced “Wave 22” for Phase 2. If your business’s turnover is more than SAR 1 million, you must be fully integrated with the Fatoora Portal by the end of 2025.

Let’s walk through everything you need to know aboutZATCA E Invoicing in Saudi Arabia — from who needs it, the phases, important rules, penalties, and more.

What is e-Invoicing in Saudi Arabia?

E-invoicing is the digital version of those paper invoices we used to send and get. The difference is e-invoices are created and exchanged digitally, instead of printing out or scanning paper invoices, which makes everything faster and more accurate.

An e-invoice isn’t just a scanned copy of those paper invoices. It’s generated by your invoicing system in a special, machine-readable format (like XML) and also comes with a PDF version.

Structured Format: E-invoices are formatted so anyone can read them easily, which automates a lot of tasks.

Integration with ZATCA: Your invoices need to be created or validated through ZATCA’s system (called FATOORAH) or software that meets their standards.

Reporting: These invoices have to be reported on time.

Direct Transmission: If connected, invoices go straight from your system to the buyer’s.

Special Fields: They include unique details like an Invoice Reference Number (IRN) and a QR code, on top of the usual VAT info.

Who Needs to Use e-Invoicing?

If you’re a taxable person registered for VAT in Saudi Arabia—or if you’re required to register—this applies to you. That means businesses inside Saudi Arabia, whether they trade locally or internationally.

Also, if you’re a customer or third party issuing invoices on behalf of someone else, you’ve got to follow these rules too.

What Are the Obligations and Exceptions?

All VAT-registered businesses compulsorily issue e-invoices for all transactions that need tax invoices. This includes electronic credit and debit notes for goods and services taxed at standard or zero rates.

One important exception: if you’re a non-resident business (outside Saudi Arabia) supplying goods or services taxable in Saudi Arabia, you don’t have to issue e-invoices.

Getting Ready: ZATCA’s Compliance Guidelines

You need to keep in mind the following to stay compliant:

• E-invoicing covers all VAT-taxed goods and services, regardless of the VAT rate.

• All VAT-registered businesses (except non-residents) must use e-invoicing for sales, and any third parties invoicing for them must comply too.

• Invoices must be in Arabic language.

• They should be in XML or PDF/A-3 format with embedded XML.

• ZATCA E Invoicing is mandatory for all kinds of transactions—business to business (B2B), business to government (B2G), business to consumer (B2C), plus credit and debit notes.

• Your system needs to connect securely to ZATCA’s portal through APIs.

You’ll use special features like UUIDs, digital signatures, sequential invoice numbers, cryptographic stamps, and anti-tampering measures.

Types of e-Invoices You’ll Use

ZATCA recognizes mainly two types of e-invoices:

Standard Tax Invoice: This is mostly for B2B and B2G transactions. These include all the detailed info about buyers and sellers, especially their VAT registration numbers. Buyers use these to claim input VAT. These invoices need real-time cryptographic stamping and validation by ZATCA.

Simplified Tax Invoice: Usually issued from business to consumer (B2C). These invoices have fewer details, and buyers can’t claim VAT input. In Phase 1, these were just shared with customers, but in Phase 2, they must also be reported to ZATCA within 24 hours.

The Two Phases of e-Invoicing

Saudi Arabia is rolling out ZATCA E Invoicing in two big phases:

Phase 1 (Generation): Started December 2021. Businesses had to start creating e-invoices in the correct format, but there was no need to connect directly to ZATCA yet.

Phase 2 (Integration): Began January 2023. This is when businesses must link their systems directly with ZATCA’s FATOORAH platform. You’ll need to connect via APIs, generate UUIDs, add digital signatures, and more. Your invoices have to get ZATCA’s “clear” approval before you send them to your customers.

This phase is rolling out in waves, starting with the biggest businesses (over SAR 3 billion turnover) and moving down.

Who’s in Charge?

ZATCA (formerly GAZT) is the authority managing this entire e-invoicing system. They started with draft regulations back in March 2021 and finalized everything by May 28, 2021.

How Does the ZATCA E Invoicing Process Work?

It varies a bit depending on what kind of invoice you’re issuing and which phase you’re in. But the key is: by now, most businesses should be generating invoices digitally and sending them to ZATCA for validation. The system makes sure invoices are correct, untampered, and reported on time.

Penalties for Not Complying

ZATCA is pretty serious about this. They start with warnings, but repeat offenses lead to fines. Here’s a quick breakdown:

• Not issuing or storing e-invoices properly can cost SAR 5,000 to SAR 50,000.

• Wrong amendments or cancellations might cause fines between SAR 10,000 to SAR 50,000.

• Missing QR codes or VAT numbers on invoices usually start with warnings.

• If issues aren’t fixed in 3 months, fines increase for repeated violations — starting at SAR 1,000 and going up to SAR 40,000 for fifth offenses.

Why Go Digital? The Benefits of e-Invoicing

Saudi Arabia isn’t just doing this because it’s trendy — ZATCA E Invoicing brings some real perks:

Transparency: It makes all business transactions clear and helps ensure tax compliance.

Accuracy: Ensures less human error and smoother transactions.

Efficiency: Faster communication and payments, plus lower administrative costs.

Environmentally Friendly: Cuts down on unnecessary paper waste.

Fraud Prevention: Authorities can spot fraud quicker with real-time tracking.

How Peniel Technology Can Help You

If this all sounds a bit overwhelming, Peniel Technology offers multiple services and Federal Tax Authority (FTA) approved accounting software like Tally, QuickBooks, Sage Accounting Software, and Elate ERP to link with ZATCA’s platform. Our solution checks your data for errors, and assistance with VAT registration, return filing, and audit preparation to ensure compliance with Saudi Arabia’s regulations. This way, you can be sure you’re fully compliant without extra hassle.