The Kingdom of Saudi Arabia is undergoing a massive digital transformation, and the cornerstone of this change in the business sector is the ZATCA e-invoicing mandate. While Phase 1 (the Generation Phase) focused on getting businesses to issue digital invoices, Phase 2, known as the Integration Phase, is about connecting your systems directly to the government’s.
If your business operates in Saudi Arabia, understanding the rolling deadlines and turnover thresholds for ZATCA Phase 2 isn’t optional, it’s essential to avoid steep penalties and maintain smooth operations.
What is ZATCA Phase 2 (The Integration Phase)?
Phase 2, which began on January 1, 2023, is the process of integrating your company’s accounting or ERP system with the ZATCA (Zakat, Tax and Customs Authority) platform, known as Fatoora.
This phase requires more than just generating a digital document; it mandates:
- Real-Time Clearance (B2B): For Tax Invoices (business-to-business), your system must send the invoice to ZATCA for validation and clearance before it’s issued to the customer.
- Near Real-Time Reporting (B2C): For Simplified Tax Invoices (business-to-consumer), your system must report the invoice data to ZATCA within 24 hours of issuance.
- Enhanced Security: Invoices must include new technical fields, such as a Cryptographic Stamp, a unique UUID, and a digital signature, all designed to ensure the data’s integrity and prevent tampering.
The Rolling Waves: How to Identify Your Deadline
To make the transition manageable, ZATCA is rolling out Phase 2 in successive waves, or groups, based on a business’s annual VAT-taxable turnover. This means the largest businesses were first, and the compliance mandate is gradually trickling down to smaller enterprises.
The Golden Rule: ZATCA officially notifies taxpayers of their applicable wave at least six months before their integration deadline. However, it’s the business’s responsibility to proactively check its turnover against the published thresholds.
Key Turnover Thresholds and Deadlines
The criteria for inclusion in a wave is your total VAT-taxable turnover during either 2021, 2022, 2023, or 2024 (depending on the wave).
Here is a look at how the compliance waves are progressing across Saudi Arabia:
| Wave Example | Turnover Threshold (Highest in 2022, 2023, or 2024) | Integration Deadline (Approximate) |
| Early Waves | Exceeding SAR 500 Million | Already Passed (Mid-2023) |
| Middle Waves | Exceeding SAR 10 Million | Early 2025 |
| Latest Waves | Exceeding SAR 1 Million | Q4 2025 |
| Upcoming Waves | Exceeding SAR 375,000 | Q2 2026 |
The trend is clear: the threshold is continually dropping to include more and more businesses. For instance, ZATCA has announced that businesses with an annual taxable turnover as low as SAR 375,000 (during 2022, 2023, or 2024) are now being phased in, with an expected integration deadline around June 30, 2026.
Action Item: If your business is VAT-registered in Saudi Arabia and your annual revenue is above SAR 375,000, you are almost certainly included in one of the upcoming ZATCA Phase 2 waves.
Preparing Your Business for Integration
Preparation is the only way to ensure a smooth transition and avoid the financial penalties that come with non-compliance.
- Verify Your Wave: Immediately calculate your highest VAT-taxable revenue from the relevant years (2022, 2023, or 2024) to pinpoint your mandatory integration date.
- Choose Compliant Software: Your current invoicing system or ERP must be able to meet the technical requirements of Phase 2. This means it must support API connectivity with the Fatoora portal, generate the required cryptographic stamps, and format the invoice correctly (XML or PDF/A-3 with embedded XML).
- Start Early: ZATCA provides a six-month window for a reason. Use this time to test your system integration, train your staff on the new real-time process, and stabilize your invoicing flow. Delaying until the final weeks dramatically increases the risk of system failure and compliance breaches.
The e-invoicing mandate in Saudi Arabia is a permanent shift toward digital tax reporting. By understanding the rolling deadlines and thresholds of ZATCA Phase 2, your business can turn a compliance obligation into an opportunity for greater efficiency and security.
For more info on ZATCA Phase 2, contact +966 56 927 1692