E-Invoicing for Small Businesses: Phases, Waves, and How to Prepare

Phase 1: Generation (since December 2021)

Phase 1, the Generation phase, began on 4 December 2021 and applies to every VAT-registered taxpayer without exception. In this phase you must issue your invoices and your credit and debit notes through a compliant electronic solution instead of handwriting them or using paper invoice books.

• Issuing the invoice electronically in a structured format and storing it digitally.
• Including a scannable QR code on the simplified tax invoice.
• Including all mandatory fields such as the seller name, VAT registration number, issue date, and tax amount.
• Not using handwritten invoices or ones prepared in a plain editable text editor.

Phase 2: Integration (in waves)

Phase 2, the Integration phase, links your electronic solution directly to ZATCA's platform (Fatoorah) so that invoices reach the authority the moment they are issued. A full tax invoice (for business-to-business dealings) is cleared by the authority before it is handed to the buyer, while a simplified invoice (for retail customers) is reported to the authority within twenty four hours of issuance. This phase does not start for everyone at the same time. It is applied in waves.

The technical obligation in this phase is broader than mere generation. It involves a specific technical setup that your solution or provider must offer.

What Phase 2 Requires Technically

• A compliant e-invoicing solution able to connect to ZATCA's platform through an application programming interface (API).
• A cryptographic stamp that proves the invoice came from a trusted source and was not altered.
• A QR code on every invoice that matches the authority's requirements.
• Issuing invoices in XML format, or in PDF/A-3 format embedded with an XML file.
• A one-time onboarding to obtain the compliance cryptographic certificate for each issuing device.

In most cases your compliant accounting software or point-of-sale provider handles these requirements on your behalf, so your most important decision is choosing an approved solution before your notice arrives.

How ZATCA Selects Businesses into Waves

ZATCA brings businesses into the Integration phase in successive batches. The main selection criterion is the total annual VAT-taxable revenue for a reference year set by the authority. The earliest waves covered the largest taxpayers with the highest revenue, and the thresholds then step down gradually to include smaller businesses with each new wave.

1. ZATCA sets a revenue threshold for the wave, and every business whose revenue exceeded that threshold in the reference year is included.
2. ZATCA sends an official notice to the selected businesses roughly six months before their integration date.
3. The notice specifies the mandatory integration date by which your solution must be integrated.
4. ZATCA continues announcing later waves with lower revenue thresholds until small businesses are gradually covered.

An important note: the revenue thresholds and wave dates change over time and are announced by the authority for each wave separately, so do not rely on a fixed figure. Follow the authority's announcements and check your annual revenue against the threshold published for each wave.

How a Small Business Should Prepare Before Its Notice

1. First, confirm full compliance with Phase 1: electronic issuance, a QR code, and correct mandatory fields.
2. Calculate your total annual VAT-taxable revenue to estimate roughly where you fall among the expected waves.
3. Choose an invoicing program or point-of-sale system that is compliant with Phase 2 requirements and listed among the approved solutions.
4. Update your business details with the authority, especially your email and mobile number, so the notice reaches you on time.
5. When the notice arrives, complete the onboarding procedure and test issuing a trial invoice before the mandatory date.
6. Record the integration date in a tax compliance calendar so the deadline does not pass unprepared.

Early preparation protects you from late-compliance penalties and from disrupting your invoicing at the last minute. It is best to choose a compliant solution before the notice arrives so you are ready as soon as your integration date is set.

Frequently asked questions