ZATCA E-invoicing Phase Two (Integration): What Do You Need?

Many businesses receive the letter from the Zakat, Tax and Customs Authority (ZATCA) setting their integration date, only to discover that their invoicing software prints an invoice with a QR code but cannot connect to the Authority's platform. That is where e-invoicing phase two begins. In this phase, issuing invoices from electronic software is no longer enough: the system itself must connect to the Fatoora platform and send each invoice in a specific format. This article explains what the phase means in practice, who it applies to, and what to check in your system before the deadline.

From phase one to phase two: what changed?

Phase one (generation and storage) started on 4 December 2021. Businesses had to issue and store invoices electronically instead of by hand, with essential elements such as a QR code on simplified invoices.

Phase two (integration) adds three fundamental requirements, according to ZATCA:

• Integrating your invoicing system with the Fatoora platform, so invoices reach it automatically.
• Issuing invoices in a specific format: a structured XML file, or a PDF/A-3 with the XML embedded inside it.
• Additional invoice elements, such as a unique identifier for every invoice and a cryptographic stamp proving it has not been altered after issue.

In other words, phase one was about what the invoice looks like; phase two is about your system talking to the Authority and the integrity of the data.

Who does e-invoicing phase two apply to?

ZATCA rolls out phase two in successive groups, or waves, each selected by its revenue subject to VAT. The Authority notifies the businesses in each wave at least six months before their integration date.

The latest criteria ZATCA had announced at the time of writing are for wave 25: businesses whose VAT-able revenue exceeded SAR 187,500 in any one of the years 2022, 2023, 2024 or 2025. Their integration with Fatoora starts on 1 February 2027.

Two points to keep in mind:

1. Exceeding the threshold in a single year is enough, even if your revenue dropped afterwards.
2. ZATCA's letter and official website are the reference, not what circulates online. If you haven't been notified but think you may be included, check your account and the Authority's official channels.

Clearance and reporting: two invoice types, two paths

What confuses businesses most in this phase is that invoices are not all handled the same way. It depends on the type:

Tax invoices (business to business)

These are invoices you issue to a business or a government entity. They follow the clearance path: your system sends the invoice to Fatoora as soon as it is issued, the platform validates and clears it, and only then is it delivered to the customer. Your system therefore has to be connected to the platform at the moment of issue.

Simplified tax invoices (to individuals)

These are consumer invoices, such as point of sale receipts. They follow the reporting path: the customer gets the invoice straight away, and the system reports it to the platform within 24 hours. An internet outage at a branch won't stop sales, but the system must send any delayed invoices automatically once the connection is back.

The same applies to credit and debit notes: each one follows the path of the invoice it relates to.

The technical requirements your system must support

You don't need to be a developer to know what your system should do. Confirm these points with your system provider:

• Onboarding to Fatoora: every invoicing device or system receives its own cryptographic stamp certificate, using an activation code from the Fatoora portal.
• A unique identifier for every invoice, in a tamper-proof sequence that links each invoice to the one before it.
• The cryptographic stamp and QR code, with the elements ZATCA requires in this phase.
• The approved XML format, with a copy of every invoice kept exactly as it was sent.
• Handling rejections: if the platform rejects an invoice because of a wrong VAT number or address, the reason must be shown clearly so the employee can fix it.
• Complete customer data: tax invoices need the buyer's full details, including VAT number and national address. Missing data is one of the most common reasons for rejection.

Before going live, test your invoices in ZATCA's sandbox environment and make sure every type is accepted.

Practical steps to prepare before your integration date

If you've received the ZATCA notice, or expect to, here is a short action plan:

1. List every source of invoices in your business: the accounting software, point of sale in each branch, and any other system that issues invoices, such as a contracts system or an online store.
2. Ask each system provider directly: does it support phase two integration with Fatoora, and has it done this for other businesses?
3. Clean up customer data: complete the VAT numbers and national addresses of your business customers before integration, not after.
4. Register your invoicing devices in the Fatoora portal and connect them to your system.
5. Test tax invoices, simplified invoices and notes in the sandbox.
6. Train your staff to read rejection messages and correct them, and on what happens when the connection drops.
7. Start early: leaving preparation to the final week means any data error will stop you issuing tax invoices.

Is your current system enough, or do you need a new one?

Not every business has to change its system. If your software provider supports integration and keeps it up to date, an update and some configuration may be all you need. But many businesses discover at this stage that their invoices are spread across several systems that don't talk to each other, which doubles the integration problem.

That is where an integrated ERP becomes the practical choice: sales, point of sale, inventory and accounting in one system, connected to Fatoora from one place. For example, the Saudi edition of Odoo supports Fatoora integration and issues invoices in the required format, as does Subra for businesses looking for a ready-made system. Whatever system you choose, running it on stable infrastructure matters, because a tax invoice can't be cleared without a connection. If you host your own system, see our guide to choosing a VPS server.

The bottom line

E-invoicing phase two is not about how the invoice looks; it's about your system's connection to Fatoora and the integrity of every invoice. Tax invoices are cleared by the platform before delivery, and simplified invoices are reported within 24 hours. Start by listing your invoice sources, confirm your system supports integration, complete your customer data and test before the deadline. The criteria and dates for each wave come from ZATCA, so make its official website and the letter to your business your first reference. And if you need help preparing and integrating your system, the Role8 team can help.