ZATCA Phase 1 vs Phase 2 is the difference between issuing electronic invoices on your own system and sending those invoices to ZATCA's Fatoora platform. Phase 1, the Generation Phase, has applied to every resident VAT taxpayer since 4 December 2021. Phase 2, the Integration Phase, started on 1 January 2023 and rolls out in waves: your system must connect to Fatoora, issue XML invoices and clear or report every document. Here's what changes for your invoices.
The short answer
- Phase 1 (Generation): since 4 December 2021, stop handwritten and text-editor invoices. Use a compliant electronic solution, store the invoices, put a QR code on simplified (B2C) invoices and keep prohibited functions out of the software. No connection to ZATCA is required.
- Phase 2 (Integration): from your wave's go-live date, onboard each invoicing unit on Fatoora, issue invoices as XML (or PDF/A-3 with embedded XML), clear standard (B2B) invoices with ZATCA before the buyer sees them, and report simplified invoices within 24 hours.
- What stays the same: you still issue tax invoices and simplified tax invoices, credit and debit notes, and you still archive them under the VAT rules.
- When Phase 2 hits you: ZATCA notifies each wave at least six months ahead. Wave 25 must integrate by 1 February 2027.
What Is ZATCA Phase 1?
Phase 1 is the Generation Phase. ZATCA's roll-out phases page says it became enforceable on 4 December 2021 for all taxpayers subject to the e-invoicing regulation (excluding non-resident taxpayers) and for anyone who issues a tax invoice on behalf of a resident supplier.
In practice, Phase 1 means three things, as ZATCA's Phase 1 preparation page and the Detailed Guidelines for E-Invoicing set out:
- A compliant electronic solution. Handwritten invoices and invoices made in word processors or spreadsheets no longer count. A paper invoice that is scanned or photographed is not an e-invoice.
- The right fields on each invoice type. Tax invoices (usually B2B) must include the buyer's VAT number when the buyer is VAT-registered, plus an invoice-type title. Simplified tax invoices (usually B2C) must carry a QR code generated by your system, plus the invoice-type title.
- No prohibited functions. The solution must not allow anonymous access, default passwords, silent tampering of invoices or logs, resetting the invoice counter, or running more than one invoice sequence on a unit at a time.
Phase 1 does not require a specific file format. You can generate invoices in any electronic format. There is no Fatoora onboarding, no cryptographic stamp from ZATCA and no real-time submission to the Authority.
What Is ZATCA Phase 2?
Phase 2 is the Integration Phase. It has applied in waves since 1 January 2023. On top of everything from Phase 1, your e-invoicing solution must integrate with ZATCA's Fatoora platform, issue invoices in the required technical format and include the extra fields in Annex 2 of the E-Invoicing Implementation Resolution.
ZATCA's Wave 24 announcement puts the Phase 2 extras in three lines: integrate with Fatoora, issue e-invoices in a specific format, and include additional fields. The Detailed Guidelines spell out what that means day to day:
- Format: generate invoices and notes as XML or as PDF/A-3 with embedded XML. Submissions to Fatoora are XML only.
- Onboarding: each e-invoice generation solution (EGS) unit that signs invoices gets a Cryptographic Stamp Identifier (CSID) through the Fatoora portal.
- Clearance for standard tax invoices: send the XML to Fatoora before you share it with the buyer. ZATCA validates it, adds its cryptographic stamp and QR code, and returns the cleared XML.
- Reporting for simplified tax invoices: stamp the XML with your unit's CSID, put a Phase 2 QR code on it, give it to the customer straight away, and report the XML to Fatoora within 24 hours of generation.
- Technical fields: UUID, previous-invoice hash, a counter that never resets, and the security features in the resolution.
For the step-by-step Fatoora onboarding flow (OTP, CSR, compliance checks, production CSID), see our ZATCA Phase 2 requirements checklist.
Side-by-Side: What Changes for Your Invoices
Use this table as a quick check of where you are today and what your wave date adds.
| Topic | Phase 1 (Generation) | Phase 2 (Integration) |
|---|---|---|
| Start date | 4 December 2021 for all resident taxpayers | From 1 January 2023, in waves; you get at least six months' notice |
| Core duty | Generate and store electronic invoices and notes | Do Phase 1, plus integrate with Fatoora |
| File format | Any electronic format | XML or PDF/A-3 with embedded XML; submit XML to Fatoora |
| Connection to ZATCA | Not required | Required through Fatoora APIs |
| Device / unit registration | Not mandated | Each signing unit onboarded; gets a CSID |
| Standard tax invoice (B2B) | Electronic invoice with required fields; QR optional | Cleared by ZATCA before sharing with the buyer; ZATCA adds stamp and QR |
| Simplified tax invoice (B2C) | Electronic invoice with a mandatory 5-field QR | Stamped by your solution; 9-tag QR; reported to ZATCA within 24 hours |
| Cryptographic stamp | Not mandated in Phase 1 | Required: ZATCA stamps standard invoices at clearance; your CSID stamps simplified invoices |
| Sharing with buyers | Any electronic format (simplified also as print) | Standard: XML or PDF/A-3 with embedded XML; simplified: print or agreed electronic/human-readable form |
QR Codes: Five Fields vs Nine Tags
The QR code is the change most people notice on a receipt.
In Phase 1, simplified tax invoices need a QR code with five pieces of information, as ZATCA's QR guidance and Phase 1 materials describe: seller name, seller VAT registration number, invoice timestamp, invoice total including VAT, and VAT total. On tax invoices the QR was optional.
In Phase 2, simplified invoices need a nine-tag QR in TLV Base64 form. The extra tags cover the hash of the XML, the ECDSA signature, the ECDSA public key and the signature of the stamp from ZATCA's certificate authority, on top of the original five. For standard tax invoices, ZATCA generates the QR string at clearance; your system prints the QR it receives back.
Clearance vs Reporting
Phase 2 splits invoices into two paths. Neither existed in Phase 1.
Clearance applies to standard tax invoices and their credit and debit notes. You send the XML to Fatoora first. If it passes validation, ZATCA stamps it and returns it; only then do you share it with the buyer. A rejected invoice is not shared: you fix the errors and submit a new document with its own hash and counter value.
Reporting applies to simplified tax invoices and their notes. The customer gets the invoice immediately. You must upload the XML to Fatoora within 24 hours of generation. The platform validates it and returns an API acknowledgement.
That 24-hour clock is why offline and van-sales setups need a queue: the system keeps trying until the connection is back, and ZATCA's guidelines describe how to notify the Authority when devices or networks fail for longer.
Who Must Move from Phase 1 to Phase 2, and When?
Everyone subject to the e-invoicing regulation is already on Phase 1. Phase 2 arrives by wave. ZATCA sets each wave by VAT-subject revenue over recent years and notifies the group at least six months before the integration date, as the roll-out phases page states.
Recent examples from ZATCA announcements:
- Wave 24: VAT-subject revenue above SAR 375,000 in 2022, 2023 or 2024; integrate by 30 June 2026 (ZATCA news).
- Wave 25: VAT-subject revenue above SAR 187,500 in 2022, 2023, 2024 or 2025; integrate by 1 February 2027 (see ZATCA Wave 25).
Until your wave's date, you stay on Phase 1. You may start Phase 2 earlier on a voluntary basis; ZATCA's FAQ in the Detailed Guidelines says that is allowed, but you are not required to until your notification date.
Can You Keep Your Phase 1 Software?
Often yes, if the vendor can upgrade it. ZATCA's FAQ says a taxpayer can keep the same E-Invoice Solution used for Phase 1 by updating it to meet Phase 2 requirements. If the software cannot produce XML, cannot onboard a CSID, cannot call the Fatoora APIs or still allows a prohibited function, you need a replacement before your go-live date.
ZATCA publishes an indicative Solution Providers Directory. Listing is not a legal requirement; compliance is judged on the solution's behaviour, and the responsibility stays with you.
A Practical Path from Phase 1 to Phase 2
- Confirm you are still Phase 1 compliant: electronic invoices only, required fields, QR on simplified invoices, no prohibited functions.
- Find your wave and date from your ZATCA email or SMS and your VAT-subject revenue.
- Ask your provider whether the current system can onboard on Fatoora, clear standard invoices and report simplified ones. Get the answer in writing against your go-live date.
- Count your EGS units (office systems, POS tills that sign, van devices, branch servers) so you know how many OTPs and CSIDs you need.
- Clean master data early: customer VAT numbers and addresses for B2B, item names and VAT treatment. Clearance rejects bad data.
- Test in ZATCA's sandbox or Fatoora simulation, then onboard in production well before the deadline. Our Phase 2 checklist walks through each portal step.
How Raad ERP Helps
Raad ERP is a cloud ERP for trading, van sales, retail and manufacturing businesses in the GCC. For Saudi Arabia it covers ZATCA Phase 1 and Phase 2: every invoice and receipt carries the required QR code, and Phase 2 documents are sent to ZATCA in the background once your units are onboarded.
Shops can add Raad POS so tills print ZATCA receipts and feed sales into the same system. When you migrate, the team imports products, customers and opening balances and trains your staff, which is a natural moment to fix the data Phase 2 clearance depends on. See Raad ERP for the feature list.
Frequently Asked Questions
What is the difference between ZATCA Phase 1 and Phase 2?
Do I still need Phase 1 once Phase 2 starts?
When does Phase 2 apply to my business?
Is a QR code required in Phase 1 and Phase 2?
What is clearance vs reporting?
Can I keep the same software I used for Phase 1?
What file format does Phase 2 require?
Does Phase 1 require connecting to Fatoora?
Moving from Phase 1 to Phase 2?
Tell us which wave you are in and how many devices you invoice from. We will map what changes for your invoices and what onboarding looks like.
WhatsApp "ZATCA" to +971 56 102 1565 and we'll reply quickly.
Selling in the UAE too? Different rules apply. Read UAE E-Invoicing 2027 Made Simple.
This article is general information only and is not legal, tax or professional advice. Regulations, including ZATCA, UAE Ministry of Finance and FTA requirements, change often, and this content may be incomplete, out of date or contain errors. Before you act on it, check with the official authority (ZATCA in Saudi Arabia, or the Ministry of Finance or Federal Tax Authority in the UAE) or a qualified tax adviser. Raad ERP makes no warranties about the accuracy or completeness of this content and accepts no liability for any loss arising from reliance on it. Links to third-party websites are provided for convenience and are not endorsements.