Saudi Arabia Expands E-Invoicing Regime to Cover More Businesses in 2025: Key Details

More businesses will be subject to e-invoicing compliance in Saudi Arabia by 2025 as the 15th and 16th waves of integration get implemented by March 1 and April, respectively. We discuss the criteria of applicability and how businesses can prepare.

By Melissa Cyrill

In a significant development aimed at further digitizing its economy, Saudi Arabia is set to expand its electronic invoicing (e-invoicing) system to a larger group of taxpayers from April 1, 2025. This move is part of the Kingdom’s broader effort to modernize its tax infrastructure, improve transparency, and boost compliance across industries.

The Zakat, Tax, and Customs Authority (ZATCA), which oversees tax regulations in the country, announced that businesses with turnover exceeding a specified limit will be required to comply with the expanded e-invoicing requirements.

This reflects Saudi Arabia’s long-term vision to streamline tax operations and enhance the efficiency of VAT collections, which play an increasingly important role in the Kingdom’s revenue system that is seeking to diversify beyond dependency on earnings from hydrocarbon assets.

Businesses covered by the new regulations must ensure their invoicing systems are fully integrated with ZATCA’s “FATOORA” platform, enabling seamless digital invoice issuance and validation.

The road to full e-invoicing in Saudi Arabia: A phased approach

The Kingdom has been progressively rolling out its e-invoicing system since the publication of its first regulations in 2021. The e-invoicing system, commonly referred to as FATOORA, aims to eliminate the use of paper-based invoicing in favor of digital systems that enhance accuracy, reduce fraud, and provide real-time monitoring of taxable transactions.

E-invoicing in Saudi Arabia is being implemented in two phases:

• Phase 1 (Generation): Launched on December 4, 2021, this phase required businesses to issue electronic invoices for all taxable transactions, replacing traditional paper invoices. However, at this stage, businesses did not need to integrate their systems with the tax authority.
• Phase 2 (Integration): Starting from January 1, 2023, the second phase requires businesses to link their invoicing systems with ZATCA’s FATOORA platform. This involves generating electronic invoices, which are then validated in real time by ZATCA before being issued to customers. As part of this process, businesses must ensure that their invoices contain additional elements, such as Invoice Reference Numbers (IRNs), QR codes, and cryptographic stamps.

The e-invoicing system is being rolled out in waves under Phase 2, targeting different taxpayer groups based on their annual revenue. The first wave, which took effect in January 2023, applied to businesses with annual revenues exceeding SAR 3 billion. Over time, this has expanded to cover smaller enterprises, and ZATCA recently announced the 15^th wave, which will begin on March 1, 2025.

Details of the 15^th and 16^th waves of e-invoice integration in Saudi Arabia

The 15^th wave will impact businesses whose VAT-taxable revenues exceeded SAR 4 million in 2022 or 2023. These businesses will need to integrate their accounting systems with ZATCA’s platform by March 1, 2025, six months before the April 1, 2025, deadline for the 16^th wave, which applies to businesses with SAR 3 million to SAR 4 million in taxable revenue.

Affected businesses must ensure their e-invoicing systems meet the following requirements:

• Format: Invoices must be generated in a structured, machine-readable format such as XML, along with a human-readable version in PDF/A-3 format with embedded XML.
• Integration: Businesses must connect their invoicing systems to ZATCA’s FATOORA platform via secure Application Programming Interfaces (APIs), allowing for real-time transmission of invoices.
• Additional Fields: E-invoices must include mandatory fields such as IRNs, QR codes, and digital signatures, ensuring the authenticity of the transaction.
• Reporting: Invoices issued to consumers must be reported to ZATCA within 24 hours, ensuring timely submission and reducing the risk of discrepancies.

What businesses need to do to prepare

As the deadline for the next waves of e-invoicing compliance in Saudi Arabia approaches, businesses are advised to take proactive steps to ensure their systems meet the necessary technical and regulatory requirements. ZATCA will notify affected businesses at least six months before their compliance deadline, providing ample time for system integration and testing.

Companies must assess their current invoicing software and ensure it is compatible with the FATOORA platform. This might involve upgrading existing systems or adopting new software that can generate invoices in the required formats, including the ability to attach digital signatures and generate unique identifiers for each transaction.

Additionally, businesses should ensure they have secure connections with ZATCA’s platform to transmit invoices in real-time, a critical component for compliance with the integration phase of the e-invoicing mandate. This includes implementing anti-tampering features, sequential numbering of invoices, and cryptographic stamps to guarantee the integrity of each invoice issued.

Benefits of e-invoicing for businesses and the Saudi economy

The expansion of e-invoicing offers multiple benefits for both businesses and the Saudi Arabian economy at large:

• Enhanced transparency: By requiring businesses to issue invoices digitally and report them in real time to ZATCA, the system enhances transparency and ensures that all taxable transactions are properly recorded.
• Reduced fraud and errors: E-invoicing eliminates the risks associated with manual invoicing, such as human error or the potential for fraud. The system’s cryptographic security features ensure that invoices cannot be tampered with once issued.
• Streamlined operations: Businesses that integrate their invoicing systems with FATOORA benefit from more streamlined operations. The real-time validation process reduces the administrative burden on businesses, making tax compliance more efficient.
• VAT compliance: The digital invoicing system ensures that businesses comply with VAT regulations, minimizing the risk of non-compliance penalties. This is particularly important for businesses involved in cross-border trade, as e-invoicing simplifies the process of claiming input VAT and ensures that all invoices meet regulatory standards.

Looking ahead: Saudi Arabia’s commitment to digitization

Saudi Arabia’s push toward a fully digital tax system is aligned with the Kingdom’s Vision 2030 initiative, which seeks to transform the economy through technology and innovation. By expanding the e-invoicing regime, Saudi Arabia aims to enhance the business environment, attract foreign investment, and position itself as a leader in digital governance in the region.

As the April 2025 deadline approaches, businesses across the Kingdom will need to adapt to the new system to ensure continued compliance. The expansion of e-invoicing is a critical step toward achieving Saudi Arabia’s long-term economic goals, providing a more transparent and efficient tax system for businesses of all sizes.

Businesses that are well-prepared for this digital transformation stand to benefit from smoother operations, reduced compliance risks, and improved financial oversight. As Saudi Arabia continues to innovate in the digital space, the expanded e-invoicing regime is set to play a key role in shaping the future of commerce in the Kingdom.

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