Businesses across Saudi Arabia are preparing for the next wave of e-invoicing requirements. If your company had VATable revenue exceeding SAR 375,000 in 2022, 2023, or 2024, your integration deadline is June 30, 2026. For those with revenue above SAR 750,000, the deadline is March 31, 2026.
ZATCA Phase 2 Compliance: A Complete Guide for Saudi Businesses in 2026
Is your ERP ready for ZATCA Phase 2?
Businesses across Saudi Arabia are preparing for the next wave of e-invoicing requirements. If your company had VATable revenue exceeding SAR 375,000 in 2022, 2023, or 2024, your integration deadline is June 30, 2026. For those with revenue above SAR 750,000, the deadline is March 31, 2026.
This is not just about generating invoices anymore. Your ERP system must now connect directly to ZATCA’s Fatoora portal for real-time clearance and reporting.
The right ERP solution makes this transition seamless. The wrong one leaves you facing penalties ranging from SAR 5,000 to SAR 50,000.
This guide explains what your ERP needs to do for ZATCA PHASE 2 COMPLIANCE and how SAGE X3 ERP delivers the capabilities you need.
What Your ERP Must Do for ZATCA Phase 2
ZATCA PHASE 2, also known as the Integration Phase, is the second stage of Saudi Arabia’s e-invoicing (Fatoorah) mandate. While Phase 1 (December 2021) required businesses to generate and store electronic invoices with QR codes, Phase 2 requires your ERP system to:
- Connect via real-time API to ZATCA’s Fatoora portal
- Generate invoices in XML or PDF/A-3 format with embedded XML
- Apply cryptographic stamps (digital signatures) using ZATCA-issued CSID
- Create unique identifiers (UUID) and sequential hashing for invoice integrity
- Generate compliant QR codes with five mandatory fields
The rollout is happening in waves based on business revenue. ZATCA typically provides a six-month notice before each wave’s deadline.
Key Deadlines for 2026
Wave | Revenue Threshold | Deadline |
Wave 23 | > SAR 750,000 (2022-2024) | March 31, 2026 |
Wave 24 | > SAR 375,000 (2022-2024) | June 30, 2026 |
Wave | Revenue Threshold | Deadline |
Wave 23 | > SAR 750,000 (2022-2024) | March 31, 2026 |
Wave 24 | > SAR 375,000 (2022-2024) | June 30, 2026 |
ZATCA has extended the fines exemption initiative through June 2026, giving businesses a grace period to correct procedural errors. However, this does not mean compliance can be delayed — your ERP integration must still be completed by the assigned deadline.
Two Integration Models Your ERP Must Support
ZATCA PHASE 2 uses two different integration models depending on the type of transaction. Your ERP system must support both:
- Clearance Model (B2B / B2G)
Used for transactions between businesses (B2B) or with government entities (B2G). In this model:
- Your ERP generates the invoice
- It sends the invoice to ZATCA’s Fatoora portal for real-time validation
- ZATCA validates, applies a cryptographic stamp, and returns it
- Only after clearance can your ERP share the invoice with the customer
- Reporting Model (B2C)
Used for transactions with final consumers (B2C). In this model:
- Your ERP generates the invoice with cryptographic stamp, UUID, and QR code
- The invoice is issued directly to the customer
- Your ERP must report the invoice to ZATCA within 24 hours
An ERP system that handles both models ensures full compliance across all transaction types.
Technical Requirements for Your ERP
To achieve ZATCA PHASE 2 COMPLIANCE, your ERP system must meet these technical requirements:
- API Connectivity
Your ERP must connect directly to ZATCA’s Fatoora portal via API. No manual submissions or batch processing — every B2B invoice must be cleared before issuance. - XML / PDF/A-3 Format
Your ERP must generate invoices in XML format or PDF/A-3 with embedded XML. This ensures the invoice data is machine-readable and tamper-proof. - Cryptographic Stamp (CSID)
Your ERP must digitally sign each invoice using a cryptographic stamp (CSID) obtained from ZATCA. This guarantees authenticity and prevents tampering. - UUID and Sequential Hashing
Your ERP must assign a Universally Unique Identifier (UUID) to every invoice and maintain a cryptographic hash chain linking it to the previous invoice. - QR Code Requirements
Your ERP must generate compliant QR codes containing five mandatory fields:
- Seller Name
- VAT Number
- Timestamp
- Invoice Total (including VAT)
- VAT Total
The QR code must be Model 2, Base64 encoded, with error correction level “M” (15%) and a minimum size of 2 cm.
6. Bilingual Format
Your ERP must generate invoices with mandatory fields in Arabic, though they can be bilingual (Arabic and English).
How Sage X3 ERP Delivers ZATCA Compliance
SAGE X3 ERP is an enterprise solution designed to handle complex regulatory environments. For Saudi businesses preparing for ZATCA PHASE 2, SAGE X3 ERP offers:
- Automated XML Generation
SAGE X3 ERPgenerates invoices in the required XML format with all mandatory fields, ensuring compliance with ZATCA’s data structure requirements. - Cryptographic Stamping
The system automatically applies cryptographic stamps (CSID) to each invoice, ensuring digital authenticity and integrity. - Real-Time API Integration
SAGE X3 ERPconnects directly to ZATCA’s Fatoora portal via API, enabling real-time clearance for B2B invoices and timely reporting for B2C invoices. - QR Code Generation
Compliant QR codes are generated automatically for all invoices, incorporating the five mandatory fields required by ZATCA. - Secure Data Archiving
All generated invoices (both XML and PDF) are securely archived, meeting ZATCA’s requirement for long-term storage and audit readiness.
6. Sandbox Testing Support
Before going live, SAGE X3 ERP allows businesses to test their integration in ZATCA’s sandbox environment, ensuring error-free submission before the deadline.
Step-by-Step Roadmap for Your ERP Implementation
Step 1: Identify Your Wave
Check your VATable revenue for 2022, 2023, and 2024. Determine if you fall under Wave 23 (March 31, 2026) or Wave 24 (June 30, 2026).
Step 2: Assess Your Current ERP
Ensure your ERP system supports API integration, XML generation, and cryptographic stamping. If not, now is the time to upgrade to SAGE X3 ERP.
Step 3: Obtain CSID
Generate Cryptographic Stamp Identifiers (CSID) via the ZATCA Fatoora portal for your ERP system’s EGS (Electronic Generating Solution) units.
Step 4: Configure Your ERP
Work with your implementation partner to configure SAGE X3 ERP to generate invoices in the required format and connect to ZATCA’s API.
Step 5: Test in Sandbox
Before going live, test your ERP integration in ZATCA’s simulation environment. Validate that invoices are correctly cleared and reported.
Step 6: Train Your Team
Ensure finance and IT teams understand the new workflow within your ERP, including how to handle rejected invoices and monitor compliance.
Step 7: Go Live
Once testing is successful, activate real-time ERP integration before your wave deadline.
What Happens If Your ERP Isn't Ready?
Non-compliance with ZATCA PHASE 2 can result in significant penalties:
Violation | Penalty Range |
Failure to integrate on time | Up to SAR 50,000 |
Non-compliant invoices (missing QR, wrong format) | Starting SAR 5,000 |
Data tampering or deletion | Starting SAR 10,000 |
Failure to generate or store invoices | Starting SAR 5,000 |
ZATCA applies a progressive penalty approach, with fines increasing for repeat violations within a 12-month period. A compliant ERP system is your best defense.
Why Sage X3 ERP Is the Right Choice
SAGE X3 ERP is trusted by businesses across the Middle East for its robust compliance capabilities, including:
- Real-time API connectivity to ZATCA’s Fatoora portal
- Automated XML generation with all mandatory fields
- Cryptographic stamping for invoice authenticity
- QR code generation compliant with ZATCA standards
- Secure archiving for audit readiness
- Proven track record in Saudi regulatory compliance
With SAGE X3 ERP, ZATCA PHASE 2 COMPLIANCE becomes a seamless part of your operations rather than a disruptive burden.
Conclusion
ZATCA PHASE 2 is more than a regulatory requirement — it is the foundation for a digital, transparent VAT ecosystem in Saudi Arabia. With deadlines approaching in March and June 2026, businesses must ensure their ERP systems are ready.
A robust SAGE X3 ERP solution provides the real-time integration, automated XML generation, and cryptographic stamping needed for full FATOORAH COMPLIANCE. From sandbox testing to go-live, SAGE X3 ERP simplifies the path to ZATCA PHASE 2 COMPLIANCE, allowing you to focus on your business while your ERP handles the compliance.
At GREYTRIX MIDDLE EAST, we help Saudi businesses implement SAGE X3 ERP and ensure seamless ZATCA PHASE 2 COMPLIANCE. Whether you are preparing for Wave 23 or Wave 24, our team is here to guide you through every step.
Ready to ensure your ERP is ZATCA-ready?
Get a free consultation with Greytrix Middle East: https://www.greytrix.com/middle-east/
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