NAQIXZATCA Phase 1 vs Phase 2: what each requires of a small business
Saudi e-invoicing arrived in two phases. Phase 1 changed how invoices are produced; Phase 2 changes who sees a business invoice first. Here are the two side by side, what each asks of a small business, and how to tell which one applies to you now.
The two phases at a glance
| Topic | Phase 1: generation | Phase 2: integration |
|---|---|---|
| Started | 4 December 2021, for all VAT-registered businesses | From 1 January 2023, in waves grouped by revenue |
| Core requirement | Issue and store tax invoices and notes from a compliant electronic solution | The same, plus connect that solution to ZATCA's FATOORA platform |
| Format | Electronic, from a compliant solution | Structured XML in ZATCA's format, or a PDF/A-3 with the XML embedded |
| QR code | Required on simplified invoices and their notes | Required, with additional cryptographic fields |
| Standard (business) invoices | Issued and shared by the seller | Cleared by ZATCA before they are shared with the buyer |
| Simplified (consumer) invoices | Issued with a QR code | Reported to ZATCA within 24 hours of issue |
| Stamp, hash and counter | Not required | Every document is signed, numbered by a counter and chained by hash to the previous one |
| Onboarding | None with ZATCA | Each invoicing unit is registered with a one-time password and receives a certificate |
ZATCA's published rules and technical guidelines are the reference. This summary is orientation; confirm the details for your business with your tax adviser.
Phase 1 in more detail
Phase 1 did not connect anyone to ZATCA. It required businesses to stop producing invoices by hand or in editable word-processor files and to use an electronic solution that meets ZATCA's rules.
Two kinds of tax invoice
A standard tax invoice is issued to a VAT-registered business and carries full details, including the buyer's name, address and VAT number. A simplified tax invoice is issued to consumers, usually at a counter, and carries fewer details plus a QR code. Credit and debit notes follow the type of the invoice they correct.
The Phase 1 QR code
The QR code on a simplified invoice encodes the seller's name, the seller's VAT number, the date and time of the invoice, the total including VAT and the VAT amount. A customer, or a ZATCA inspector, can scan it with ZATCA's app to read those values.
What the solution must not allow
ZATCA's rules list functions a compliant solution must not have. In broad terms: uncontrolled access, tampering with invoices or their logs, more than one invoice sequence for the same unit, and deleting or changing an issued invoice. Corrections are made with a credit or debit note that refers to the original invoice.
What Phase 2 adds
Phase 2 keeps everything from Phase 1 and adds integration. Each invoicing unit, which may be a till, a branch system or an online store, is onboarded with ZATCA and receives a cryptographic stamp identifier. Every invoice and note is produced as XML, given a unique identifier, numbered by the unit's counter, chained to the previous document by its hash and signed.
Standard invoices go to ZATCA for clearance and may only be shared with the buyer once ZATCA has cleared them. Simplified invoices are given to the customer at once and reported to ZATCA within 24 hours. A rejected document is corrected and issued again, not resent unchanged. Our Phase 2 buyer checklist covers the software questions in detail.
Which phase applies to you now
- Phase 1 has applied to VAT-registered businesses since December 2021, whatever their size.
- Phase 2 applies from the date ZATCA gives you. ZATCA announces each wave by revenue threshold and notifies the businesses in it in advance, typically several months ahead.
- If you are not yet in a wave, Phase 1 still applies in full.
Look for ZATCA's notification in your account and keep a note of your integration date. If you cannot find one, ask your tax adviser to confirm your position.
What changes day to day
- Business invoices wait for clearance. Under Phase 2, a standard invoice cannot be handed over until ZATCA clears it, usually within seconds. Plan for the moment it does not respond.
- Every branch and till counts. Each unit that issues invoices may need onboarding, and a new branch adds a step to its opening checklist.
- Customer data matters more. Business buyers need a correct VAT number and address before an invoice can clear.
- Someone owns the exceptions. Rejected and failed documents need a person who checks them every day.
Where NAQIX stands today
- The Saudi e-invoicing profile holds your VAT number, commercial registration number, registration name and national address, which print on your invoices with the VAT totals.
- The Phase 2 integration is built and has been tested against ZATCA's developer sandbox: per-branch onboarding with a FATOORA one-time password, signing and hash chaining, clearance of standard invoices, reporting of simplified ones, credit and debit notes, retries and certificate renewal.
- NAQIX prints the ZATCA QR code on invoices and notes issued through a branch connected to ZATCA: the QR NAQIX signs on simplified invoices, and ZATCA's own QR on cleared standard invoices.
- The production connection is not open yet. Until it is, NAQIX does not clear or report your live invoices with ZATCA. Branches can connect to ZATCA's simulation or sandbox environments, whose documents have no legal effect.
If you need to issue Phase 1 invoices for live trading today, ask the NAQIX team to show you a printed Saudi invoice for your own setup before relying on it. The NAQIX page for Saudi Arabia, the Tax & compliance and Sales & billing pages and the ZATCA invoicing overview describe the current setup.