If your company sells in Saudi Arabia, every tax invoice now has to go through ZATCA’s e-invoicing platform, called Fatoora. Phase 2, the Integration Phase, is being rolled out in waves, and each wave pulls in smaller businesses than the last.
This guide explains in plain language what ZATCA Phase 2 means for companies running Microsoft Dynamics 365 Business Central, who is affected, what your system must do, and how to get ready.
Key takeaways
- ZATCA Phase 2 requires your ERP to connect to the Fatoora platform and send invoices electronically.
- Wave 25 covers businesses with VAT-able revenue above SAR 187,500 in 2022, 2023, 2024 or 2025. The deadline is 1 February 2027.
- Business invoices (B2B) must be cleared by ZATCA before you send them. Simplified invoices (B2C) must be reported within 24 hours.
- Business Central is available in Saudi Arabia, but ZATCA integration comes from a localization or e-invoicing app, not out of the box.
What is ZATCA Phase 2 e-invoicing?
The Zakat, Tax and Customs Authority (ZATCA) introduced e-invoicing in two phases. Phase 1 (the Generation Phase) started on 4 December 2021 and required businesses to create invoices electronically instead of on paper or in Word or Excel.
Phase 2 (the Integration Phase) goes further. Your invoicing system must connect directly to ZATCA’s Fatoora platform, use a set structured format, and add security features so every invoice can be checked and traced.
| Requirement | What it means in practice |
|---|---|
| Structured XML (UBL 2.1) | Each invoice is created as a machine-readable XML file, not just a PDF. |
| Cryptographic stamp | The invoice is digitally signed, so nobody can change it after it is issued. |
| QR code | The printed or PDF invoice carries a QR code that customers and auditors can scan. |
| Unique ID and invoice chain | Each invoice has a unique ID and links to the previous one, so gaps or edits are visible. |
| Onboarding with CSID | Each invoicing system is registered with ZATCA and receives a Cryptographic Stamp Identifier (CSID) certificate. |
Clearance vs reporting
- Standard tax invoices (B2B and B2G): sent to ZATCA for clearance first. Only once ZATCA approves can you share the invoice with your customer.
- Simplified tax invoices (B2C): you give the invoice to the customer straight away, then report it to ZATCA within 24 hours.
Who is affected? The Phase 2 waves
ZATCA brings businesses into Phase 2 in waves, based on their VAT-able revenue. Earlier waves covered large companies; the latest waves now reach small businesses.
| Wave | Who is in scope | Integration deadline |
|---|---|---|
| Wave 24 | Revenue above SAR 375,000 in 2022, 2023 or 2024 | 30 June 2026 |
| Wave 25 | Revenue above SAR 187,500 in 2022, 2023, 2024 or 2025 | 1 February 2027 |
ZATCA notifies each business directly when it falls into a wave, and says it will notify later waves at least six months before their integration date. If your revenue is above SAR 187,500, plan as if you are in scope now.
Why it matters for Business Central users
Business Central is fully available in Saudi Arabia, with environments hosted in Microsoft’s UAE data centres. Microsoft provides the international version, and local requirements such as ZATCA come from partner localization and e-invoicing apps on Microsoft Marketplace.
That means ZATCA compliance in Business Central is a project, not a switch. You need the right app, correct master data, onboarding with ZATCA, and testing before your wave deadline. Companies that leave it late often find invoices rejected because of small data problems, such as a missing building number in a customer address.
How to get Business Central ready for ZATCA Phase 2
- Confirm your wave and deadline from your ZATCA notification or your revenue figures.
- Choose a ZATCA-ready app for Business Central that supports Phase 2 clearance and reporting.
- Clean your master data: VAT numbers, full national addresses (building number, district, postal code) and the correct VAT categories on items and customers.
- Onboard with ZATCA: generate the OTP on the Fatoora portal and register each environment to receive its CSID.
- Test in the ZATCA sandbox with real scenarios: standard and simplified invoices, credit notes, debit notes and prepayments.
- Go live and monitor: watch for rejected or warning invoices in the first weeks and fix the root cause quickly.
A practical example
A Riyadh distributor using Business Central receives its Wave 25 notification. In the first two weeks, its consultant finds that 30% of customer records are missing building numbers, and that two item groups use the wrong VAT category. After fixing the data and installing a ZATCA app, the team tests 50 invoices in the sandbox. On go-live, B2B invoices are cleared in seconds from the posted sales invoice, and the QR code prints automatically. Nobody re-keys data into a separate portal.
Checklist before your deadline
- Wave and integration date confirmed
- ZATCA-ready Business Central app selected
- Customer and vendor VAT numbers and addresses validated
- VAT categories checked on items, resources and G/L accounts
- CSID onboarding completed for each environment
- Sandbox tests passed for every invoice type you use
- A named person monitors rejections after go-live
How Mohila can help
Mohila is a Microsoft partner that implements and supports Business Central across the UAE and GCC, including ZATCA Phase 2 setup and troubleshooting for Saudi clients. We review your data, set up and onboard your e-invoicing app, and test every scenario before your wave deadline. Operating in more than one GCC country? Read our guide to Business Central across the GCC, or see our Dynamics 365 support services.
Talk to an Expert
In a ZATCA wave and running Business Central? Book a free 1-hour consultation with a certified Dynamics 365 consultant.
Frequently asked questions
It is the Integration Phase of Saudi e-invoicing. Your invoicing system must connect to ZATCA’s Fatoora platform and send invoices in a structured XML format with a cryptographic stamp and QR code.
Businesses whose VAT-able revenue was above SAR 187,500 in 2022, 2023, 2024 or 2025. They must integrate with Fatoora by 1 February 2027.
No. Business Central is available in Saudi Arabia, but ZATCA integration comes from a partner localization or e-invoicing app from Microsoft Marketplace, which must be set up and onboarded with ZATCA.
Standard B2B and B2G invoices must be cleared by ZATCA before you send them to the customer. Simplified B2C invoices are given to the customer first and reported to ZATCA within 24 hours.
Related reading: UAE E-Invoicing and Business Central Integration and Business Central vs Finance and Operations.
