Saudi Arabia has made big progress in digital transformation with ZATCA’s new e-invoicing system. Now, all businesses in the Kingdom must use ZATCA e-invoicing software to stay compliant and keep their invoicing clear and accurate. That’s why it’s important for companies to understand the difference between Phase 1 and Phase 2—especially when choosing ZATCA-approved software or upgrading their existing systems.

What Is ZATCA E-Invoicing?

E-invoicing referred to as FATOORAH substitutes paper invoices with produced and safely archived digital invoices. Every VAT-registered company is required to utilize ZATCA authorized einvoicing software or ZATCA authorized accounting software to create, issue and preserve invoices in compliance, with ZATCA regulations.

ZATCA Phase 1: Generation Phase

ZATCA Phase 1 started on December 4 2021. This stage concentrated on allowing companies to produce structured invoices through e invoicing software Saudi Arabia.

Key Requirements of Phase 1

• Create tax invoices, credit memos and debit memos
• Use ZATCA approved accounting software
• Handwritten or entered invoices are not permitted
• Mandatory fields and invoice structure
• Add a QR code to B2C) invoices
• Store invoices digitally in a secure system

Phase 1 marked the beginning of transformation guaranteeing that businesses transitioned from paper or modifiable invoice formats to standardized digital records.

ZATCA Phase 2: Integration Phase

Phase 2 started on January 1 2023. Is being rolled out in phases. This phase concentrates on connecting ZATCA approved e invoicing software to the ZATCA platform, for verification and approval.

Key Requirements of Phase 2

• Integration with ZATCA’s FATOORAH system via API
• Real-time or near-real-time invoice clearance
• Invoice layouts should comply with XML/UBL guidelines
• Use of cryptographic stamps, digital signatures, and UUID
• Reporting of simplified invoices to ZATCA
• Mandatory use of ZATCA approved software capable of high-level security and automation

Phase 2 guarantees improved transparency strengthened security tampering prevention and automated interactions, between companies and ZATCA.

Phase 1 vs Phase 2: The Core Difference

Phase 1 is centered on generating invoices via e invoicing software Saudi Arabia whereas Phase 2 involves sending and linking those invoices with the ZATCA system, for validation.

Main Differences at a Glance

Phase 1 → Generate e-invoices

Phase 2 → Clear invoices through ZATCA via API

Phase 1 → Integration not required

Phase 2 → Mandatory software integration

Phase 1 → Basic digital invoices

Phase 2 → Invoices that have been secured. Authenticated

Phase 1→ QR code for B2C

Phase 2 → Digital signatures, cryptographic stamps, XML files

Put simply Phase 1 guarantees the generation of invoices whereas Phase 2 ensures adherence, verification and safe transmission, to the ZATCA system.

Reasons Why Companies Require ZATCA-Authorized Software

To remain compliant companies are required to utilize ZATCA approved accounting software or ZATCA approved e invoicing software that provides:

• Standard invoice creation
• Automatic QR code generation
• Invoice formats structured in XML/UBL
• Secure cloud or on-premise storage
• Real-time ZATCA integration
• Digital signatures and cryptographic seals

Using the right ZATCA e invoicing software not only ensures compliance but also improves speed, accuracy, and automation in day-to-day financial operations.

Stay Compliant, Stay Ahead — Choose Proffin

As Saudi Arabia progresses in developing its tax framework choosing the appropriate technology ally is essential. Proffin provides a user-friendly and completely ZATCA-certified e-invoicing solution tailored to fulfill all demands of Phase 1 and Phase 2. Featuring invoice creation, instant clearance and fully automated compliance capabilities Proffin supports businesses to function with confidence and efficiency.

Choose Proffin — and grow with confidence.