Preparing for Saudi Arabia’s New E-Invoicing Groups

Imagine a small business owner in Riyadh who has just landed a major client. Excitement quickly turns into stress when they realize their old paper-based invoicing system can’t keep up with the new compliance rules. Deadlines are looming, penalties are costly, and efficiency is more critical than ever. This situation is becoming increasingly common as Saudi Arabia rolls out new electronic billing groups, pushing businesses of all sizes to adapt.

What is Electronic Billing?

Electronic billing, also known as e-invoicing, is the process of generating, transmitting, and storing invoices in a digital format that complies with government regulations. Unlike traditional paper invoices, which require manual handling, e-invoices are created within accounting or ERP systems and sent electronically to customers and tax authorities.

In Saudi Arabia, the Zakat, Tax and Customs Authority (ZATCA) has mandated the adoption of e-invoicing for businesses of all sizes. This ensures that invoices are standardized, secure, and transparent, helping to reduce fraud, improve record-keeping, and streamline compliance. Electronic billing is not just about replacing paper with digital files. It involves using structured data formats, such as XML or PDF/A-3 with embedded data, so systems can automatically validate and process invoices. This makes financial operations more efficient and significantly reduces errors.

The New Groups Announced by ZATCA

To ensure a smooth transition to nationwide electronic billing, ZATCA has been rolling out e-invoicing in phases. Each phase includes specific groups of taxpayers based on their annual revenue or industry category. These groups are gradually being brought into compliance, with clear timelines and technical requirements.

Who is included in the new groups?

The newly announced groups typically include businesses whose annual revenues exceed a threshold. For example, earlier phases targeted large enterprises with revenues above SAR 3 billion, followed by companies with SAR 500 million, then SAR 250 million, and so on. Smaller and medium-sized businesses are added to the compliance net with each announcement. Currently Valid Groups:

• Wave 19 (Group 19) Criteria: Taxpayers whose VAT-liable revenues exceeded SAR 1.75 million during 2022, 2023, or 20243. Deadline: Must integrate with ZATCA’s Fatoora platform by 30 September 2025.
• Wave 20 (Group 20) Criteria: Businesses with VAT-liable revenues above SAR 15 million in 2022, 2023, or 2024. Deadline: Integration to be completed by 11 October 2025.
• Wave 21 (Group 21) Criteria: Taxpayers whose VAT-liable revenues exceeded SAR 1.25 million during 2022, 2023, or 2024 are included in Wave 21 of the e-invoicing integration phase. Deadline: These taxpayers must fully integrate their e-invoicing systems with ZATCA’s Fatoora platform by 30 November 2025.
• Wave 22 (Group 22) Criteria: Taxpayers with VAT-subject revenues exceeding SAR 1 million during 2022, 2023, or 2024. Deadline: Integration required by 31 December 2025.
• Wave 23 (Group 23) Criteria: VAT-registered businesses with revenues above SAR 750,000 in 2022, 2023, or 2024. Deadline: Must integrate between 1 January and 31 March 2026.

Why Electronic Billing Matters for Businesses

Electronic billing is more than a regulatory requirement; it is a transformative shift in how businesses handle financial operations. The benefits extend well beyond compliance and touch every aspect of a company’s efficiency, transparency, and competitiveness.

• Regulatory Compliance and Avoidance of Penalties With ZATCA mandating e-invoicing across all groups, businesses must comply to avoid fines and disruptions. Compliance ensures that companies can continue operations without the risk of tax disputes or financial penalties.
• Operational Efficiency E-invoicing eliminates manual paperwork, reduces data entry errors, and speeds up invoice issuance. Automation allows finance teams to focus on higher-value activities like analysis and planning rather than administrative tasks.
• Cost Reduction Moving away from paper invoices saves printing, storage, and courier costs. More importantly, it reduces the hidden costs of inefficiencies—such as delayed payments caused by misplaced or incorrect invoices.
• Improved Cash Flow Management Electronic billing makes it easier to track receivables in real time. Faster processing and validation mean quicker payments, improving working capital management and financial stability.
• Enhanced Transparency and Fraud Prevention Since invoices are standardized and transmitted through secure digital channels, there is less room for fraud or manipulation. Tax authorities also benefit from greater visibility, ensuring a fairer marketplace.
• Future Readiness E-invoicing lays the foundation for broader digital transformation. Businesses that adopt it are better positioned to integrate with advanced tools like AI-driven analytics, automated reporting, and cloud-based accounting platforms.

Key Challenges and How to Overcome Them

While electronic billing offers significant advantages, the transition is not without challenges. Businesses, especially SMEs, often face hurdles when shifting from manual or semi-automated processes to fully digital invoicing. Identifying these challenges and preparing solutions in advance is crucial for smooth compliance.

• System Integration Difficulties Many companies already use ERP or accounting software that may not be fully compatible with ZATCA’s Fatoora requirements. Upgrading or replacing these systems can be costly and time-consuming. Choosing ZATCA-approved accounting platforms, such as Wafeq, that are pre-integrated with the Fatoora platform, can reduce implementation risk and save time. Read Also: Connecting to Fatoora Portal.
• Technical Complexity E-invoicing requires invoices in structured formats (XML, PDF/A-3), secure APIs, and real-time connectivity with ZATCA. For businesses with limited IT expertise, this can seem overwhelming. Working with technology providers who handle the technical side ensures seamless compliance without overburdening internal teams.
• Staff Training and Change Management Employees accustomed to manual invoicing may resist or struggle with the transition. Conducting training programs to familiarize staff with the new process and highlighting the long-term efficiency gains and reduced workload helps ease this change.
• Data Accuracy and Compliance Risks Incorrect invoice data can lead to rejections by ZATCA’s system or even penalties. Implementing validation checks within the accounting system to flag errors before submission and relying on automated systems minimizes the risk of human error.
• Cost Concerns for SMEs Small businesses may worry about the cost of compliance, from software upgrades to training. Opting for cloud-based accounting solutions with subscription models that scale with business needs ensures affordability without compromising compliance.
• Transition Timelines With strict deadlines for each group, late preparation can lead to rushed and error-prone implementations. Beginning preparations immediately upon receiving ZATCA’s notification allows sufficient time for testing and training before the deadline.

Read Also: Complete guide to e-Invoicing using Wafeq.

How Wafeq Supports Businesses in Electronic Billing

Wafeq is designed to simplify the transition to electronic billing for businesses of all sizes. It helps companies meet ZATCA’s requirements while enhancing operational efficiency by combining compliance features with intuitive automation.

• Seamless ZATCA Integration Wafeq fully complies with ZATCA’s Fatoora platform, enabling automatic invoice generation in the required formats (XML, PDF/A-3) and real-time submission. This eliminates technical hurdles and ensures businesses avoid penalties.
• User-Friendly Interface The platform is intuitive, allowing finance teams to issue, track, and manage invoices without extensive technical knowledge. Notifications and dashboards provide visibility into invoice status, deadlines, and potential errors.
• Automation and Error Reduction Wafeq automatically populates mandatory invoice fields, validates data, and generates QR codes. This reduces human errors and ensures compliance with the latest regulatory standards for all new groups, including Waves 19–23.
• Scalable Solution for SMEs and Large Enterprises Whether a company is a small business in Wave 23 or a large enterprise in Wave 20, Wafeq scales to meet the volume of invoices and complexity of operations, offering cloud-based flexibility and affordability.
• Training and Support Wafeq provides training and dedicated support to guide businesses through setup, integration, and ongoing use. This reduces transition friction and ensures that teams are confident in issuing compliant e-invoices.
• Enhanced Financial Insights Beyond compliance, Wafeq provides real-time reporting and analytics, helping businesses manage cash flow, track revenue, and make data-driven financial decisions.

Know more about: The best accounting software in Saudi Arabia.

Electronic billing is no longer optional; it is a fundamental requirement for businesses in Saudi Arabia. From regulatory compliance to operational efficiency and cost savings, the benefits are clear. With Waves 19–23 gradually coming into effect, businesses must act promptly to ensure seamless integration and avoid penalties.

Platforms like Wafeq make this transition easier, offering pre-integrated solutions, automated processes, and real-time financial insights. By adopting e-invoicing now, businesses not only comply with ZATCA’s requirements but also position themselves for future growth and digital transformation.

FAQs about the Zatca e-invoicing phase 2 new waves

Who is required to implement electronic billing in Saudi Arabia?

All VAT-registered businesses included in Waves 1–23, based on their revenue thresholds, must comply with ZATCA’s e-invoicing requirements. This includes companies in the latest Wave 21 with revenues exceeding SAR 1.25 million.

What is the deadline for Wave 21 businesses?

Businesses in Wave 21 must fully integrate with ZATCA’s Fatoora platform by 30 November 2025. Early preparation is recommended to avoid penalties.

Can businesses issue invoices in PDF format only?

No. For full compliance, invoices must be issued in structured formats (XML or PDF/A-3 with embedded data) and include all mandatory fields such as QR codes.

How can SMEs reduce compliance costs?

Using cloud-based accounting solutions like Wafeq provides scalable and affordable compliance, automates invoice generation, and reduces manual errors, thus lowering hidden operational costs.

How does Wafeq help with technical integration?

Wafeq is pre-integrated with ZATCA’s Fatoora platform, enabling real-time invoice submission, automated data validation, and generation of compliant invoice formats without needing extensive IT expertise.