ZATCA Phase 2
Compliance
with ERPNext
The Saudi Guide
ZATCA’s Wave 25 pulls almost every remaining VAT-registered business into Phase 2: the integration deadline is 1 February 2027, and it applies if your VAT-subject revenue exceeded SAR 187,500 in 2022, 2023, 2024 or 2025. Every tax invoice now has to clear through the Fatoora platform: cryptographically stamped, UBL 2.1 formatted, and archived. MAAS Consult makes that switch straightforward with ERPNext.
Wave timeline: from Wave 1 to Wave 25
ZATCA publishes each wave with a revenue threshold and a fixed integration date. Here is the roadmap Saudi businesses have been working through since 2023.
Why this matters: SAR 187,500 is Saudi Arabia's voluntary VAT registration threshold, the lowest revenue figure a business can hold while still being VAT-registered. Wave 25 effectively closes the gap: there is no obvious threshold left below it, so a business that misses this window is not waiting on a later wave, it is simply late. ZATCA notifies targeted taxpayers directly, at least six months before their deadline; if you have not had a letter yet, confirm your status through the ZATCA portal rather than assuming you are exempt.
The penalty table no Saudi CFO wants to see
Non-compliance with Phase 2 is treated as a tax violation under the VAT Implementing Regulations. Fines escalate with repeat offences, and ZATCA can suspend your ability to issue invoices.
| VIOLATION | 1ST OFFENCE | REPEAT OFFENCE | SEVERITY |
|---|---|---|---|
| Failure to issue or archive e-invoices | SAR 1,000 | Up to SAR 50,000 | Critical |
| Failure to include the QR code on simplified invoices | SAR 1,000 | Up to SAR 40,000 | High |
| Failure to notify ZATCA of system malfunction | SAR 1,000 | Up to SAR 10,000 | Medium |
| Deleting or amending issued e-invoices | SAR 5,000 | Up to SAR 50,000 | Critical |
| Missing mandatory invoice fields (VAT no., timestamp, etc.) | SAR 1,000 | Up to SAR 10,000 | Medium |
ZATCA has historically paired new waves with a "warning first" grace period: a first-time violation gets a correction window rather than an immediate fine. Coverage and dates for that initiative change with each announcement, so confirm the current terms for Wave 25 directly through ZATCA's portal rather than assuming an earlier wave's grace period still applies.
How ERPNext makes Phase 2 boring (in a good way)
ERPNext is a full open-source ERP suite. Configured by a ZATCA-experienced partner, it handles every Phase 2 requirement inside the same software your team already uses for invoicing, VAT returns and inventory, with no separate "compliance tool" to babysit. See our ERPNext implementation service for how we scope and deliver this.
UBL 2.1 XML generation
Every Sales Invoice is serialised into the exact XML schema ZATCA expects, with mandatory fields auto-populated from the customer and item masters.
CSID & cryptographic stamp
Onboarding generates your Cryptographic Stamp Identifier through the Fatoora compliance API. ERPNext signs every invoice with your private key, automatically.
TLV-encoded QR code
The base64-encoded TLV QR (seller, VAT, timestamp, total, VAT amount, hash, signature, public key) prints on every PDF and POS receipt.
Real-time clearance & reporting
B2B standard invoices go out for clearance; B2C simplified invoices are reported within 24 hours, both as background jobs the user never sees.
Bilingual print formats
Arabic-English invoice layouts that respect ZATCA's mandatory fields, right-to-left typography and your brand identity.
5-year audit archive
Hashed UBL XML and the ZATCA response payload are stored against each invoice for the full 5-year retention period, searchable in one click.
HOW ERPNEXT CONNECTS TO ZATCA FATOORA
Want the technical walkthrough? See our step-by-step ERPNext ZATCA integration guide, or confirm our credentials on the Frappe Emerging Partner page.
TallyPrime & ZATCA: what changes for Tally users
TallyPrime covers Phase 1 Generation out of the box: QR codes on simplified invoices, Arabic field support, and VAT returns. For Phase 2 Integration, Tally users typically need either a certified connector or a structured migration to ERPNext. We help you decide based on transaction volume, customisation depth and roadmap, see our TallyPrime sales and solutions service.
Keep Tally + add a connector
- ✓ Lower change-management friction for finance teams
- ✓ Phase 1 already handled natively
- ✗ Phase 2 needs an external Fatoora middleware
- ✗ Limited inventory, manufacturing and HR modules
One system, end-to-end
- ✓ Phase 1 + Phase 2 inside the same invoice screen
- ✓ Open-source, no per-user licence inflation
- ✓ CRM, inventory, manufacturing, HR & payroll included
- ✓ MAAS Consult migrates Tally data, zero gap period
Thinking about switching? Read 8 signs your business has outgrown TallyPrime or our step-by-step Tally to ERPNext migration guide.
Step-by-step: from VAT invoice today to Fatoora-cleared tomorrow
This is the runbook MAAS Consult follows when we onboard a Saudi business onto ERPNext for Phase 2. Most engagements finish in 4 to 6 weeks.
Discovery & gap audit
We map your current invoicing flow, customer/item masters, VAT setup and chart of accounts against ZATCA's mandatory fields. You leave with a fixed-scope plan.
ERPNext configuration & data migration
Company, fiscal year, tax templates and bilingual print formats are configured. Opening balances, customers, suppliers and items are migrated from Tally, Excel or legacy systems.
ZATCA onboarding (CSID issuance)
We generate your CSR, request the Compliance CSID, run ZATCA's compliance test invoices, then upgrade to a Production CSID, all from inside ERPNext.
Clearance & reporting workflow
B2B standard invoices are wired for real-time clearance; B2C simplified invoices for 24-hour reporting. Failed submissions trigger automatic alerts.
UAT with your finance team
We run user acceptance testing with your actual invoice scenarios, credit notes, returns, multi-branch transactions, until your team signs off with confidence.
Go-live & after-sales support
Cut-over on a weekend, then ongoing after-sales support and an annual ZATCA compliance health-check, so you never fall behind a new wave.
Book your free ZATCA Wave 25 audit
30 minutes with a ZATCA-experienced consultant. We review your current invoicing setup, identify the gaps against Fatoora's requirements, and send you a written roadmap. If Tally is the right answer for you, we will say so.
A trusted ERP partner in Riyadh
MAAS Consult is a financial consulting firm based in Riyadh, Saudi Arabia, and an official Frappe Emerging Partner, specialising in ERPNext and TallyPrime. We have onboarded trading houses, manufacturers, holding groups and professional services firms onto Phase 2, on time, without invoice downtime. See our full services overview or read more about our team.
READY TO GET COMPLIANT?
Wave 25 deadline:
1 February 2027
Most engagements finish in 4 to 6 weeks. Start now and go live with time to spare.
Get Free ZATCA Audit WhatsApp: +966 53 213 6446GOOGLE REVIEWS
Very prompt. And happy to have kind patience to explain all the queries till one understood it.
Excellent service from MAAS Consult. They completed our ZATCA Phase 2 integration on time without any disruption to our invoicing. The team was professional throughout the entire process.
We migrated from Tally to ERPNext with full ZATCA compliance. MAAS Consult managed everything, our finance team was trained and confident within a week of go-live. Highly recommended.
Responsive team and a clean handover. They kept us informed at every stage of the ERPNext rollout and were easy to reach whenever we had a question.
Frequently asked questions
Phase 2 (the Integration Phase of Fatoora) requires VAT-registered businesses in Saudi Arabia to integrate their invoicing systems with ZATCA's Fatoora platform and exchange invoices as UBL 2.1 XML with cryptographic stamps, UUIDs and a QR code. Unlike Phase 1, where you simply generated a structured invoice file, Phase 2 requires your ERP to be directly and continuously connected to ZATCA's API.
Wave 25 covers businesses whose annual VAT-taxable revenue exceeded SAR 187,500 in any of 2022, 2023, 2024 or 2025. The compliance deadline is 1 February 2027. ZATCA typically sends an official notification letter at least six months before the cutover, if you have not received one yet, check with MAAS Consult for a free wave assessment.
Clearance applies to Standard Tax Invoices (B2B). Before you can send the invoice to your buyer, it must be submitted to ZATCA's Fatoora platform, stamped with a clearance signature, and returned, usually within seconds. Reporting applies to Simplified Tax Invoices (B2C, e.g. retail). You issue the invoice immediately, but must report it to ZATCA within 24 hours. ERPNext handles both automatically in the background.
SAR 187,500 is Saudi Arabia's voluntary VAT registration threshold, the lowest revenue figure a business can hold while still being VAT-registered. Wave 24 already reached the mandatory registration threshold of SAR 375,000; Wave 25 goes a step further and pulls in nearly every remaining VAT-registered business, including small trading, retail and services firms that had previously watched Phase 2 from the sidelines.
Yes. ERPNext has native ZATCA Phase 2 support built in, including UBL 2.1 XML generation, CSID cryptographic stamping, TLV QR codes, Fatoora API integration, and 5-year audit archiving. Activating and correctly configuring this requires a certified partner who understands both the Frappe/ERPNext framework and ZATCA's technical requirements. See our ERPNext ZATCA integration guide for the full technical walkthrough.
Yes for Phase 1 compliance. For Phase 2 integration, TallyPrime users need either a certified Fatoora middleware connector or a structured migration to ERPNext. MAAS Consult is certified for both TallyPrime and ERPNext, so we can give you an honest recommendation based on your transaction volume, complexity, and growth roadmap, without bias toward either platform.
Penalties start at SAR 1,000 for a first offence and escalate to SAR 50,000 for repeat violations. More critically, ZATCA can suspend a business's ability to issue invoices entirely until compliance is achieved. For businesses that invoice daily, even a few days of suspension can cause serious operational and reputational damage.
ZATCA requires certain invoice fields to be in Arabic, including seller name, VAT registration number, and some line-item descriptions. ERPNext configured by MAAS Consult generates fully bilingual Arabic-English invoices that satisfy all ZATCA mandatory field requirements, with a right-to-left compatible layout that can carry your company branding.
Most MAAS Consult ZATCA Phase 2 engagements complete in 4 to 6 weeks from signed proposal to production go-live. Simple businesses with clean data can be live in 2 to 3 weeks. Complex multi-branch businesses or those migrating from a legacy system may take 6 to 10 weeks. Given the Wave 25 deadline of 1 February 2027, businesses should start the process well ahead of the final quarter of 2026.
Reach out through our contact page, or message us directly on WhatsApp at +966 53 213 6446. We'll schedule a call to review your current setup, confirm your wave assignment, and outline the fastest compliant path. The initial audit carries no cost and no obligation.