The Complete Guide to ZATCA VAT & E-Invoicing (Fatoora) in Saudi Arabia 2026

If you run a business in Saudi Arabia, ZATCA compliance is not optional. Since the introduction of the 15% Value Added Tax and the mandatory Fatoora e-invoicing system, businesses across the Kingdom have had to fundamentally change how they issue invoices, calculate tax, and report to the authorities. With Phase 2 of Fatoora now rolling out, the requirements have become even more stringent.

This guide covers everything you need to know about ZATCA VAT and E-Invoicing in 2026. We explain the 15% VAT rate, the difference between Phase 1 and Phase 2 of Fatoora, B2B vs B2C invoice requirements, step-by-step VAT calculation formulas, real-life examples, and how to file your VAT returns.

Use our free ZATCA VAT Calculator to calculate VAT amounts, extract VAT from totals, and ensure your invoices are accurate — in seconds.

Phase 1: Generation (Already in Effect)

Phase 1 requires all businesses to generate electronic invoices using compliant software. Key requirements:

• Invoices must be created digitally — paper invoices are no longer sufficient.
• Invoices must include a QR code (for simplified/B2C invoices) or standard tax invoice fields (for B2B).
• Invoices must be stored securely for the legally required retention period.
• No real-time transmission to ZATCA is required in Phase 1.

Phase 2: Integration (Rolling Out 2026)

Phase 2 is the more advanced stage. Businesses must integrate their invoicing systems directly with ZATCA's platform. Key requirements:

• Invoices must be generated in a specific XML format defined by ZATCA.
• Each invoice must contain a cryptographic QR code with verified invoice data.
• Invoices must be transmitted to ZATCA in real time or near-real time.
• B2B invoices require additional fields including buyer's VAT number and detailed line-item tax.
• Medium and large businesses are being onboarded first, followed by small and micro businesses.

Standard Tax Invoice (B2B)

Required when selling to another VAT-registered business. Must include:

• Invoice number (unique, sequential) and issue date
• Seller's legal name, address, and VAT registration number
• Buyer's legal name, address, and VAT registration number
• Description, quantity, and unit price of goods/services
• Net amount per line, VAT rate, and VAT amount per line
• Total VAT amount and total payable including VAT
• QR code compliant with ZATCA specifications

Simplified Tax Invoice (B2C / Retail)

Required when selling to an end consumer or non-VAT-registered customer. Must include:

• Invoice number and issue date
• Seller's name and VAT registration number
• Description of goods/services
• Total amount including VAT
• QR code (must contain specific invoice data per ZATCA rules)
• No buyer details required

Formula 1: Adding VAT to a Price (Output VAT)

Formula 2: Extracting VAT from a Total Price

Input Tax vs Output Tax

Understanding the difference is crucial for filing accurate VAT returns:

• Output Tax: The VAT you collect from your customers on your taxable sales. This is what you owe ZATCA.
• Input Tax: The VAT you pay on your business purchases, expenses, and imports. This is what you can reclaim from ZATCA.
• Net VAT Payable: Output Tax − Input Tax. If positive, you pay ZATCA. If negative, ZATCA refunds you.

Example 1: Retail Shop (B2C)

A retail shop sells electronics worth 1,000 SAR to a walk-in customer.

Example 2: B2B Service Contract

A consulting firm provides services worth 50,000 SAR (excl. VAT) to another registered business.

1. Determine Filing Frequency:

   If your annual supplies exceed 40 million SAR, you must file monthly. All other registered businesses file quarterly.

2. Calculate Output VAT:

   Total the VAT collected on all taxable sales during the period.

3. Calculate Input VAT:

   Total the VAT paid on business purchases and expenses (keep supporting invoices).

4. Compute Net Payable:

   Output VAT − Input VAT = Amount due to ZATCA (or refundable).

5. File via ZATCA Portal:

   Log in to the ZATCA online portal, complete the VAT return form with the calculated amounts, and submit within 30 days after the tax period ends.

6. Make Payment:

   Pay the net VAT due via SADAD or other approved payment methods. Save the payment receipt.

• Missing QR Codes on Invoices

  Since Phase 1 of Fatoora, every simplified invoice must include a ZATCA-compliant QR code. Missing QR codes can result in fines up to 50,000 SAR.

• Wrong VAT Registration Number

  Using an incorrect or expired VAT registration number on invoices is a common error. Always verify your VAT certificate is current before issuing invoices.

• Not Issuing E-Invoices for All Transactions

  Some businesses still issue paper invoices or handwritten receipts. Under Fatoora, all taxable transactions must be invoiced electronically with the correct format.

• Mixing B2B and B2C Invoice Formats

  Using a simplified invoice for a B2B transaction (without buyer's VAT number) or vice versa can lead to penalties. Use the correct template for each customer type.

• Late or Incorrect VAT Return Filing

  Filing late returns, under-reporting output VAT, or over-claiming input VAT are common errors that trigger ZATCA audits and fines. Use a calculator to double-check your figures.

Our free VAT calculator handles all the common scenarios: add VAT to a net price, extract VAT from a gross amount, calculate VAT per line item, and determine net VAT payable. Designed for Saudi Arabia's 15% VAT rate and ZATCA-compliant.

• Add VAT: Calculate total including 15% VAT
• Extract VAT: Get the VAT amount from a total
• Per-line VAT: Calculate VAT for individual items
• Free — no registration required