In the simplest terms, ZATCA e-invoicing is about replacing paper or PDF tax invoices with structured electronic invoices that follow a specific format. These invoices can be generated, shared, and stored digitally.
The goals are clear:
- reduce tax evasion
- boost transparency
- simplify reporting
- align with global digital standards
And yes, it’s mandatory.
Phase 1 (generation) vs. phase 2 (integration): where are we now?
The rollout of e-invoicing in Saudi Arabia has been happening in two phases:
- Phase 1: Generation - This began in December 2021. Businesses had to stop issuing handwritten or PDF invoices and start using e-invoicing software that can generate invoices with mandatory fields like tax number, invoice number, QR code, and timestamp.
- Phase 2: Integration - This is where things get more technical. From January 2023 onward, businesses are gradually being asked to integrate their systems directly with ZATCA’s platform (Fatoorah). That means your invoicing software must now communicate with ZATCA’s servers in real time.
Each business gets notified by ZATCA when it's their turn to comply with phase 2. The timeline varies depending on your annual revenue.
Key requirements for a compliant e-invoice
Whether you’re in phase 1 or phase 2, your tax invoices must include:
- the buyer and seller VAT registration numbers
- a unique invoice number
- the date and time of the transaction
- a clear itemized list of goods or services
- total amount before VAT, VAT amount, and total after VAT
- a QR code (especially for simplified invoices)
- a compliant XML format (in phase 2)
The QR code is especially important for B2C invoices; it helps customers verify authenticity by scanning it using a ZATCA app.
The hidden challenge: managing your incoming invoices and expenses
Most of the attention around ZATCA compliance focuses on sending e-invoices. But what about the invoices and receipts you receive from vendors and employees?
Let’s say your procurement team gets 50 supplier invoices a month. Or your employees submit dozens of receipts for travel, meals, and office supplies. These documents must also be processed, validated, and stored in a compliant way if you’re going to claim input VAT.
That’s where many businesses face their biggest headaches:
- paper receipts without VAT breakdown
- supplier invoices with missing fields
- delayed or lost receipts from employees
- lack of a clean audit trail
This part of the process is messy; but it’s critical. And that’s exactly where Pemo steps in.
How an automated expense management platform supports ZATCA compliance
Pemo doesn’t issue sales invoices. But we handle the rest of the ecosystem that ZATCA is asking you to clean up; employee spending and accounts payable.
Here’s how Pemo helps:
- Digital capture of receipts at the source - As soon as your employee pays using a Pemo card, the transaction is logged instantly. They get a prompt to snap a photo of the receipt and add notes; no more chasing receipts at month-end.
- Automated VAT calculations - Pemo automatically pulls out VAT details and categorizes the expense based on your chart of accounts. This ensures accuracy and reduces the risk of non-compliant data entry.
- Auditable expense records - All expenses, invoices, and receipts are stored digitally in one platform. Need to prepare for a ZATCA audit? You’ve got everything ready to go; with our accounting automation, you can expect no boxes of paper or spreadsheet chaos.
- Expense approval flows - Before any reimbursement or payment happens, expenses go through your internal approval process. You define the rules; Pemo enforces them.
Checklist: Are your financial processes ZATCA-ready?
Here’s a quick self-check to see how prepared you are:
- Are you still using Excel or paper for employee reimbursements?
- Do you have real-time visibility on what’s being spent across departments?
- Are your supplier invoices stored digitally and with the correct tax fields?
- Can you track input VAT accurately for all purchases?
- Do you have a consistent approval workflow for all expenses and invoices?
- If ZATCA requested an audit, could you provide supporting documents quickly?
If you answered “no” to any of these, you’re not alone, and you’re not too late to fix it.
Conclusion: Compliance is just the beginning
ZATCA’s e-invoicing mandate might feel overwhelming at first. But it’s actually a golden opportunity. It’s a chance to modernize your financial processes, eliminate messy manual work, and build a system that works for the future.
Think of compliance as the baseline, and efficiency, visibility, and control as the real rewards.
And when it comes to managing your expenses, approvals, and employee spending, Pemo is your partner in getting it right.
Want to make compliance easier and turn your expense management into a competitive advantage?
Try Pemo today; book your demo and see how simple finance can be.
