The Zakat, Tax and Customs Authority (ZATCA) is rolling out the second phase of e-invoicing in successive batches called “waves.” Not every business is mandated on the same date; instead, businesses are divided into groups based on the size of their annual VAT-taxable revenue. Each group has its own compliance date, and every business connects to the Fatoora platform only when its wave’s deadline arrives.
This guide focuses on the wave-division mechanism itself: how the Authority selects businesses for each wave, what revenue threshold defines each wave, how to tell which wave your business falls into, and the sequence of announced waves and their thresholds. The general phases and deadlines of e-invoicing are explained in the guide Phases and Deadlines for Implementing E-Invoicing in detail.
Why did the Authority divide businesses into waves?
Phase Two means connecting a business’s invoicing system directly to the Authority’s Fatoora platform. Every tax invoice passes through the platform for clearance or reporting. This connection requires a ready technical infrastructure on the business’s side, as well as sufficient capacity on the platform itself.
If every VAT-registered business were mandated on a single date, the platform would face enormous pressure all at once. That is why the Authority chose a gradual rollout. It starts with the largest businesses by revenue, then works its way down to smaller businesses. This gradual approach achieves two goals:
- It gives each group enough time for technical preparation before its mandate date.
- It spreads the load on the platform across years rather than one single moment.
Large businesses usually have technical teams and mature accounting systems, so the Authority began with them because they are the most capable of responding quickly. The scope of the mandate then widened to include medium and then small businesses, which need more time and simpler tools to prepare.
What criterion determines each business’s wave?
The only criterion that determines a business’s wave is its total annual VAT-taxable revenue. The wave has nothing to do with the sector, the number of employees, or the type of activity. The measure is a single one: the size of taxable revenue in a reference year set by the Authority.
Taxable revenue, not total sales
It is important to distinguish here. What is meant is revenue subject to VAT, not necessarily the entire sales figure in the financial statements. Exempt sales or sales outside the scope of the tax do not enter the calculation on which the Authority bases its wave decision. As a result, the figure the Authority looks at may differ from the sales figure the business’s management knows.
The reference year
The Authority relies on a business’s revenue in a specific reference year to determine its wave. For the first waves, the reference year was 2021. As the waves expanded to include smaller businesses, the Authority began looking at a business’s revenue in any of the years 2022, 2023, or 2024. In other words, a business falls within the wave if its revenue exceeded the announced threshold in any of these years.
This is a point that is often overlooked. A business’s revenue may be low this year, yet it exceeded the threshold in an earlier reference year. In that case it remains bound to its wave based on that year, and a later drop in revenue does not lift the mandate.
The revenue threshold that separates the waves
Each wave has a minimum revenue threshold. A business whose revenue exceeds this threshold in the reference year is classified within the wave. As the waves progress, the threshold drops, widening the circle of businesses included.
The threshold started very high in the first wave, at SAR 3 billion, meaning the very largest businesses in the Kingdom. It then descended in succession: SAR 500 million, SAR 250 million, SAR 150 million, and so on until the latest waves reached hundreds of thousands of riyals.
The core idea is that the thresholds do not overlap in a way that confuses businesses. Each business belongs to the first wave whose threshold its revenue exceeds. So if a business’s revenue exceeds the threshold of an earlier wave, it is bound from that wave onward and does not wait for the later, smaller waves.
Full readiness for Phase Two, whatever your wave
It connects your system’s entries to the Fatoora platform and issues tax invoices compliant with the Authority’s requirements, so you need not worry about when your wave arrives. Preparation is completed well before the deadline.
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The sequence of announced waves and their thresholds
The Authority has announced the waves in batches since the start of Phase Two implementation on 1 January 2023. Below is the full sequence of announced waves, the revenue threshold for each wave, and its mandate date.
| Wave | Annual taxable revenue threshold |
|---|---|
| First wave (January 2023) | More than SAR 3 billion |
| Subsequent waves | Descending thresholds announced in advance |
| Smaller waves | Down to SAR 375,000 |
Waves 1 to 8 (large businesses)
- Wave 1: revenue more than SAR 3 billion. Mandate from 2023-01-01.
- Wave 2: revenue more than SAR 500 million. Mandate from 2023-07-01.
- Wave 3: revenue more than SAR 250 million. Mandate from 2023-10-01.
- Wave 4: revenue more than SAR 150 million. Mandate from 2023-11-01.
- Wave 5: revenue more than SAR 100 million. Mandate from 2023-12-01.
- Wave 6: revenue more than SAR 70 million. Mandate from 2024-01-01.
- Wave 7: revenue more than SAR 50 million. Mandate from 2024-02-01.
- Wave 8: revenue more than SAR 40 million. Mandate from 2024-03-01.
Waves 9 to 16 (medium businesses)
- Wave 9: revenue more than SAR 30 million. Mandate from 2024-06-01.
- Wave 10: revenue more than SAR 25 million. Mandate from 2024-10-01.
- Wave 11: revenue more than SAR 15 million. Mandate from 2024-11-01.
- Wave 12: revenue more than SAR 10 million. Mandate from 2024-12-01.
- Wave 13: revenue more than SAR 7 million. Mandate from 2025-01-01.
- Wave 14: revenue more than SAR 5 million. Mandate from 2025-02-01.
- Wave 15: revenue more than SAR 4 million. Mandate from 2025-03-01.
- Wave 16: revenue more than SAR 3 million. Mandate from 2025-04-01.
Waves 17 to 24 (small businesses)
- Wave 17: revenue more than SAR 2.5 million. Mandate from 2025-07-31.
- Wave 18: revenue more than SAR 2 million. Mandate from 2025-08-31.
- Wave 19: revenue more than SAR 1.75 million. Mandate from 2025-09-30.
- Wave 20: revenue more than SAR 1.5 million. Mandate from 2025-10-31.
- Wave 21: revenue more than SAR 1.25 million. Mandate from 2025-11-30.
- Wave 22: revenue more than SAR 1 million. Mandate from 2025-12-31.
- Wave 23: revenue more than SAR 750,000. Mandate from 2026-03-31.
- Wave 24: revenue more than SAR 375,000. Mandate from 2026-06-30.
Note that the Wave 24 threshold equals the mandatory VAT registration threshold itself, which is SAR 375,000 per year. In practice this means Wave 24 includes every VAT-registered business. After this wave, the Authority is moving toward covering all tax registrants under Phase Two without exception.
Advance notice: a period of no less than 6 months
The Authority does not leave a business to discover its wave suddenly. The announced rule is that the Authority notifies every business included in an upcoming wave no less than 6 months before the mandate date. This period is intended to give the business enough time for technical preparation and connection to the Fatoora platform.
What should a business do during the six-month notice period?
The notice period is not a waiting phase; it is a window for work. During it, the business needs to:
- Choose an e-invoicing system compliant with Phase Two requirements.
- Complete the setup and connection to the Fatoora platform, and issue the cryptographic stamp certificate for its devices.
- Test invoice issuance in the sandbox environment before actual production.
- Train the accounting team on clearance for tax invoices and reporting for simplified invoices.
A business that begins preparing as soon as the notice arrives enters its mandate date with confidence. Postponing until the final weeks, however, puts the business under pressure and may leave it unready on the mandate date. The details of what this phase requires are explained in the guide Requirements of Phase Two of E-Invoicing.
Receiving the Authority’s wave notice
Choosing a compliant system and connecting
Testing in the sandbox environment
Activation and actual issuance on the wave date
How do you know which wave your business is in?
The most important practical question for every business owner: how do I know my wave and my mandate date? There are two reliable sources, one direct and the other inferential.
1. The official notice from the Authority
The first and most reliable source is the notice the Authority sends directly to the included business. This notice arrives through the official channels registered with the Authority, and it specifies the business’s wave and its own mandate date. This notice is the authoritative reference, and on it the business builds its preparation timeline.
It is therefore essential to keep the contact details registered with the Authority up to date. A notice that fails to arrive because of outdated details does not lift the mandate; it merely puts the business in a difficult position as the date approaches.
2. Inferring from the revenue threshold
The second source is inferential. A business can compare its annual taxable revenue in the reference years against the announced wave thresholds. If its revenue exceeded the threshold of a particular wave, it is most likely included in that wave or an earlier one.
This inference is useful for early planning before the notice arrives. But it does not replace the official notice. The final decision on the wave and the mandate date rests with the Authority, and it is what arrives in the official notice. Use inference to prepare early, not as a substitute for it.
Why do the thresholds descend in such fine increments?
Anyone looking at the wave table notices that the gaps between thresholds narrow as the waves progress. At first the jumps were huge: from SAR 3 billion to SAR 500 million to SAR 250 million. Then the steps became smaller and smaller: SAR 2.5 million, SAR 2 million, SAR 1.75 million, and so on down to hundreds of thousands.
The reason is that the number of businesses rises sharply as the revenue threshold drops. Businesses whose revenue exceeds SAR 3 billion are very few in the economy. But businesses whose revenue exceeds one million or half a million number in the thousands. That is why the Authority divided the smallest segment into many closely spaced waves, so that huge numbers of businesses do not enter all at once and overwhelm the platform and the support teams.
This also explains the closeness of the dates in the later waves. Waves 17 to 24 are separated by only a few months, because each of them absorbs a dense segment of small businesses. A deep understanding of this logic helps the small-business owner realize that their turn is inevitably coming, and that early preparation is wiser than waiting until the last moment.
How the threshold boundaries work in practice: applied examples
The clearest way to understand the wave mechanism is to trace different businesses across the threshold table. The rule is fixed: each business belongs to the first wave whose minimum threshold its revenue exceeds. Here are three applied examples that show how the classification falls into place.
First example: a large business with revenue of SAR 600 million
A business whose annual taxable revenue reached SAR 600 million in a reference year. This figure exceeds the Wave 2 threshold (SAR 500 million) but is below the Wave 1 threshold (SAR 3 billion). So the business belongs to Wave 2, and its mandate date is 2023-07-01. It does not wait for the later, smaller waves, because it has already exceeded the threshold of an earlier wave.
Second example: a medium business with revenue of SAR 12 million
A business with taxable revenue of SAR 12 million. The figure exceeds the Wave 12 threshold (SAR 10 million) but is below the Wave 11 threshold (SAR 15 million). So its wave is Wave 12, and its mandate date is 2024-12-01. Note that exceeding the threshold by a little is enough to place the business in the wave. There is no margin or rounding down.
Third example: a small business with revenue of SAR 800,000
A business with taxable revenue of SAR 800,000. The figure exceeds the Wave 23 threshold (SAR 750,000) but is below the Wave 22 threshold (SAR 1 million). So its wave is Wave 23, and its mandate date is 2026-03-31. This small business is not mandated early; instead it waits for its relatively later wave, in line with the logic of moving from the largest to the smallest.
The rule drawn from the three examples: determine your annual taxable revenue in the reference years, then look for the first wave from the top whose threshold your revenue exceeds. That is your wave, and its mandate date is your deadline.
Common misconceptions about the waves
Some misconceptions about the wave mechanism keep recurring, and correcting them spares a business unsound decisions.
“Waves are determined by sector”
Not true. The sector has nothing to do with the wave at all. A restaurant, a contracting company, and a retail store with the same taxable revenue fall into the same wave. The only criterion is revenue, not the type of activity.
“If I did not receive a notice, I am not mandated”
A dangerous error. A notice may fail to arrive because of outdated contact details with the Authority, not because there is no mandate. The mandate arises from exceeding the wave threshold, not from receiving the notice. Update your details with the Authority, and do not treat the absence of a notice as proof of exemption.
“A drop in my revenue removes me from the wave”
Not true. Once the threshold is exceeded in the reference year, the mandate is established. A subsequent drop in revenue does not cancel the wave or postpone the mandate date. The wave is a decision built on the reference year, not on the current situation.
“I can postpone preparation until the date is near”
A risky decision. Setup, connection, and sandbox testing take time, and technical problems may emerge that need resolving. The six-month period is designed to be used from its start, not postponed to its final weeks. A business that delays risks being unready on the mandate date.
What changes in practice when your wave’s date arrives?
When the wave’s mandate date is reached, the business’s invoicing pattern shifts fundamentally. Before the date, the business issued its invoices electronically under Phase One without a direct connection to the Authority. After the date, connection to the Fatoora platform becomes mandatory.
In practice, this means that tax invoices addressed to businesses are subject to clearance before they are delivered to the customer. A tax invoice is not delivered to the buyer until the system has passed it through the Fatoora platform and it has been returned cleared. Simplified tax invoices addressed to consumers, on the other hand, are delivered to the customer immediately and then reported to the Authority within 24 hours.
This transition does not tolerate any interruption. The moment the date arrives, the system must be connected and ready, because any invoice issued after the date without passing through the platform violates the requirements. This is why advance preparation during the six-month period takes on its utmost importance: the goal is for the business to cross the mandate moment without any halt in issuing invoices.
One aspect that is sometimes overlooked is that the wave binds not only the single business but all of its devices and branches that issue invoices. A multi-branch business needs to prepare each branch and each issuance point separately before the date. The larger the business, the more issuance points must be connected, and the longer the actual preparation takes. This is a fundamental consideration when estimating the time needed within the six-month period, since a business with ten branches needs far more connection effort than a business with a single branch, even though both may fall into the same wave by revenue.
Businesses that entered VAT after the waves began
A recurring question: what about a business that registered for VAT after the waves had already begun? Businesses new to the tax system, or whose revenue recently exceeded the mandatory registration threshold, enter the system according to what the Authority specifies in its notice.
With the waves reaching the SAR 375,000 threshold in Wave 24, the scope of Phase Two now covers, in practice, every VAT-registered business. So any business that exceeds the mandatory registration threshold today should consider itself within the scope of Phase Two and prepare its system for connection without delay.
In practice, a fast-growing startup may exceed the mandatory registration threshold within a single year. The wiser choice for such a business is to select a Phase Two–ready invoicing system from the outset, rather than starting with a simple system and then being forced to change it later under the pressure of a mandate date. Early readiness saves the cost of a late migration and spares the business duplication in preparing data and systems.
How does Qoyod help you be ready for your wave?
Whatever your business’s wave or mandate date, the technical readiness is the same: an invoicing system that is compliant and connected to the Fatoora platform. Qoyod’s e-invoicing software provides all of this ready to go:
- Issuing tax invoices compliant with the Phase Two requirements of the Zakat, Tax and Customs Authority.
- Connecting to the Fatoora platform, and handling clearance for tax invoices and reporting for simplified tax invoices.
- Managing the cryptographic stamp certificate for each device or branch as part of the setup and connection steps.
- Generating the QR code, the cryptographic signature, and the invoice chain required in Phase Two.
This is how a business enters its wave’s mandate date having completed preparation in advance. There is no need to worry about the wave’s date as long as the infrastructure is ready well before the deadline. For full details on the connection, see the guide Integration with the Zakat, Tax and Customs Authority, and to learn which businesses are mandated, see the guide Who Is Required to Use E-Invoicing.
Frequently asked questions about e-invoicing implementation waves
| Case | What you do |
|---|---|
| You received a notice from the Authority | Comply with the date specified in the notice |
| You have not received a notice yet | Compare your taxable revenue against the thresholds and prepare early |
What determines my business’s wave?
It is determined by a single criterion only: your total annual revenue subject to VAT in the reference year the Authority adopts. The wave has nothing to do with the sector, the number of employees, or the type of activity.
How long is the notice period before the mandate date?
The Authority notifies an included business no less than 6 months before its mandate date, to give it enough time to choose a system, complete the connection, and test before actual issuance.
How do I know for certain which wave my business is in?
The authoritative reference is the official notice from the Authority, which arrives through your registered channels. You can make an early inference by comparing your revenue against the wave thresholds, but the final decision remains with the official notice.
Does the revenue threshold apply to total sales or to taxable revenue?
To revenue subject to VAT specifically, not necessarily the entire sales figure. Exempt sales or sales outside the scope of the tax do not enter the calculation on which the Authority bases its wave decision.
My revenue dropped this year; will I be removed from my wave?
No. The mandate is built on exceeding the threshold in the reference year. If you exceeded the threshold in an earlier reference year you are bound to your wave, and a later drop in revenue does not lift that.
I registered for VAT recently; what is my wave?
With Wave 24 reaching the SAR 375,000 threshold, the scope of Phase Two now covers every VAT-registered business. If you exceed the mandatory registration threshold, consider yourself within the scope, and prepare your system for connection based on the Authority’s notice.
