Saudi compliance in 2026: e-invoicing and transfer pricing.
Saudi Arabia’s tax compliance framework is moving deeper into the way businesses operate. In 2026, two areas deserve particular attention: ZATCA’s expanding FATOORA e-invoicing programme, and the broader application of transfer pricing requirements, including to zakat-paying businesses.
For finance leaders, the significance goes beyond another filing deadline. Both regimes increasingly require compliance to be built into systems, transaction processes, documentation, and governance.
Phase 2 continues to expand.
Saudi Arabia’s e-invoicing framework remains divided into two stages.
Phase 1, the Generation Phase, has applied since December 2021 and requires taxpayers to generate and retain electronic invoices through compliant electronic solutions.
Phase 2, the Integration Phase, began in January 2023 and is being implemented progressively through taxpayer waves. Under Phase 2, businesses must integrate their invoicing systems directly with ZATCA’s FATOORA platform and satisfy additional technical and data requirements.
The latest development is Wave 25, announced by ZATCA on 24 July 2026. Wave 25 covers taxpayers whose revenues subject to VAT exceeded SAR 187,500 in any of 2022, 2023, 2024, or 2025. Taxpayers falling within the wave are required to integrate their e-invoicing solutions with FATOORA no later than 1 February 2027. ZATCA will notify affected taxpayers directly.
This follows Wave 24, which covered taxpayers above SAR 375,000 and had an integration deadline of 30 June 2026. The direction is clear: Phase 2 is progressively reaching smaller businesses.
Integration means more than producing a digital invoice. A PDF invoice generated by accounting software is not, by itself, sufficient for Phase 2. The underlying invoicing solution must be capable of generating compliant structured invoice data and interacting with ZATCA according to the required process. ZATCA’s technical framework distinguishes between two principal invoice flows: standard tax invoices, generally associated with B2B transactions, follow the clearance model and must be submitted to ZATCA for clearance before reaching the customer; simplified tax invoices, generally associated with B2C transactions, follow the reporting model and must be reported to ZATCA within the prescribed period after issuance.
Phase 2 also introduces a series of system-level requirements, including structured XML invoice data, unique invoice identifiers, cryptographic controls, invoice hash chaining, QR codes, security credentials, and direct connectivity with ZATCA’s systems. For businesses operating through several POS terminals, e-commerce platforms, or ERP systems, this makes e-invoicing an IT, finance, and controls project, rather than a tax-only exercise.
A wider compliance population.
At the same time, transfer pricing has become relevant to a substantially broader group of Saudi businesses. Transfer pricing governs transactions between related persons and persons under common control. The fundamental requirement is the arm’s length principle: controlled transactions should be priced on conditions comparable to those that would apply between independent parties.
One of the most important changes in recent years was the extension of the broader transfer pricing framework to zakat payers, from financial years beginning on or after 1 January 2024. This means Saudi and GCC-owned businesses that may previously have viewed transfer pricing primarily as a corporate income tax issue now need to assess their own obligations carefully.
The disclosure form has no minimum transaction threshold. A particularly important distinction concerns the Disclosure Form of Controlled Transactions, commonly referred to as the transfer pricing disclosure form, or CTDF. Where a taxpayer has controlled transactions, the disclosure requirement is not limited to large groups. The CTDF applies to both relevant income-tax taxpayers and zakat payers with controlled transactions, regardless of their value. The filing deadline is generally within 120 days after the end of the financial year, together with the annual tax or zakat return.
ZATCA’s current FAQ likewise confirms that the disclosure form remains applicable where aggregate controlled transactions are below SAR 6 million. An affidavit or Chartered Accountant Certificate from a licensed auditor is also required with the disclosure form, certifying the consistent application of the relevant transfer pricing policy. This is an important point for smaller businesses: being below the Master File and Local File thresholds does not necessarily remove the disclosure obligation.
Master File and Local File thresholds. The more detailed documentation requirements depend on the type of taxpayer and the aggregate value of controlled transactions. For corporate income tax and mixed taxpayers, the key threshold remains SAR 6 million of aggregate controlled transactions; businesses below that level generally benefit from the Small Enterprise exemption from Master File and Local File requirements. For 100% zakat-paying entities, a transitional regime applies during FY2024–FY2026:
| Aggregate controlled transactions | FY2024–FY2026 position |
|---|---|
| Up to SAR 48 million | Master File / Local File generally not required |
| Above SAR 48 million but below SAR 100 million | Optional |
| SAR 100 million or more | Mandatory |
From FY2027 onward, the mandatory threshold for 100% zakat payers moves to above SAR 48 million under the phased framework described in ZATCA’s updated guidance. The Master File provides group-level information, while the Local File focuses much more closely on the Saudi entity, its controlled transactions, functional analysis, transfer pricing method, financial information, and arm’s length support.
These files are generally submitted when requested by ZATCA. However, this should not be interpreted as permission to prepare them only once a request arrives. ZATCA expects adequate documentation to already exist when the disclosure form is filed, with requested documentation then provided within the period specified by the Authority, which will be no less than 30 days.
Country-by-country reporting remains a separate test. Large multinational groups must also consider Country-by-Country Reporting. The Saudi threshold remains consolidated MNE group revenue exceeding SAR 3.2 billion in the preceding financial year. The reporting framework contains separate notification and report-filing requirements, so businesses should not assume that completion of the transfer pricing disclosure form automatically satisfies every CbCR obligation.
The practical response should begin with scope, not paperwork. Businesses should first determine which e-invoicing wave applies, using historical VAT-subject revenue and any notification received from ZATCA. For Wave 25 taxpayers, the current integration deadline is 1 February 2027. They should then assess whether every invoicing channel, including ERP systems, POS terminals, and e-commerce platforms, is capable of operating under the required FATOORA model.
Separately, finance and tax teams should establish a complete register of related-party and controlled transactions. This should include more than obvious sales and purchases: management charges, financing, guarantees, shared services, intellectual property arrangements, cost allocations, and other intercompany dealings may all require consideration under the transfer pricing framework. The Local File requirements themselves demonstrate the breadth of information expected around controlled transactions and their economic analysis.
Documentation should then be aligned with the applicable threshold and prepared contemporaneously, rather than reconstructed after ZATCA raises a request.
FATOORA and transfer pricing appear to address different areas of tax compliance, but they reflect the same underlying direction. Saudi tax compliance is becoming increasingly transaction-level, data-driven, and system-based.
E-invoicing gives ZATCA structured visibility over invoicing activity. Transfer pricing requires businesses to demonstrate the commercial and economic basis of transactions with related parties. Together, they make the quality of underlying systems, documentation, and internal controls increasingly important.
For businesses, the strongest approach is therefore not to treat each new requirement as a separate annual exercise. The objective should be to build a compliance structure in which transactions are captured correctly, related-party relationships are visible, documentation is maintained as activity occurs, and tax requirements are incorporated into normal finance and system processes.
In that environment, compliance becomes less about responding to the next deadline, and more about ensuring that the business is ready before it arrives.
Compliance is becoming transaction-level, data-driven, and system-based.
If your invoicing systems or your controlled-transaction file have not had a check against Wave 25 and the transfer pricing thresholds, that is a fixed scope, fixed fee conversation, not a stage of the audit.
Open the scope builderThis article is intended as a general overview of the Saudi regulatory position as at August 2026 and does not constitute tax, legal, or regulatory advice.