ZATCA Phase 2 E-Invoicing for Construction Companies

What Phase 2 actually requires

Saudi e-invoicing arrived in two phases. Phase 1 (Generation), in force since 4 December 2021, ended manual invoicing: handwritten invoices, Word and Excel stopped counting — invoices must be generated by a compliant electronic system. Phase 2 (Integration), rolling out in waves since January 2023, is the harder step: your system must integrate with ZATCA's Fatoora platform via API.

In practice, Phase 2 means your invoicing software must:

• issue invoices in the required XML format (or PDF/A-3 with embedded XML);
• carry a UUID, a cryptographic stamp and a QR code on every invoice;
• clear standard (B2B) invoices with ZATCA in near real time — the invoice isn't valid until cleared;
• report simplified (B2C) invoices to ZATCA within 24 hours;
• onboard your devices/solution with ZATCA (CSID) through the Fatoora portal.

ZATCA assigns businesses to waves by revenue and notifies them directly, typically about six months ahead. Thresholds started with the giants (Wave 1: over SAR 3 billion) and stepped down ever since — by Wave 24 the threshold reached SAR 375,000, which is also Saudi Arabia's mandatory VAT-registration floor, so that wave put ordinary small contracting businesses squarely in scope. Wave 24's deadline (30 June 2026) has now passed, and because it captured essentially every VAT-registered business it was the most expansive wave to date. As of July 2026 ZATCA has not publicly announced a later wave — expect at least six months' notice before any new integration date, and watch your Fatoora notifications.

Why construction billing makes this harder

A café issues simple invoices; a contractor doesn't. Construction billing has structures that generic invoicing tools handle badly even when they're technically "ZATCA-certified". Before you commit to any system, make the vendor demo your flows:

• Progress claims (المستخلصات): can the system raise a compliant tax invoice against a contract for each certified progress claim — with correct cumulative quantities, previous-claim deductions and VAT?
• Advance payments: can it issue a compliant advance-payment invoice, then offset that advance correctly across later claims?
• Retention (محتجزات الضمان): retention changes when money falls due — your system must keep VAT treatment correct on invoiced amounts while tracking retained balances to final account.
• Supply-and-install contracts: mixed goods + services billing on one contract, still producing clean XML.
• Subcontractor chain: matching incoming subcontractor e-invoices to certificates, and handling withholding tax where it applies.

Which construction software is ZATCA-ready?

From the 15 construction-software platforms in our Saudi directory, these are the ones advertising ZATCA e-invoicing capability — with our notes on fit. (Always verify a vendor against ZATCA's official solution-provider directory before signing.)

Compliance checklist for contractors

1. Confirm your status. If VAT-taxable revenue exceeded SAR 375,000 in 2022, 2023 or 2024, you were in Wave 24 (deadline 30 June 2026 — now passed). Check the Fatoora portal / your registered contacts, and if a new firm crosses the VAT-registration threshold, watch for ZATCA's notification of any later wave.
2. Pick certified software now. Shortlist from the table above; cross-check ZATCA's solution-provider directory. If your deadline has already passed, onboarding is urgent — don't add more non-compliant months; otherwise leave 2–3 months before your date.
3. Demo YOUR billing flows. Progress claims, advances, retention, supply-and-install — in the demo, on your real contract structure.
4. Onboard with Fatoora. Device/solution onboarding (CSID issuance) through the portal, done by your vendor or accountant.
5. Run a clearance test. Issue real cleared invoices in a controlled batch before switching the whole business over.
6. Train the back office. The people raising claims need to know what now blocks an invoice (missing buyer VAT number, wrong format) — fix at source, not at month-end.