ZATCA Phase 2 Compliance Guide for Construction Companies in Saudi Arabia
Everything construction companies need to know about ZATCA's Phase 2 e-invoicing requirements — from UBL XML generation to QR codes and ECDSA digital signatures.
What is ZATCA Phase 2?
The Zakat, Tax and Customs Authority (ZATCA) of Saudi Arabia has mandated that all businesses integrate with their FATOORA platform for electronic invoicing. Phase 2, also known as the "Integration Phase," requires real-time reporting of all invoices to ZATCA's system.
For construction companies, this is particularly significant because of the high volume of invoices generated from progress billing, subcontractor payments, and material procurement.
Key Requirements for Construction Companies
UBL XML Format
All invoices must be generated in UBL 2.1 XML format, containing structured data that ZATCA can process automatically.
QR Code Generation
Each invoice must contain a QR code that encodes the invoice data in a format readable by ZATCA's systems.
ECDSA Digital Signatures
Invoices must be digitally signed using ECDSA (Elliptic Curve Digital Signature Algorithm) to ensure authenticity and integrity.
Real-Time Reporting
Invoices must be reported to ZATCA in real-time or near-real-time, depending on your business category and revenue threshold.
Challenges Specific to Construction
Construction companies face unique challenges with ZATCA compliance due to:
- Progress billing: Invoices based on percentage of completion (POC) require accurate calculation of work done.
- Retention handling: Retention amounts must be properly reflected in e-invoices.
- Subcontractor invoices: High volume of subcontractor payments, each requiring separate e-invoicing.
- Material procurement: Three-way matching (PO ↔ GRN ↔ Invoice) must generate compliant e-invoices.
- VAT at 15%: Correct VAT calculation on construction services, including zero-rated and exempt categories.
How Ebny Handles ZATCA Compliance
Ebny is purpose-built for Saudi construction companies and includes full ZATCA Phase 2 compliance out of the box:
- Automatic UBL XML generation for all invoice types
- QR code encoding per ZATCA specifications
- ECDSA digital signature integration
- Real-time reporting to ZATCA's FATOORA platform
- VAT 15% calculation with proper categorization
- Progress billing (POC) with compliant invoice generation
Getting Started
If your construction company hasn't yet integrated with ZATCA Phase 2, the time to act is now. Non-compliance can result in penalties and restrictions on your ability to operate.