Introduction
Saudi Arabia’s Zakat, Tax and Customs Authority (ZATCA) has rolled out Phase 2 of the e-invoicing (Fatoora) program, requiring businesses to integrate their invoicing systems directly with ZATCA.
This step is part of the Kingdom’s digital transformation and VAT compliance goals. For companies, it means adapting their software and processes — or risking heavy fines.
In this article, we’ll break down what Phase 2 means, who it applies to, and how your business can prepare with the right ERP solutions.
What Is ZATCA Phase 2?
Phase 2 — also called the Integration Phase — requires businesses to:
- Generate invoices in a structured electronic format (XML / UBL).
- Integrate directly with ZATCA’s platform.
- Include mandatory fields (buyer & seller info, timestamps, VAT breakdown).
- Add QR codes for validation.
- Support debit and credit notes electronically.
Unlike Phase 1 (the generation phase), where only electronic invoices were required, Phase 2 is about seamless communication between your ERP and ZATCA.
Who Must Comply?
ZATCA is rolling out compliance in waves, based on revenue thresholds.
- Businesses with revenue above SAR 3 billion → already integrated.
- Current waves cover medium and small businesses.
- By end of 2025, all VAT-registered businesses in Saudi Arabia will be required to comply.
If you’re VAT registered in Saudi Arabia, you will be included in Phase 2.
Deadlines & Penalties
- ZATCA announces waves on their portal and emails registered companies.
- Businesses are given at least 6 months to prepare after notification.
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Failure to comply can lead to:
- Financial penalties
- Suspension of tax certificates
- Legal complications
How to Prepare Your Business
To comply with Phase 2, companies must:
- Upgrade their invoicing systems to support XML/UBL formats.
- Enable QR code generation on invoices.
- Connect their ERP system directly with ZATCA’s APIs.
- Ensure audit logs and secure storage of e-invoices.
Why ERP/Odoo Is the Best Solution
Instead of relying on manual fixes, a modern ERP system like Odoo, customized for Saudi regulations, ensures:
- Automatic ZATCA integration (XML/UBL invoices + direct submission).
- QR code generation built into invoices.
- Multi-language & multi-currency support.
- Error-free VAT calculations.
- Scalable setup for businesses of all sizes.
At JH Systems W.L.L., we help Saudi businesses:
- Set up ZATCA-compliant ERP systems.
- Customize Odoo for accounting, invoicing, and tax compliance.
- Provide training to teams so compliance becomes smooth and efficient.
Frequently Asked Questions (FAQ)
Q1: How do I know if my business is in the next wave?
Check ZATCA announcements or your registered email — they notify businesses directly.
Q2: Can I use my existing software for Phase 2?
Only if it supports XML/UBL, QR codes, and ZATCA API integration. Most old systems don’t.
Q3: What if I don’t comply in time?
You risk penalties, blocked tax certificates, and business disruption.
Conclusion
Phase 2 of ZATCA e-invoicing is not optional. It’s the future of business compliance in Saudi Arabia.
The good news? With the right ERP partner, compliance becomes effortless.
Ready to integrate with ZATCA? Contact JH Systems W.L.L. today for a consultation.