How to Prepare Your Accounting System for ZATCA Phase 2 Integration

With the ZATCA Phase 2 (the Integration Phase), e-invoicing has become a more connected, real-time compliance workflow. If you’re issuing tax invoices, your accounting software now must generate structured e-invoices and integrate with ZATCA systems as required for the e-Invoicing wave that your company would fall in.

Let’s understand how you can easily upgrade your existing software to ensure ZATCA Phase 2 Compliance.

What is ZATCA Phase 2?

In Phase 2, electronically generated invoices are validated through integration. For standard tax invoices, the Fatoora platform validates the XML and then “clears” the invoice by adding a cryptographic stamp and QR code, returning the cleared XML via APIs.

For simplified tax invoices, you still generate them in a compliant format (XML or PDF/A-3 with embedded XML), but submission follows a “reporting” model. These invoices must be uploaded in XML to the platform within 24 hours of issuance.

Also, Phase 2 is being rolled out in waves, so the practical question is: Are you ready to generate e-invoices in Phase 2 or are you still preparing early to avoid a rushed go-live? If you are getting ready to prepare your accounting software for Phase 2

Step-by-step setup of accounting software for Phase 2 compliance

Below is a practical walkthrough of how businesses typically configure their accounting systems to meet ZATCA Phase 2 requirements, from readiness checks to live submission.

Step 1: Assess whether your accounting software needs an upgrade

Check if your current accounting/ERP is Phase 2-ready and can act as an e-invoice generation solution (EGS). It should have XML generation, API connectivity, and support for the Phase 2 clearance/reporting model. If your current system can’t meet this, you’ll need either an upgrade or a compliant solution/partner that can.

Step 2: Configure your invoice templates and masters

Phase 2 fails most often due to messy master data. Update your invoice layouts and company/customer masters so mandatory details are captured consistently (for example: address components and identifiers). It is important to standardise numbering rules (unique invoice numbers).

Step 3: Onboard your EGS unit on the Fatoora portal

Time to link your system/device to ZATCA.

Generate an OTP for the EGS unit (OTP is valid for 1 hour).

Use the OTP inside your accounting software’s ZATCA/e-invoicing configuration to authenticate the device and generate a CSR (Certificate Signing Request), which is submitted for compliance credentials.

Step 4: Enable signing/CSID credentials

Once onboarded, your system must be able to handle:

Clearance flow (typically standard tax invoices): ZATCA validates and returns a cleared XML with cryptographic elements.

Reporting flow (simplified invoices): submit XML within 24 hours.

Operationally, define who can submit, what happens on rejection, and how you’ll manage invoice corrections.

Step 5: Test in simulation/sandbox, then go live

Use a controlled testing cycle to:

Generate sample invoices (standard and simplified)

Validate formatting, QR requirements, and API responses

Train users on what to do when an invoice is rejected or flagged

Then move to live submission once your pass rate is stable.

Step 6: Archive, retention, and governance

ZATCA-linked e-invoices must be stored safely, searchable, and audit-ready. As a baseline, VAT regulations require invoices, books, and records to be retained for at least six years (with longer periods for certain asset records).

So your setup isn’t complete until you’ve defined where XML/PDF-A3 outputs are stored, who has access, and a proven audit trail.

Your Phase 2 readiness checklist

Before you change the settings, check whether your accounting software aligns with these basics:

Confirm your software can do Phase 2 output and connectivity

At a minimum, you need the ability to generate e-invoices in the required structured formats (XML / PDF-A3 with embedded XML) and support API-based exchange with the platform.

Get your data capture right

Phase 2 is unforgiving about missing/incorrect fields. Your invoice template and masters should consistently store items like seller/buyer identifiers, timestamps, and other mandated fields.

Plan for onboarding and credentials

Device/solution onboarding relies on the Fatoora portal flow: you log in using your TIN (or registered email) and password, generate an OTP (valid 1 hour), and use it to onboard your E-Invoicing Generation Solution (EGS) unit.

Prepare for process change

In Phase 2, “save” can mean “submit” (clear/report). That affects reversals, error handling, and user permissions, so staff training is highly important.

Making Phase 2 simpler with TallyPrime

If you want Phase 2 compliance to feel less like an IT project and more like a guided workflow, using an accounting software that already supports the KSA e-invoicing integration journey helps.

TallyPrime’s KSA e-invoicing flow is designed around the same building blocks you’re required to complete anyway, such as:

Ensuring the right company details are captured,

Generating credentials through an OTP/CSR-style onboarding flow,

Enabling e-invoicing controls through company features and voucher configuration.

It also adds practical guardrails (like stronger visibility into changes around e-invoicing workflows), which is valuable when multiple users are raising invoices under real operational pressure.

ZATCA Phase 2 compliance is ultimately a combination of correct invoice data, secure onboarding credentials, and clean system-to-portal integration, plus the human layer of training and governance. The businesses that get this right typically treat it like a one-time implementation: fix masters, test properly, document workflows, and then run consistently.

If you’re planning to upgrade your currentaccounting software or move to a Phase 2-ready platform like TallyPrime, aim for a setup that’s not only compliant today but also easy to maintain as ZATCA updates technical requirements over time.