On a construction project the invoice is never the first document. First comes the progress claim, measured on site, argued over with the owner and signed by the consultant. Because that is the paper everyone negotiates, many contractors treat it as the invoice. It is not. The certificate proves the work; the tax invoice raised on it proves the debt, and only the invoice goes to ZATCA. The same confusion puts a claim worth hundreds of thousands of riyals on a simplified invoice because the contractor has one client, when the rule points the other way.
A progress certificate is not a tax invoice
The certificate, called an extract or an interim payment certificate in some contracts, records percentage complete and quantities and is approved by the consultant or the owner. Nothing goes to the Authority at that stage. Once it is approved, you issue a tax invoice for the certified amount. That invoice is what is signed, sent to the Authority and paid against; the certificate stays in your file as its support.
Quote the claim number in the line description or the invoice notes so your records match the owner's. The invoice number runs in its own sequence and does not follow the claim numbers.
Standard or simplified: the owner decides
The type follows who the owner is, not the size of the claim or how many clients you have. For a contractor it comes down to two cases (full comparison here):
- A company, an establishment or a public body registered for VAT: a standard tax invoice carrying the owner's VAT number and address, cleared by the Authority before you hand it over. Clearance is an automated call that returns in seconds.
- An individual building their own home: a simplified tax invoice, reported within 24 hours, however large the amount.
So ask one question before every claim invoice: does the owner have a VAT number? It must be fifteen digits beginning and ending with 3. A mistyped one breaks BR-KSA-44, an error-level rule, and the invoice is rejected, so check it once with the VAT number lookup. Address problems are gentler: an owner postal code that is not five digits comes back as a warning under BR-KSA-67, and the invoice still clears.
The whole contract, document by document
For an owner registered for VAT:
| What happens | What you issue | Sent to ZATCA |
|---|---|---|
| The advance falls due or is paid | A tax invoice for the advance | Yes, cleared before the owner gets it |
| The consultant approves a certificate | Nothing: the certificate is your support | No |
| The certified amount is billed | A tax invoice for the work, less any advance recovered | Yes, cleared before the owner gets it |
| The owner pays, holding back retention | A receipt voucher against the invoice | No |
| A penalty is deducted or an item rejected after invoicing | A credit note referencing the invoice, with the reason | Yes |
| Extra work is approved after invoicing | A debit note, or a new invoice, as agreed | Yes |
| Retention is released | A receipt voucher, or an invoice if the contract made retention due only at handover | Voucher no, invoice yes |
| A subcontractor bills you | Nothing: they invoice you, with your VAT number | From their system |
Advance payments: invoiced once, recovered claim by claim
The advance is invoiced on its own tax invoice when it falls due or is received. Each later claim deducts the share it recovers as a clearly labelled deduction. Leave that out and the owner is billed VAT twice on the same money, and every claim looks larger than the work it certifies.
ZATCA's guideline gives this its own structure in the XML: the advance invoice carries document type code 386 instead of 388, and each later invoice references it by number, date and time and subtracts the recovered amount, VAT included, as a prepaid amount. See section 8 of the Detailed Guidelines for E-Invoicing.
One claim, worked through at 15% VAT
A contract worth SAR 2,000,000 before VAT. The owner pays a 10% advance, SAR 200,000, invoiced at SAR 230,000 with its VAT and recovered at 10% of each certified claim, and holds back 5% of the certified work as retention until handover. Claim No. 3 certifies SAR 150,000 of work.
| Claim No. 3 | SAR |
|---|---|
| Work certified in this claim | 150,000.00 |
| Less advance recovered (10% of the certified work) | −15,000.00 |
| Net amount | 135,000.00 |
| VAT at 15% on the net | 20,250.00 |
| Invoice total | 155,250.00 |
| Retention held back (5% of the certified work) | −7,500.00 |
| Paid now, recorded with a receipt voucher | 147,750.00 |
| Still open on the invoice until retention is released | 7,500.00 |
In the guideline's structure the same claim keeps its full SAR 150,000 and SAR 22,500 of VAT, a total of SAR 172,500, and subtracts a prepaid amount of SAR 17,250: the 15,000 recovered plus the 2,250 of VAT already charged on it. The amount due is SAR 155,250 either way. The difference is that the XML points back to the advance invoice.
Retention is unpaid, not discounted
The retention did not reduce the invoice or its VAT. It is part of what the owner owes you, paid later, so the common approach is the one above: invoice the full amount and let the retention stay open on that invoice until a receipt voucher settles it on release. Where the contract makes retention due only at final handover, invoice it then instead. Either way: one amount, one invoice. Which case yours is, and which VAT period that puts the retention in, is one to confirm with your accountant.
Penalties, rejected items and variations
An issued invoice cannot be edited or deleted. A delay penalty the owner deducts, or an item rejected after invoicing, is a credit note that references the invoice number, states the reason and carries the reduction. It is signed and sent to the Authority like the invoice, and a note without a reason is rejected under BR-KSA-17, an error-level rule. Unsure whether a deduction reduces the price of your work or is a separate claim between you and the owner? Ask your accountant before the note goes out.
Extra work approved after an invoice was issued is a debit note against it or a new invoice, depending on what was agreed, while work certified for the first time in a later claim is simply a line on that claim's invoice. The guide to credit and debit notes covers both.
Subcontractor invoices run the other way
When you hire a subcontractor, you are the buyer. They issue you a standard tax invoice made out to your company with your VAT number, and that invoice supports deducting its VAT in your return, so check it is the right document before you file it. Your own invoices to the owner are entirely separate: the subcontractor's invoice is never passed on to the owner.
What this needs from a system, and where ours stops
None of this needs accounting software, and ZATCA Tools does only this narrow job. Connecting takes one OTP from the Fatoora portal. Owners are saved as customers with their VAT number and national address. A claim invoice can wait as a draft while the certificate is approved, unsigned and without an invoice number until you issue it, and each line takes a scope-of-work description and its own discount, with a note for the claim number. Rejections come back with the official code and, where one exists, a link to its guide. Receipt vouchers (RV-) mark each invoice paid, partially paid or unpaid, so retention stays visible as an open balance, and per-customer statements and reports export to CSV and PDF. Credit and debit notes are raised against the original with their reason, quotations convert into invoices, the signed XML is downloadable, and an ERP can issue through the API.
Where it stops matters as much. It cannot issue a prepayment invoice (type 386) or reference one on a claim: a recovery can only be shown as a discount, which gets the amount due right but not the structure the guideline describes. If your contract has an advance, agree with your accountant how to handle it before the advance invoice goes out. There is no project or BOQ accounting, no retention ledger and no button that copies last month's claim; each claim is a new invoice built from the saved owner and your saved items. It is not an accounting system.
It is free to start: 50 invoices or 30 days from the day you connect, whichever comes first. Start here, or read the Phase 2 walkthrough first.