On 30 September 2024, The Federal tax Authority in UAE included key provisions in the VAT regulations for the introduction and implementation of electronic invoicing (e-invoicing).
To establish a groundwork for e-invoicing, the UAE government amends certain provisions on the VAT Law and Tax Procedures Law by issuing Federal Decree-Law No. 16 of 2024 and Federal Decree-Law No. 17 of 2024, respectively.
E-invoicing Framework in UAE
On 30 October 2024, The UAE Ministry of Finance later launched an official portal for the e-Invoicing programme with basic information, including the overview of the e-invoicing regime and FAQ Section. The phase-1 of e-invoicing will be set into effect on July 2026 for B2B and B2G transactions.
The e-invoicing framework is yet to be launched soon, business need to be prepared by learning about the e-invoicing regulations and adapt to the transformation. In this article, let us provide the brief overview of this new e-invoicing system in UAE, key requirements, timelines, and practical measures to be taken by businesses and government organisations in UAE to acclimate to this transition.
The Objectives of The e-invoicing System
E-invoicing is one of the significant initiatives towards digitalization of the tax system under the “E-Billing System”. By July 2026, e-Invoicing UAE will be mandatory for B2B and B2G transactions.
The objective of this e-invoicing system:
- Streamline invoicing processes
- Reduce usage of paper
- Ensure compliance with tax regulations
Timeline for e-invoicing in UAE:
The estimated date of implementation of e-invoicing was July 2025 but due to technical challenges, it has been postponed to July 2026.
During the Dubai E-invoicing Exchange Summit in 2024, the Ministry of Finance (MoF) in UAE declared additional information on the implementation of the timeline and model.
The proposed timeline for the e-invoicing implementation is as follows:
Q4 2024: Development of accreditation procedures for UAE service providers and data dictionary.
Q2 2025: Issuance of e-invoicing related legislation
July 2026: Phase 1 go-live of e-invoicing reporting
What is e-invoicing?
E-invoicing is the process of issuing, receiving and processing invoices electronically between a supplier and a buyer. Unlike traditional invoices, invoices are exchanged in a machine-readable format in e-invoicing process, ensuring efficiency and accuracy in any transaction.
How e-Invoicing Will Work in UAE:
The e-Invoicing framework is implemented on a 5-corner Decentralized Continuous Transaction Control and Exchange (DCTCE) model based on PEPPOL (Pan-European Public Procurement On-Line) which is also called as 5-corner PEPPOL model. This PEPPOL network enhances cross-border interoperability by enabling seamless communication and document sharing between enterprises by ensuring systemized invoice processing across businesses.
Taxpayers will be required to integrate with Accredited Service Provider (ASP) who are accredited by the Ministry of Finance (MoF). Only the ASPs will have a direct access to e-invoicing technology infrastructure.
Note: All the members of the VAT group will be required to have an independent endpoint connection with the ASP, while still operating under the group’s TRN (Tax Registration Number)
The e-invoicing process in UAE
Step 1: The supplier generates the invoice data to the accredited service provider (ASP).
Step 2: The ASP converts and validates the invoice to ensure it meets the UAE e-invoicing standards.
Step 3: The supplier’s ASP will send the e-invoice to the buyer’s ASP and ensure compliance with PEPPOL Standards.
Step 4: The ASP send the validated e-invoice data to the FTA in real-time.
Step 5: The FTA sends an acknowledgement of successful receipt while the buyer receives the invoice from its ASP.
E-Invoicing Obligations for Taxpayers
To facilitate e-invoicing transactions, it is crucial for taxpayers to engage with an
Accredited Service Provider (ASP) for validation and exchange of invoices. As the e-invoices are exchanged through the ASP’s systems, the list of ASPs will be published soon by the UAE government.
Data Requirements and Validation
The data dictionary will outline all the requirements for that data in an e-invoice and taxpayers must ensure e-invoices adhere to the conditions. The ASP will evaluate the date prior to transmitting the invoice to the FTA and the buyer. In case of any errors, the ASP will send back the invoice to the supplier.
For now, business-to-business (B2B) and business-to-government transactions will be in scope under the e-invoicing systems, irrespective of their VAT registration status of the supplier and buyer.
Launching Phases: The launch of e-Invoicing framework in the UAE will be in a phased approach. Based on the predetermined criteria, businesses are expected to integrate the framework to their system at specific stages. A sufficient notification will be published for the taxpayers by the FTA before the requirements are defined.
UAE Businesses are Required to Prepare to Adopt e-invoicing
Although it has been official that the e-invoicing will be mandatory for businesses in UAE by July 2026, further clarification related to the true scope of the framework, specifications, clear requirements and procedures are yet to be issued.
While waiting for further notice, VAT registered businesses need to prepare to harmonize their systems with compliance requirements of e-invoicing regime. This involves assessing their internal systems such as invoicing technology and data management systems, train their staff, identify system issues and upgrade the ERPs or other systems to prepare the ground for e-invoicing system.
Need help in evaluating your accounting systems, ensuring compliance with regulations and train your team on adapting to the new regulations in the UAE. Our KGRN team can help you navigate the UAE regulations seamlessly and meet all the compliance requirements with ease. Reach Out To Our Experts Today!
