The United Arab Emirates (UAE) is advancing towards a fully digitized tax system with the introduction of an e-invoicing mandate under the "E-Billing System." By July 2026, e-invoicing will become compulsory for Business-to-Business (B2B) and Business-to-Government (B2G) transactions. This initiative is part of a broader government strategy to streamline invoicing processes, minimize paper usage, and ensure adherence to global tax regulations. The UAE’s e-invoicing framework is structured around the Peppol 5-corner model, which guarantees a standardized and efficient invoicing system across various businesses.

Recent Update

The timeline for implementing e-invoicing in the UAE has been revised. On February 14, 2024, during the Dubai E-Invoicing Exchange Summit, the UAE Ministry of Finance announced the adoption of the Peppol-based DCTCE (5-corner) model as part of the new Continuous Transaction Control (CTC) framework.

What is E-Invoicing in the UAE?

E-invoicing in the UAE refers to the electronic generation, submission, and storage of invoices using a standardized digital format and process mandated by the government. For an invoice to be considered valid in the UAE, it must meet several key requirements:

• It must be created in a digital format such as XML or JSON.
• It must utilize a structured data format like UBL (Universal Business Language) or PINT (Peppol Invoice Standard).
• The invoice must be transmitted through an accredited service provider using the Peppol Network to the e-Billing system managed by the Federal Tax Authority (FTA).
• Submission to the e-Billing system must occur in real-time.

The FTA will securely store all submitted e-invoices. Note that invoices generated manually or in formats like PDF, JPG, or on paper do not qualify as valid e-invoices.

E-Invoicing Implementation Timeline in the UAE

Initially, e-invoicing was expected to be implemented by July 2025; however, due to technical challenges, this date has been pushed back to July 2026. During the 2024 Dubai E-Invoicing Exchange Summit, further details on implementation were shared. The proposed timeline is as follows:

E-Invoicing Framework in the UAE

The CTC e-invoicing framework in the UAE, known as the "DCTCE" model, is based on the "Peppol "5-corner" model. This model consists of five main components:

Learn more about Peppol 5-corner model DCTCE

1. Issuer: The entity generating the invoice.
2. Receiver: The entity receiving the invoice.
3. E-Billing System by FTA: This integrates with Peppol PINT for data exchange and acts as an invoice repository without validating invoices.
4. Sender Accredited Service Provider: This provider verifies data and transmits invoices to both the tax authority and receiver.
5. Receiver Accredited Service Provider: This provider verifies received data and transmits the invoice to the purchasing party.

Scope of E-Invoicing in UAE

While specific details regarding the scope of e-invoicing in the UAE are still being finalized, it is expected to align closely with similar mandates from other Gulf Cooperation Council (GCC) countries, particularly Saudi Arabia. E-invoicing will likely become mandatory for all VAT-registered businesses (implemented in phases) for both B2B and B2C transactions. Businesses should remain vigilant for updates to ensure they are prepared for compliance when full implementation occurs by July 2026.

Implementing Authority for UAE E-Billing System

The Federal Tax Authority (FTA), under the guidance of the Ministry of Finance (MoF), is responsible for implementing and overseeing the e-billing system in the UAE. The FTA's responsibilities include:

• Establishing regulations and technical standards for electronic invoices.
• Overseeing accreditation for service providers involved in e-invoicing solutions.
• Monitoring compliance with e-invoicing mandates.

Required Format of E-Invoices in UAE

In order to comply with regulatory standards, e-invoices in the UAE must adhere to specific formatting requirements:

• Digital Format: E-invoices must be generated digitally using formats such as XML or JSON.
• Structured Data Standards: E-invoices should follow structured data standards for consistency and interoperability. Commonly accepted formats include:
• UBL (Universal Business Language): A widely recognized standard for electronic invoicing.
• PINT (Peppol Invoice Standard): A standard adopted as part of Peppol’s framework for electronic invoicing.

Legal Background for E-Invoicing in the UAE

Value Added Tax (VAT) was introduced in the UAE on January 1, 2018. According to VAT law, digital or electronic invoicing is recognized as a valid method for generating and utilizing invoices by the Federal Tax Authority (FTA).Federal Law No. 1 of 2006 on Electronic Commerce and Transactions applies to electronic records, documents, and signatures relating to electronic commerce and transactions, granting legal recognition for their use. This law establishes uniform rules and standards for authenticating all electronic communications and invoicing through electronic signatures.Under this law, government departments can:

• Accept creation, submission, filing, and retention of documents electronically.
• Issue decisions, approvals, licenses, and permits electronically.
• Accept fees or payments electronically.
• Call for tenders and receive bids electronically.

The Ministry of Finance (MoF) adopts an e-procurement system that automates purchasing processes until payment completion. Similarly, other governmental systems allow suppliers to issue invoices electronically while managing contracts and purchase orders through digital notifications.

Steps to Prepare Your Business for E-Invoicing in UAE

To prepare effectively for compliance with e-invoicing regulations in the UAE:

1. Understand Regulations: Review relevant laws regarding digital formats and structured data standards.
2. Assess and Update Systems: Evaluate current invoicing processes to ensure software supports required formats and real-time submissions.
3. Choose an Accredited Service Provider: Partner with a certified service provider that can handle submissions through the Peppol network.
4. Integrate Systems: Ensure your business systems are integrated with your service provider for efficient transmission of invoices.
5. Conduct Testing: Perform test submissions to confirm compatibility and compliance with regulations.

Challenges of E-Invoicing for Businesses in UAE

Transitioning to e-invoicing presents several challenges related to technical requirements and regulatory compliance:

1. Continuous Real-Time Transmission: Businesses must ensure that invoices are generated and transmitted promptly to avoid disruptions or non-compliance.
2. Integration with FTA Systems: Integrating existing systems with those of FTA can be complex, especially if legacy systems are involved.
3. Digital Signing and Document Validation: Each invoice must be digitally signed to ensure authenticity; secure systems are necessary to protect data integrity throughout its lifecycle.
4. Adherence to VAT Compliance: Businesses must ensure that their invoices comply not only with e-invoicing regulations but also with VAT requirements.

Conclusion

While it has been confirmed that mandatory e-invoicing will be implemented by July 2026 in the UAE, many details regarding its scope, specifications, and processes are still pending clarification. Businesses should stay informed about updates from government authorities on these matters. In preparation, VAT-registered businesses should begin aligning their systems with anticipated compliance requirements by upgrading software or ERPs capable of supporting necessary formats and real-time transmission capabilities while budgeting for integration expenses related to digital signing and ongoing compliance efforts.