Introduction
An e-invoice is a structured form of invoice data that is issued and exchanged electronically between a supplier and a buyer and reported electronically to the UAE Federal Tax Authority. It is important to note that unstructured invoice formats such as pdf, word document, images, scanned copies and emails are not e-invoices. The UAE has been in the process of launching the e-invoicing system for the past couple of years. The VAT law of 2024 had set out the legal framework for an e-invoicing system, a valid issuing document and input tax recovery. The UAE Ministry of Finance (MOF) issued ministerial decisions in 2025 for the effective implementation of the e-invoicing system. From 2026, companies will begin shifting from paper and PDF invoices to a national electronic invoicing system. By 2027, e-invoicing will be mandatory for most VAT-registered businesses.
Ministerial Decisions
The UAE’s MOFA in 2025 issued Ministerial Decision No. 64, 243, 244, laying down the procedures and basics of the e-invoicing system. Further, the Cabinet of the UAE issued Cabinet Decision No. 106 of 2025 on the Violations and Administrative Penalties Resulting from Violations of the Legislation Regulating the Electronic Invoicing System.
E-invoicing System
The E-invoicing system shall be applicable to any person conducting business in the country in respect of every Business Transaction except the following:
• Business transactions conducted by government entities in sovereign capacity and which are not in competition with the private sector,
• International passenger transportation services or such ancillary services by an Airline to its passengers,
• International transportation services in respect of goods, provided by an Airline for up to two years
• Financial services that are exempt from VAT or subject to VAT at a zero rate,
• Any other business transaction as may be determined by the Minister.
Process Brief
Every issuer and receiver of e-invoice shall appoint an Accredited Service Provider (ASP). Once the supplier of goods/services generates the invoice by entering the invoice data into their ERP system, and it sends it through their ASP to the buyer of goods/services. The ASP validates the invoice data to ensure it meets the UAE’s e-invoicing standards. The validated invoice is securely transmitted to the buyer’s ASP, ensuring compliance with the required standards. The ASP reports the validated invoice data to the FTA in real time. The buyer’s system receives the invoice via their ASP, ensuring data integrity and compliance.
Timeline
While the voluntary phase for e-invoicing had begun last year, below are the timelines for mandatory implementation:
• From January 1, 2027: Mandatory compliance for businesses with revenues above AED 50 million.
• From July 1, 2027: Mandatory compliance for small and medium sized businesses with revenue below AED 50 million.
• From October 1, 2027: Mandatory compliance for all government entities.
Failure by the Issuer to appoint the Electronic Invoicing System including the failure to appoint an Accredited Service Provider within the timeline shall result in fine of up to AED 5,000 for each month of delay.
Benefits
The e-invoicing system will help the UAE government to digitalise tax compliance, increase tax transparency, automate VAT compliance and ensure faster payment cycles. Further, it will increase the global compatibility of the UAE’s businesses. The government will also be able to take data-driven decisions due to a structured invoicing system. The system will also help in establishing simplified compliance and reporting.
Taxpayer businesses should begin preparing for ERP system updates, ensuring data compatibility, and identifying potential gaps before the deadlines and start selecting accredited service providers to avoid penalties.
For more information, you may contact:
Thomas Paoletti
Fauzia Khan
“This article is for information purposes only and does not constitute legal or professional advice”.
