UAE to Implement E-Invoicing Mandate by July 2026: What Businesses Need to Know

The UAE e-invoicing mandate will be implemented in three stages from Q4 2024 to July 2026, starting with accrediting service providers, followed by legislative updates, and culminating in mandatory compliance for B2B and B2G transactions via the Peppol network. This initiative aims to enhance efficiency, compliance, and transparency while reducing tax evasion.

By Giulia Interesse

The UAE is advancing toward a fully digital economy with its latest e-invoicing mandate, set to become a requirement for businesses by July 2026. As announced by the UAE Ministry of Finance, the new system will mandate electronic invoicing for both business-to-business (B2B) and business-to-government (B2G) transactions, with invoices exchanged in near-real-time via the Peppol network in a standardized format.

This framework, known as the Peppol Continuous Transaction Control (CTC) model, aims to increase transparency, efficiency, and compliance in financial transactions.

To support taxpayers, businesses, and software providers in preparing for this transition, the UAE Ministry of Finance (MoF) has launched a dedicated webpage, providing resources and guidelines to help entities meet the upcoming requirements. With a decentralized “5-corner” model, only accredited service providers will be authorized to submit invoice data to a centralized platform managed by the Financial Tax Authority (FTA), ensuring secure and efficient data transmission.

E-invoicing in the UAE: Background and context

E-invoicing is a crucial component of the UAE’s broader strategy to modernize its financial ecosystem through the introduction of an advanced electronic billing system, as articulated by the MoF. This initiative is not merely about replacing paper invoices; it represents a comprehensive effort to streamline the invoicing process, enhance tax compliance, and reduce instances of tax evasion across the nation.

The development of the broader “e-billing system” aims to automate tax return filings, making it easier for businesses to comply with their tax obligations while minimizing the administrative burden. By integrating electronic invoicing into the broader tax system, the UAE seeks to create a more efficient and transparent financial environment that supports the growth of its digital economy.

Currently, the UAE has granted legal recognition to e-invoices, provided that both parties involved in a transaction agree to use them. This legal framework not only facilitates smoother transactions but also aligns with international best practices in digital invoicing.

The UAE’s move towards e-invoicing follows the precedent set by Saudi Arabia, which implemented its e-invoicing mandate in December 2021. This regional shift reflects a growing trend among Gulf Cooperation Council (GCC) countries (such as seen in the case of Saudi Arabia) to embrace digital solutions that enhance financial accountability and operational efficiency. As the UAE continues to advance its e-invoicing project, it stands to benefit from improved data accuracy, real-time reporting, and a more robust mechanism for combating tax fraud, ultimately contributing to a more resilient fiscal landscape.

Legislative amendments accompanying UAE e-invoicing mandate

In order to facilitate the realization of its e-invoicing mandate, the UAE MoF has unveiled crucial legislative updates, respectively:

• Federal Decree-Law No. 17 of 2024, which modifies certain provisions of Federal Decree-Law No. 28 of 2022 concerning tax procedures; and
• Federal Decree-Law No. 16 of 2024, which introduces amendments to aspects of Federal Decree-Law No. 8 of 2017 related to Value Added Tax (VAT).

These changes collectively establish a comprehensive framework to facilitate the shift toward electronic invoicing. Notable updates include:

• Updated definitions: A series of new definitions relevant to the e-invoicing framework have been introduced or refined, providing clarity and establishing a common understanding for all participants in the electronic invoicing process.
• Input VAT recovery requirements: It’s now mandated that taxable entities retain tax invoices that comply with the e-invoicing system as a necessary condition for recovering input VAT. This stipulation applies to all invoices that are issued or are required to be issued electronically, highlighting the importance of compliance with the new standards.
• Issuance of tax invoices and credit notes: The revisions specify that those obligated to use e-invoicing must produce invoices, credit notes, and other relevant electronic documents in accordance with the prescribed system standards. This ensures consistency and regulatory adherence across all entities involved.
• Non-compliance penalties: Explicit penalties are introduced for entities that fail to issue tax invoices and credit notes within the mandated timelines. This framework aims to reinforce the importance of compliance and encourages businesses to swiftly incorporate e-invoicing into their operational practices.

These legislative changes signal the UAE’s proactive stance on implementing the e-invoicing mandate.

Overview of the UAE e-invoicing framework: CTC model

The e-invoicing framework in the UAE operates on a decentralized CTC model, commonly known as the Peppol 5-corner model. This system involves five key participants: the issuer, the recipient, the central tax authority, and their respective Peppol Access Points. Both the sender and the receiver must possess certified Access Points to ensure that invoice data is accurately validated and transmitted.

In this model, when a seller issues an invoice, they first send the data to their accredited service provider, which then converts it into the standardized electronic invoice XML format specific to the UAE. The seller’s service provider forwards the electronic invoice to the buyer’s service provider, which in turn delivers it to the buyer. Concurrently, the seller’s service provider communicates relevant tax information regarding the e-invoice to the central government platform, which acts as an invoice repository and acknowledges receipt without performing validation checks.

Currently, the exchange of electronic documents is permissible as long as both the issuer and the receiver mutually agree on the format. All documents must adhere to established standards and be stored in the same format as issued.

Additionally, the use of electronic signatures is required to ensure the authenticity and integrity of the documents.

Implementation of the UAE e-invoicing mandate: Q4 2024 to July 2026

The rollout of the UAE’s e-invoicing mandate is structured into a comprehensive timeline that aims to ensure a smooth transition for all stakeholders involved. The implementation process is designed in three key stages:

• Q4 2024: The first stage focuses on the accreditation of service providers offering e-invoicing solutions. This step is crucial as it sets the foundation for the subsequent phases, ensuring that only qualified providers can facilitate e-invoicing within the new system.
• Q2 2025: The second stage will introduce necessary legislative updates to formalize the requirements for e-invoicing. This includes defining the technical specifications, schema, and procedures for issuing electronic invoices, which will be detailed in regulations developed before the end of 2024.
• July 2026: The final stage marks the full implementation of the e-invoicing system, at which point it will be mandatory for all B2B and B2G transactions. During this phase, issuers and recipients will be required to communicate invoices and receipt acknowledgments through the Open Peppol network. Accredited solution providers will handle the validation and reporting of these invoices to the MoF and the FTA.

This phased approach underscores the UAE’s commitment to enhancing its digital economy, improving operational efficiency across sectors, and minimizing VAT fraud through increased transparency and compliance in financial transactions.

FAQs about the UAE e-invoicing mandate

Q1. Which data fields of the e-Invoice are validated by the FTA and the MoF?

The e-invoicing system in the UAE operates within a five-corner model that mandates validation of all e-invoice fields by an Accredited Service Provider (ASP). This ASP checks each data field in compliance with the UAE e-invoice data dictionary before the invoice is exchanged over the Peppol network.

Subsequently, the ASP submits all tax-related data to the FTA for regulatory purposes, ensuring that both exchange and reporting processes align with official standards.

Q2. How does e-invoice exchange work between businesses and clients, including overseas customers?

For UAE-based transactions, e-invoices must be exchanged through an ASP, which delivers invoices to the buyer’s electronic address on the Peppol network. For cross-border transactions, if the foreign buyer is Peppol-registered, their endpoint address is used for the invoice exchange. If not, a ‘dummy’ endpoint allows the invoice to bypass Peppol, and the seller must send it via alternate methods, such as email.

Overseas buyers are only required to register with a UAE ASP if mandated by UAE VAT or corporate tax law.

Q3. What is the process for error correction or adjustments on an issued e-invoice?

In case of errors, the Accredited Service Provider will return the invoice to the issuer for correction. UAE guidelines require a credit note to be issued for any necessary adjustments, and the revised data is submitted to the FTA, ensuring compliance with tax reporting standards.

Q4. Will there be a grace period for compliance with the UAE e-invoicing mandate?

Yes, a phased rollout strategy is planned, allowing businesses to adapt over time. Before full implementation, there will be a testing phase to minimize exchange issues, ensuring a smooth transition. Each business will be notified in advance, and the implementation will proceed in stages based on specific criteria and timelines.

Q5. What measures must businesses take to prepare for e-invoicing compliance?

Businesses should first analyze transaction data against the UAE’s e-invoicing data dictionary to ensure compliance. Once the list of ASPs is published, businesses need to establish a commercial arrangement with an ASP and integrate their systems for e-invoice transmission and reporting.

Each transaction must meet UAE data protection and security standards, as outlined by regulatory guidelines and the UAE National Cloud Security Policy, particularly for those adopting cloud solutions.

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