e-Invoicing in the United Arab Emirates (UAE)

Introduction

In the realm of taxation and business transactions, the United Arab Emirates (UAE) is on the pathway to embracing a fully digitalized tax system through the implementation of e-invoicing under the “E-Billing System.” By July 2026, e-Invoicing in the UAE will be obligatory for B2B and Business-to-Government (B2G) transactions. This transition is part of a broader governmental initiative to streamline invoicing processes, curtail paper usage, and ensure alignment with global tax regulations. The e-Invoicing in the United Arab Emirates (UAE) is structured on the Peppol 5-corner model, guaranteeing a standardized and efficient invoicing system across various businesses.

What is e-Invoicing in the United Arab Emirates (UAE)?

e-Invoicing in the UAE pertains to the electronic creation, submission, and retention of invoices using a standardized digital format and process as mandated by the UAE government. For an e-invoice to be considered valid in the UAE, it must adhere to certain key requirements:

• It should be crafted in a digital format like XML or JSON.
• The usage of a structured data format such as UBL (Universal Business Language) or PINT (Peppol Invoice Standard) is mandatory.
• The invoice must be dispatched through an Accredited Service Provider (ASP) via the Peppol Network to the e-Billing system managed by the Federal Tax Authority (FTA).
• Real-time submission of the invoice to the e-Billing system is essential.
• The Federal Tax Authority (FTA) will securely store the e-invoice for record-keeping purposes.

Note: Invoices generated manually or in formats like PDF, JPG, or on paper do not meet the criteria to be considered as valid e-invoices in the UAE.

e-Invoicing Timeline in the UAE

Originally slated for implementation in July 2025, the timeline for e-invoicing in the UAE has been revised to commence from July 2026 due to technical impediments.

During the 2024 Dubai E-invoicing Exchange Summit, the UAE Ministry of Finance disclosed additional insights into the implementation timeline and model. The proposed timeline for e-invoicing implementation is as follows:

• Quarter 4, 2024: Initiation of the accreditation process for UAE Service Providers.
• Quarter 2, 2025: Introduction of legislative updates related to e-Invoicing.
• Quarter 2, 2026: Launch of Phase 1 of e-Invoicing reporting.

The e-Invoicing Framework in the UAE

The UAE’s CTC e-invoicing framework, known as the “DCTCE” model, is based on the Peppol “5-corner” model. The “5-corner” model involves five primary components:

• Issuer: The entity generating the invoice.
• Receiver: The entity receiving the invoice.
• E-Billing System by FTA: Facilitates integration with the Peppol PINT (Peppol Invoice Standard) for data exchange. It acts as an invoice repository without validating the invoices.
• Sender Accredited Service Provider (ASP): Verifies the data and dispatches the invoice to the tax authority and the receiver ASP.
• Receiver ASP: Validates the received data and forwards the e-invoice to the purchasing party (receiver).

Scope of e-Invoicing in the United Arab Emirates (UAE)

Although the precise scope of e-invoicing in the UAE is yet to be completely defined, it is anticipated to closely align with similar mandates in other GCC countries, notably Saudi Arabia (KSA). Most likely, e-invoicing will be mandatory for all VAT-registered businesses (implemented in phases) for all B2B and B2C transactions.

As of now, further updates concerning the full scope and specific regulations for e-invoicing in the UAE are eagerly anticipated. Businesses should remain vigilant to ensure readiness for compliance when the mandate becomes fully operational by July 2026.

Implementing Authority for the UAE e-Billing System

The Federal Tax Authority (FTA), functioning under the guidance of the Ministry of Finance (MoF), is tasked with implementing the e-billing system in the UAE. The responsibilities of the FTA include:

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

Required Format of e-Invoices in the UAE

In the UAE, e-invoices must conform to specific formatting requirements to ensure compliance with regulatory standards. The mandatory format for e-invoices encompasses the following:

• Digital Format: E-invoices must be generated in a digital format such as XML or JSON.
• Structured Data Standards: E-invoices should adhere to structured data standards for consistency and interoperability. Commonly embraced formats include: - UBL (Universal Business Language): A widely employed standard for electronic invoicing. - PINT (Peppol Invoice Standard): A standard embraced as part of the Peppol framework for e-invoicing.

Legal and Background for e-Invoicing in the UAE

VAT was introduced in the UAE on January 1, 2018. As per the VAT law, the UAE’s Federal Tax Authority (FTA) recognizes digital or electronic invoicing as a valid method to generate and employ invoices.

“Federal Law No. 1 of 2006 on Electronic Commerce and Transactions” is applicable to electronic records, documents, and signatures. It pertains to electronic commerce and transactions, granting legal recognition for their utilization.

The law delineates uniform rules, regulations, and standards for authenticating all electronic communications and electronic invoicing through electronic signatures, including their validity.

According to Federal Law, government departments can:

• Accept the creation, submission, filing, and retention of documents in electronic mode.
• Issue any decision, approval, license, and permit electronically.
• Accept fees or any other payments in an electronic form.
• Solicit tenders and receive bids related to government procurement electronically.

The Ministry of Finance (MoF) of the UAE adopts the e-Procurement system to automate the entire purchase cycle until fee payment is finalized.

Similarly, the Telecommunications Regulatory Authority’s electronic invoicing system enables all contract suppliers to issue invoices electronically and track contracts, purchase orders, invoice dues, and email notifications via electronic alerts.

Steps to Prepare Your Business for e-Invoicing in the UAE

1. Understand Regulations: Review pertinent laws and requirements for e-invoicing, encompassing digital formats and structured data standards.
2. Assess and Update Systems: Evaluate your current invoicing processes and ensure your software supports e-invoicing formats and real-time submission.
3. Choose an Accredited Service Provider (ASP): Collaborate with a certified ASP to manage e-invoice submissions via the Peppol network.
4. Integrate: Integrate your business system with the ASP for transmitting and receiving e-invoices.
5. Conduct Testing: Conduct test submissions to validate system compatibility and compliance.

Challenges of e-Invoicing for Businesses in the UAE

The transition to e-invoicing in the UAE poses several challenges for businesses, particularly concerning technical requirements and regulatory compliance. Some of the primary challenges include:

• Continuous and Real-Time Transmission: Businesses must ensure prompt generation and transmission of invoices to the Federal Tax Authority (FTA) in real-time. This necessitates robust infrastructure to manage continuous data flow without delays to avert operational disruptions or non-compliance.
• Integration with FTA Systems: Businesses need to integrate their existing systems with the FTA’s e-invoicing portal, which can be intricate, especially for businesses reliant on legacy systems or lacking the technical expertise for seamless integration. Ensuring compatibility with the Peppol network for data transmission is crucial.
• Digital Signing and Document Validation: Each e-invoice must be digitally signed to guarantee its authenticity and compliance. Businesses must also ensure that the invoice content remains unaltered, necessitating secure systems to track and safeguard data integrity throughout the invoice lifecycle.
• Adherence to Both E-Invoicing and VAT Compliance: Businesses need to ensure that their e-invoices comply not only with e-invoicing regulations but also with VAT requirements. The E-Billing system will likely mandate businesses to link their e-invoicing data directly with their VAT return filings.

Conclusion

Though e-invoicing in the UAE presents a significant shift in invoicing practices, it offers numerous benefits for businesses in the long run. By embracing e-invoicing, businesses can enhance operational efficiency, reduce manual errors, streamline invoicing processes, and ensure compliance with regulatory standards. Additionally, e-invoicing facilitates real-time monitoring of financial transactions, enhances transparency, and minimizes the risk of tax evasion.

As the UAE progresses towards a fully digitalized tax system, businesses must proactively prepare for the upcoming e-invoicing mandate. Collaborating with accredited service providers, updating systems to support e-invoicing formats, and conducting thorough testing are imperative steps to ensure a smooth transition to the new invoicing framework.

ProAct with its expertise in e-invoicing, can serve as a valuable partner for businesses seeking to navigate the complexities of e-Invoicing in the United Arab Emirates (UAE). By leveraging ProAct’s expertise in end-to-end e-invoicing services, businesses can streamline their invoicing processes, achieve full compliance with regulatory requirements, and position themselves for success in the digital economy.

In conclusion, the advent of e-invoicing in the UAE marks a pivotal moment in the country’s journey towards digital transformation. By embracing this innovative invoicing paradigm, businesses can not only comply with regulatory mandates but also unlock new opportunities for growth, efficiency, and competitiveness in the digital era.