The global adoption of digital solutions has greatly reshaped the financial and taxation sectors, with the UAE embracing this transformation as well. E-invoicing stands out as a major digital initiative in the region, driving greater efficiency, accuracy, and compliance in the invoicing process. This guide provides an overview of e-invoicing in the UAE, outlining its key benefits and exploring its impact on both businesses and tax authorities.

e-invoicing is the process of generating, sending, and storing invoices electronically in a structured format. Unlike traditional paper invoices, e-invoices are created digitally, allowing for automated processing and reducing the need for manual data entry. This automated system not only streamlines billing but also facilitates efficient record-keeping and seamless integration with tax authorities.

In UAE, e-invoicing is governed by particular rules and regulations that are laid by the federal tax authority or FTA. The purpose is to regulate and digitalize the invoicing process for all businesses regulated under VAT (Value added tax).

For UAE, the ministry of finance has mandated the e-invoicing process for B2B (business to business) and B2G (business to government) transactions. For now, B2C (business to consumer) transactions are considered to be out of scope.

The e-invoicing system will be deployed on the Open Peppol network, utilizing a decentralized continuous transaction control model with a five-corner structure to aid a secure and streamlines data exchange, resulting in accuracy through efficiency.

To sustain this initiative, the UAE issued Decree-Law 16-2024, revising the Value Added Tax (VAT) law to introduce key elements such as e-invoicing, the Electronic Invoicing System, the Tax Reporting Mechanism, and a secure storage system for electronically issued invoices. The decree further mandates that specific technical specifications, schemas, conditions, and procedures for invoice issuance will be detailed in a separate regulation, which is to be finalized by the end of 2024 and implemented by the second quarter of 2025.

Once the mandate is in effect, invoice issuers and recipients must exchange invoices and receipt acknowledgments through an access point on the Open Peppol network. The issuer’s e-invoicing solution provider will be responsible for validating these invoices and reporting them to the Ministry of Finance and the Federal Tax Authority. Only accredited solution providers will be authorized to submit validated invoices to the Federal Tax Authority.

By the last quarter of 2024, e-invoicing solutions service providers will be accredited.

By the second quarter of 2025, updating the local legislation in order to obligate the use of e-invoices.

By July 2026, it is also the phase1 go-live, where the tax payers are compelled to comply with the mandates and the taxation authorities to issue, process and validate the e-invoices.

Below stated are the guidelines and requirements that are necessary for e-invoicing in the UAE.

e-invoicing is applicable to all businesses that are registered under the VAT scheme. This includes issuing digital invoices for goods or services that contain tax implications. Such transactions are also recorded as per the FTA standards.

a. Electronic format: The invoices must be in XML or PDF/A-3 format. This format must be followed for creating, storing and sharing the invoice. Thereby facilitating smooth integration and automation.

b. Mandatory fields: The e-invoice should encompass certain mandatory fields as mentioned by the FTA. These are:

• Supplier and buyer details (name, address, and TRN – Tax Registration Number)
• Date of issuance of invoice
• Unique invoice number
• VAT amount and rate
• Total amount payable
• Description of goods or services

Tax invoices: B2B transactions, where the transaction amount exceeds AED 10,000. Complete details of buyer and seller must be mentioned, as per the mandatory field requirements.

Simplified invoices: As the name suggests, it is used for relatively smaller transactions where the transaction amount is less than AED 10,000. Usually in B2C (Business to customer) transactions. Compared to tax invoices, fewer details must be mentioned and these can be issued to non-registered customers.

In order to authenticate and invoice, each invoice must contain a digital signature or a unique identifier. This is in accordance with the FTA standards.

Businesses must account their transactions in real time or in close proximity to real time to the FTA. The e-invoices must be compatible with the FTA’s system in order to ensure precise and well-timed VAT reporting.

All businesses must archive and store the e-invoices for a minimum of 5 years. This is very important for audit and compliance processes, as these e-invoices are proof of transactions that were reported to the FTA.

The e-invoice must be issued within 14 days of the transaction date. This is essential for ensuring consistent and timely adherence to VAT regulations, enabling businesses to meet their tax obligations efficiently and avoid any delays or penalties. By streamlining the invoicing process, businesses can maintain compliance with regulatory requirements and ensure accurate and prompt reporting, ultimately fostering a smoother relationship with tax authorities.

While Arabic is the official language in the UAE, businesses are permitted to issue invoices in both English and Arabic. However, it is important to note that Arabic translations could be required during reviews and audits that are conducted by the Federal Tax Authority (FTA). Note that this ensures that the information is accessible and aligned with local regulations for tax verification and compliance purposes.

In order to ensure the data is kept confidential and secure, the businesses must make extra efforts while storing and sharing important digital information. In order to ensure this, they must comply with the data protection laws of UAE.

Non-compliance leads to consequences. If the e-invoicing regulations and guidelines are not followed or met, the business is liable to pay fines or penalties and suffer certain restraints in tax compliance treats. When a business obeys the rules and regulations, it avoids legal consequences and ensures seamless VAT operations.