Executive summary

On 24 October 2024, the United Arab Emirates (UAE's) Ministry of Finance (MoF) launched the UAE e-invoicing portal, providing key information on the new digital requirements for businesses in the UAE. Based on the portal, the MoF's "UAE eInvoicing Programme" broadly outlines how the UAE e-invoicing system (System) would operate and provides valuable insights via an FAQs section.

The MoF is expected to soon release the e-invoicing technical requirements and data dictionary that detail the System's functionality.

On 30 October 2024, the MoF announced the issuance of Federal Decree-Law No. 16 of 2024 (Law No. 16) and Federal Decree-Law No. 17 of 2024 (Law No. 17). Law No. 16 amends certain provisions of the Value Added Tax (VAT) Law, while Law No. 17 amends specific provisions of the Tax Procedures Law, with both laws including provisions relating to e-invoicing (the e-invoicing-related updates resulting from Law No. 16 and Law No. 17 are referred to as Amendments in this Alert).

Detailed discussion

Background

E-invoicing in the UAE is part of the country's broader digital transformation and tax compliance initiatives. The UAE government has been actively modernizing its financial and taxation systems to enhance transparency, reduce fraud and streamline business processes. The introduction of value-added tax (VAT) in 2018 marked a significant step toward formalizing the economy. To further support this, the Federal Tax Authority (FTA) has been working on implementing e-invoicing to ensure accurate and efficient tax reporting. The launch of the e-invoicing portal aims to facilitate seamless electronic transactions, improve tax collection and provide a robust framework for businesses to comply with VAT regulations.

Highlights from the e-invoicing portal

Key dates

E-invoicing model to be adopted. The UAE will adopt a five-corner Decentralized Continuous Transaction Control and Exchange (DCTCE) model, requiring the electronic transmission of e-invoices among suppliers, buyers and the Federal Tax Authority (FTA) through a PEPPOL network. (PEPPOL stands for Pan-European Public Procurement On-Line. It is a business network that facilitates communication and document sharing between organizations, promoting cross-border interoperability.)

Taxpayers will be required to engage with an Accredited Service Provider (ASP), serving as the access point to the network and facilitating e-invoice validation and exchange. While the exchange of e-invoices will happen through the ASPs' systems, the list of accredited ASPs will most likely be available by the end of Q4 2024.

Data requirements and validation. Taxpayers should ensure that the e-invoices adhere to all the data requirements set out in the data dictionary. The ASP must validate this data prior to exchanging the e-invoice with the buyer and the FTA. If there is an error in the e-invoice, the ASP will return the e-invoice to the supplier.

Transactions in scope. Pending the availability of the full scope of e-invoicing for business-to-consumer (B2C) transactions, all business-to-business (B2B) and business-to-government (B2G) transactions will be in scope, regardless of the VAT registration status of the supplier or the buyer.

Implementation rollout. E-invoicing rollout will be implemented in a phased manner. Businesses will be required to go live at specific stages, based on predefined criteria. Taxpayers will receive adequate notice prior to the requirements coming into effect.

Pilot program. Given the nature of the PEPPOL model framework, taxpayers should start preparing to comply with e-invoicing requirements before the legislation's publication or the involvement of the fifth corner (i.e., the FTA). From the moment the ASPs' systems are live, taxpayers will be able to access the network and begin to exchange e-invoices with buyers without reporting the e-invoices to the FTA.

Transition (grace) period. There will be a testing phase prior to going live with ASPs and the FTA platform. This will enable taxpayers to test integrations and data validity, ensuring that any necessary remediations can be made before going live.

Highlights of the Amendments

Law No. 16

Definitions. Law No. 16 expands the existing definitions of the terms "tax invoice," "tax credit note" and "non-resident," to include reference to an "electronic" format, where applicable. It also introduces the terms "electronic invoicing system," "electronic invoicing" and "electronic credit note" in the definition.

Input tax claims. Taxpayers claiming input tax should retain the tax invoice generated through the e-invoicing system, where it is required to be issued in the form of an electronic invoice.

Issuance of tax invoices. The conditions and requirements for issuing tax invoices are now amended to stipulate that taxpayers subject to the e-invoicing system must issue and submit e-invoices through the e-invoicing system and retain the original version in their records. Similar amendments have been made for tax credit notes.

Law No. 17

According to the MoF announcement, Law No. 17 introduces a definition of the term "e-invoicing system." The announcement also states that the UAE's Minister of Finance has the authority to issue the relevant decisions to implement the e-invoicing system.

Implications

Businesses should assess their internal processes, particularly their invoicing technology and data landscape, educate their internal stakeholders and address their data accuracy issues to prepare for the implementation of e-invoicing in the UAE.