Navigating the New E-Invoice Mandate in the UAE: Essential Updates and Key Dates

The UAE is gearing up for a significant shift in its tax procedures by introducing mandatory e-invoicing. This move is driven by the issuance of Federal Decree-Law No. 17 of 2024, which amends key provisions of Federal Decree-Law No. 28 of 2022 on tax procedures, and Federal Decree-Law No. 16 of 2024, which introduces amendments to Federal Decree-Law No. 8 of 2017 related to Value Added Tax (VAT).

This legislative update comes after the UAE Ministry of Finance (MoF) recently published a dedicated section on e-invoicing on its official website.  This section will act as the primary platform for announcements and resources related to the e-invoice mandate.

 What are the key legislative amendments announced?

1. Definitions: New and revised definitions have been added to support e-invoicing, including specific terms relevant to the system.
2. Input VAT Recovery: Article 55 now requires taxable persons to retain tax invoices compliant with the Electronic Invoicing System for input VAT recovery. This applies to all invoices issued or required to be issued electronically.
3. Tax Invoices and Credit Notes: Articles 65 and 70 have been updated to mandate that taxable persons subject to e-invoicing must issue invoices, credit notes, and related documents according to system standards.
4. Penalties for Non-Compliance: Article 76 now includes penalties for failing to issue tax invoices and credit notes within the specified timelines.

 Key Updates and Insights from the Website

The UAE Ministry of Finance (MoF) has unveiled the e-Invoicing Programme, outlining the essential components of the forthcoming UAE e-invoicing system in a dedicated section on its website. Included on the website are FAQs from the Federal Tax Authority (FTA) on the same subject. Here are the key points from the Programme and the FAQs provided by the FTA:

1.   Timeline for Mandatory E-Invoicing Implementation in UAE

• Q4 2024: Release of draft technical requirements and Accredited Service Providers (ASP) process; development of the Data Directory.
• Q2 2025: Updates to local legislation to enforce e-invoicing.
• July 2026: Official system launch, requiring taxpayer compliance and enabling tax authorities to validate invoices.

2.   E-Invoicing System Overview

The UAE’s new e-invoicing system will use a decentralized 5-corner model leveraging the Peppol network for invoice exchange and interoperability. Both B2B and B2G transactions will be mandatory under this system, with the Peppol International (PINT) serving as the UAE’s data dictionary.

 3.   Affected transactions and taxpayers:

The e-invoicing framework will apply to all business-to-business (B2B) and business-to-government (B2G) transactions, regardless of the VAT registration status of the entities involved.

4.   Format

The UAE has adopted a standard definition of an e-invoice as a structured, machine-readable document based on Extensible Markup Language (XML). This allows for a supplementary human-readable version, typically in PDF format.

5.   Which fields of the e-invoice are validated by MoF/ FTA systems?

The e-invoicing framework is a decentralized 5-corner model. The Service Provider will validate all data fields and report the data to the Federal Tax Authority (FTA) / the Ministry of Finance (MoF).
There are two components in this model: (1) exchange and (2) reporting. A Service Provider shall validate all the fields of an e-invoice based on the UAE data dictionary before exchanging the invoice over the Peppol network. Subsequently, all the tax data fields in an invoice shall be reported to the FTA system (Corner 5)

6.  What is the procedure to deliver the tax invoice to the customer?

Businesses in the UAE shall be required to engage with an Accredited Service Provider to issue and receive an e-invoice.
The electronic address (Endpoint) of the buyer would be used for sharing the invoice over the Peppol network.

 7.  Can an invoice contain taxable supplies along with exempt or out-of-scope supplies?

Yes, an invoice can contain taxable transactions, along with exempt or out-of-scope transactions.

8.  How will e-invoices be exchanged with overseas customers? Will they be required to register with a UAE e-invoicing service provider as a customer?

In the case of exports, if the foreign buyer is already registered within the Peppol network, then the endpoint (electronic address) of the buyer is required to be provided. If they are not registered, then a dummy endpoint will be provided. In such cases exchange of documents will not happen via the Peppol network, however, Corner 2 (SP of the seller) will continue to report the invoice to Corner 5. The seller is required to send the invoice to the buyer outside the network such as via email. The overseas buyer does not need to register with a UAE Accredited Service Provider if he is not obligated to do so as per the UAE VAT and Corporate Tax law..

 9.  Accredited Service Providers

E-invoice platforms, known as ASPs, must comply with the UAE National Cloud Security Policy and sector-specific data protection regulations. The FTA will offer an API gateway to help ASPs streamline invoice and KPI reporting, promoting a unified data infrastructure across the UAE. Before the official launch, a testing phase with the FTA and ASPs will take place to identify and address any potential issues.

According to the website guidance, ASPs must validate each data field on the e-invoice and convert the document to the standard electronic invoice XML format, ensuring it aligns with the UAE's data dictionary before sharing it via the Peppol network. Once exchanged, ASPs will report the e-invoice tax data to the Federal Tax Authority (FTA) and the Ministry of Finance (MoF). The centralized government platform will then send a notification confirming successful receipt.

 Act fast and stay up to date!

Ensuring your business signs up with an accredited ASP and begins complying with the e-invoicing mandate as soon as possible is crucial. Accredited ASPs adhere to stringent security and data protection standards, ensuring your invoicing processes are secure and compliant. Early adoption allows your business to smoothly transition through the testing phase, address any potential issues, and avoid last-minute complications. By acting now, you can ensure seamless integration with the UAE's unified data infrastructure, maintain compliance with regulatory requirements, and avoid penalties for non-compliance.

Follow the eezi blog for more updates regarding the e-invoice mandate in UAE.