Following the model of the Kingdom of Saudi Arabia (KSA), the government of the United Arab Emirates seeks to optimize the invoicing processes and streamline financial transaction management for businesses and public entities in its emirates.
Presently, a plan is underway to make e-invoicing mandatory. The aim is to save time, eliminate the risk of errors, and reduce the amount of paper invoices, which is good for the environment.
If you are a business operating in the UAE or are planning to set up a business there, it is essential to familiarize yourself with the upcoming e-invoicing mandate so you can take the correct measures to ensure compliance.
This article will act as a guide to help you understand the e-invoicing requirements in the United Arab Emirates.
We will provide you with critical information, including the implementation timeline, the entities that need to comply, the requirements, and what you can do as a business to stay compliant with the coming mandate.
Is e-invoicing mandatory in the United Arab Emirates?
Being an advocate for increased digitization within the public sphere, the United Arab Emirates government recognizes e-invoice exchange between consenting parties.
It has successfully introduced a wholly digitized public procurement platform (DPP) and Dubai’s landmark initiative to become a completely paperless government in 2021.
Presently, electronic invoices are yet to be mandatory. However, plans are underway to make it obligatory, following the framework of the Kingdom of Saudi Arabia (KSA).
The Saudi framework is as follows:
- The initial voluntary phase before July 2025
- Ability to produce QR Code e-invoices, B2B (e-invoice), and B2C (e-note where not required for a VAT deduction) using an ‘E-Invoice Generation Solution’ verified and approved by the tax authority.
- Integrate into the Ministry of Finance’s validation platform for basic checks and electronic signatures of customer approval as part of continuous transaction controls.
- Formats: UBL- XML or PDF with embedded XML.
Experts in this region who regularly monitor compliance predict the government mandate to be completed soon.
Furthermore, the Ministry of Finance of the United Arab Emirates (UAE MoF) intends to introduce the “E-Billing System” project, which considers adopting an advanced national electronic billing system.
This initiative will most likely introduce the PEPPOL CTC mandate, covering nationwide e-invoicing and e-reporting obligations.
This new system will automate the process of filing tax returns with the tax system to improve tax compliance, reduce tax evasion instances, and facilitate the filing of tax returns.
Timeline for the upcoming electronic invoicing mandate in the UAE
The Ministry of Finance of the United Arab Emirates (UAE MoF) introduced e-invoicing implementation to streamline business processes, assist with tax filing, provide real-time insights into economic performance, and lower paper waste.
Although the detailed model of the future e-invoicing system is yet to be announced, the mandate itself is expected to be introduced in two phases:
- Phase 1 in July 2025 – obligatory e-invoice issuing for all cross-border transactions (export, import, intra-community, etc.) over AED 50,000. These invoices are to be sent to SDI on a transactional basis.
- Phase 2 in July 2026 – obligatory e-invoice issuing for all transactions.
While the UAE government is in the process of making e-invoicing mandatory, businesses are to start preparing accordingly. Manually getting set for this change is valuable time that could be spent on more constructive activities.
To comply with the upcoming regulation, connect with an e-invoicing service provider like Storecove to ensure fast and smooth compliance.
Who should comply with the e-invoicing rule in the UAE?
Although the issuance of e-invoices is not yet mandatory in the UAE, as we mentioned earlier, plans are underway to make it compulsory.
The UAE already permits e-invoice exchange voluntarily, meaning UAE-based entities can use traditional or electronic invoicing.
Following this, entities involved in transporting goods or passengers, banking institutions, non-banking financial institutions, insurance companies, etc., fall under the exempt categories not required to comply with electronic invoicing.
However, they must comply with electronic invoicing requirements for supplies related to their core business activities.
For B2G supplies, clarification is needed on the good and services tax registration number that can be used for supplies to government entities that are tax registered for tax deducted at source only.
You may also like: 11 Reasons to Partner with an E-invoicing Service Provider.
What are the e-invoicing requirements in the United Arab Emirates?
As per the UAE VAT law, all VAT-registered sellers must issue a tax invoice for transactions exceeding AED 10,000. These invoices must adhere to specific formats and standards, ensuring readability, authenticity, and compliance with VAT regulations.
Here are the rules that have been outlined:
- The UAE taxpayers should comply with e-invoices by using electronic documents in the same format as those used to generate, send, or receive them.
- They must guarantee that the invoice content is not altered and the relevant controls are in place. The timestamp on each e-invoice assures that the document has stayed unaltered since its creation and is ready for online viewing and printing.
- Electronic invoices must be in a format that allows for easy reading. There should also be secured online access to e-invoices for downloading as PDFs.
- The authenticity of its origin must be foolproof. Every electronic invoice has an original file that can be downloaded anytime.
- A certified e-signature is used to examine the issuer and electronically authenticate all electronic communications or verify data.
For UAE government entities, the following actions are allowed under federal law:
- Electronic filing, creation, and preservation of documents may be accepted.
- Electronic records may be used to provide licenses and permits.
- Electronic fees and payments may be accepted.
- Tenders and bids are received electronically in the public sector.
- Tax invoices in both printed and electronic form are recognized by Federal Legislative Decree No. 8 of 2017 on VAT.
What should businesses do to comply with e-invoicing rules in the UAE?
While e-invoicing is yet to be mandatory, to comply with the upcoming e-invoice regulations in UAE, businesses should consider the following tips:
- Familiarize yourself with the coming e-invoice rules, widely believed to mirror the framework adopted by the Kingdom of Saudi Arabia.
- Get familiar with your business segment's specific demands and standards (B2B or B2G).
- Ensure your e-invoices are properly structured and formatted for easy readability.
- VAT-registered companies must comply with the record-keeping requirements of the Federal Tax Authority (FTA) and store copies of their invoices for at least 5 years.
- Identify the appropriate method of sending your electronic/ digital invoices.
- Establish internal controls and operations to ensure the accurate and compliant creation, transmission, and archiving of electronic invoices.
- Ensure that your e-invoices include all the mandatory information required.
- Keep complete and accurate records of your e-invoices as applicable regulations require.
- Constantly monitor updates and changes to e-invoice regulations.
- Consult with tax advisors, legal experts, or industry professionals with knowledge of e-invoicing ordinances to ensure ongoing compliance with the latest requirements.
Related reading: What is E-invoicing Compliance? A Detailed Guide.
Takeaway: Familiarize yourself with the United Arab Emirates e-invoicing key requirements to ensure compliance
E-invoicing has been given legal recognition in the UAE. However, it is yet to be mandatory but will soon be.
Once e-invoicing kicks off fully in the UAE, compliance will be between taxpayers and public entities, and the aim is to save time, eliminate the risk of errors, and reduce the amount of paper invoices, which is good for the environment.
To stay compliant, you should start preparing your business by familiarizing yourself with the coming e-invoice rule and staying updated on any changes to the law or future updates.
While getting set for this shift, you can partner with an e-invoicing provider like Storecove to ensure interoperability and connectivity.
We provide an extensive e-invoicing solution so companies like yours can use the correct sending and receiving infrastructure compliant with the UAE government’s legal demands.
Ready to become e-invoicing compliant in the UAE and over 50 countries? Don’t fall behind your competitors. Register for our e-invoicing solution.
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