As part of UAE’s broader digital transformation and tax compliance initiatives to enhance transparency, reduce fraud and streamline business processes, the Ministry of Finance 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 to include the general concept of e-invoicing, the Electronic Invoicing System, the Tax Reporting Mechanism, and the system to be used to store invoices once they are issued electronically while Law No. 17 amends key provisions of Federal Decree-Law No. 28 of 2022 concerning tax procedures.
The e-invoicing system is set to be deployed using the Open Peppol network, functioning as a decentralized continuous transaction control and exchange five corners model. The following steps provide an overview of this model:
1. Supplier (Corner 1) transmits eInvoice data in an agreed format with its UAE accredited Service Provider (Corner 2).
2. C2 validates the eInvoice data received from C1 and converts it into the UAE standard eInvoice xml format (if C2 has received the eInvoice in a different format from C1).
3. C2 transmits the eInvoice (in the xml format) with the buyer’s UAE accredited Service Provider (Corner 3).
4. C3 send an acknowledgement to the C2 that the eInvoice has been received successfully and transmits the eInvoice to the buyer (Corner 4).
5. C2 reports the tax related data of the eInvoice to the central data platform that is managed by the FTA (Corner 5).
6. C5 sends an acknowledgement to the C2 that the eInvoice has been successfully reported.
7. C2 forwards the C3 exchange acknowledgment and C5 reporting acknowledgement to C1.
The implementation of e-invoicing is expected to occur in three stages:
– First: scheduled for the last quarter of 2024, includes accrediting service providers of e-invoicing solutions
– Second: expected to be completed by the second quarter of 2025, involves updating local legislation to mandate the use of e-invoices
– Third: covers the system’s launch, requiring taxpayers to comply with the mandate and tax authorities to process and validate the issued invoices. This stage is planned to start in July 2026.
In order to prepare for this new requirement, businesses should start assessing their internal processes, particularly their invoicing technology and data landscape to align it with the expected compliance requirements and inform their internal stakeholders on the implications of e-invoicing.
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