E-Invoicing in the United Arab Emirates
The adoption of the e-invoicing system is picking up pace in the Gulf countries. With the Kingdom of Saudi Arabia (KSA) issuing regulations and announcing implementation timelines, the United Arab Emirates (UAE) has also indicated its plans to mandate the system. E-invoicing in the UAE is expected to bring significant changes to the invoicing process. Hence, it is important for businesses to understand the process of e-invoicing in the UAE.
What is E-Invoicing in the UAE?
E-invoicing in the UAE refers to electronically issuing and receiving invoices instead of paper ones. It's currently voluntary but is expected to be mandatory for business-to-business (B2B) transactions by July 2025. The system will use a Peppol-based model for efficient data exchange.
E-Invoicing Timeline in the UAE
The UAE government has given legal recognition to e-invoices. However, a detailed model of the e-invoicing system is yet to be announced. The mandate is expected to be implemented in two stages:
July 2025: Mandatory for all cross-border invoices such as export, import, intra-community, etc. These invoices need to be sent to SDI on a transactional basis.
July 2026: E-invoices will be mandatory for all transactions.
Who Implements E-Invoicing in the UAE?
The Federal Tax Authority (FTA), under the guidance of the Ministry of Finance (MoF), is the implementing authority for e-invoicing in the UAE. The FTA will oversee the entire process, including:
Establishing regulations and technical standards for e-invoices.
Overseeing the accreditation of service providers involved in e-invoicing solutions.
Monitoring compliance with e-invoicing mandates.
Required Format of E-Invoices in the UAE
While specific details haven't been officially announced, sources suggest the UAE's e-invoicing system will mostly follow a Peppol-based approach, also known as the Decentralized Continuous Transaction Control Engine (DCTCE). This model leverages Peppol's Peppol International Network (PINT) standards for seamless data exchange.
E-Invoicing Requirements Under the Current UAE VAT Law
VAT was introduced in the UAE on January 1, 2018. As per the VAT law, the UAE’s Federal Tax Authority (FTA) recognizes digital or electronic invoicing as a valid mode to generate and use invoices or Fatoorah.
Federal Law No. 1 of 2006 on Electronic Commerce and Transactions applies to electronic records, documents, and signatures. It relates to electronic commerce and transactions, giving legal recognition for their use. The law lays down uniform rules, regulations, and standards for authenticating all electronic communications and electronic invoicing through electronic signatures, including their validity.
As per Federal Law, government departments can:
Accept the creation, submission, filing, and retention of documents in electronic mode.
Issue any decision, approval, license, and permit electronically.
Accept fees or any other payments in an electronic form.
Call for tenders and receive bids pertaining to government procurement electronically.
The Ministry of Finance (MoF) of the UAE adopts the e-Procurement system to automate the entire purchase cycle until fee payment is complete. It enables vendors to participate online in tenders and auctions called by the UAE’s ministries or federal entities. It also allows vendors to follow up on any purchase orders and issue digital invoices.
Likewise, the Telecommunications Regulatory Authority’s electronic invoicing system allows all contract suppliers to issue invoices electronically and follow up for contracts, purchase orders, invoice dues, and email notifications through electronic alerts.
Essential Tips for E-Invoicing in the UAE
The following are some of the rules outlined related to e-invoicing:
Taxpayers in the UAE must maintain the electronic document in the same format as the one used to create, send, or receive it. They must ensure they do not alter the invoice content and have the necessary controls. The timestamp applied to each e-invoice ensures that the document has remained unaltered since its creation and is available for online display and print.
Electronic invoices are required to be in a format that allows readability. There should also be secured online access to e-invoices for downloading as a PDF.
The authenticity of its origin must be guaranteed. For every electronic invoice, there is an original file ready for download anytime. A certified e-signature is used to check the issuer and authenticate or verify data electronically.
UAE’s Paperless Strategy 2021
The Dubai Smart Government is going completely paper-free in 2021. This initiative eliminates over 1 billion pieces of paper used for government transactions every year. The aim is to save time, resources, and the environment through a paperless government.
All internal and customer-facing transactions will be digitized from 2021 to become an entirely paperless government. The government will no longer accept or issue paper documents for all its operations. Smart Dubai targets adopting and implementing all the essential technology for paper-free transactions. In turn, it aims to set up a legal structure to address digital procedures.
Frequently Asked Questions
Is e-invoicing mandatory in the UAE?
E-invoicing is expected to be implemented in two stages:
July 2025: Mandatory for all cross-border invoices such as export, import, intra-community, etc.
July 2026: Mandatory e-invoicing for all transactions.
Can you invoice without a VAT number in the UAE?
No, VAT-registered businesses must raise invoices quoting their VAT number in the UAE.
What are the requirements for a tax invoice in the UAE?
VAT-registered sellers must issue a tax invoice to VAT-registered buyers when the value of taxable supplies exceeds AED 10,000.
What is the planned e-invoicing model for the UAE?
The UAE plans to use a Peppol-based Continuous Transaction Control (CTC) model, also known as the 5-corner model.
What are the benefits of e-invoicing in the UAE?
Faster processing, fewer errors, reduced paper usage, and improved environmental impact.
Stay tuned with Flick for updates on e-invoicing developments in the UAE.