The United Arab Emirates (UAE) is launching a new electronic invoicing system that will mandate businesses to issue invoices in a different format. The pilot phase will begin in July 2026, followed by full implementation for VAT-registered businesses starting in 2027.

These invoices must be submitted to the FTA in a standardized format while ensuring all required fields are completed. Each transaction will need an e-invoice, and credit notes will be used for adjustments or cancellations.

The UAE Ministry of Finance (MoF) and the Federal Tax Authority (FTA) jointly introduced this system, based on Federal Decree-Law No. 8 of 2017 on Value Added Tax (VAT). This approach will help businesses prepare and reduce disruption. Let us further explore the changes and what the latest service involves. 

Understanding the Electronic Invoicing System

Businesses in the UAE will now be required to issue invoices in a uniform XML format under the new electronic invoicing system, which will be the sole approved format for tax invoices. The system utilizes Peppol, a globally recognized network for the secure exchange and verification of electronic documents.

Previously, businesses used various formats for invoices, including paper documents and PDFs, which made it difficult to consolidate data into one system. The new XML-based system solves this issue and allows for centralized digital invoices.

This change enables the government to monitor tax compliance in real-time, which gives the government useful data for policy development and other initiatives. In addition, e-invoices will be officially validated by an Accredited Service Provider (ASP), and they will automatically be sent to the FTA for reporting purposes. 

Scope and Applicability of New E-Invoicing in UAE

The new e-invoicing service initially applies to business-to-business (B2B) and business-to-government (B2G) transactions. As per Ministerial Decision No. 243 of 2025, the system covers all taxable entities, both local and international, that operate in the UAE. It ensures that any entity involved in taxable activities under the VAT law is included in the system.

In the first phase of implementation, the system does not apply to business-to-consumer (B2C) transactions. These will be addressed later in a future decision. The Ministry of Finance (MoF) has chosen to focus on digitalizing high-volume and higher-risk transactions between registered businesses and government bodies first before expanding to retail and consumer transactions.

The system requires both issuers and recipients to send, receive and store invoices electronically for all relevant transactions using Accredited Service Providers (ASPs) approved by the MoF and FTA. The e-invoices must follow a specific data format outlined by the Ministry, using the OpenPeppol standard to ensure secure and compatible data exchange between platforms. 

Main Updates in the New E-Invoicing System

The introduction of the e-invoicing service brings several important changes for businesses, including:

Real-time data updates

The Federal Tax Authority (FTA) will now receive real-time data on compliance and tax payments. Previously, businesses provided VAT data periodically, which used to cause delays. With this new system, the FTA will get immediate updates, which will reduce discrepancies and ensure better tax compliance. 

Standardized file format

Invoices are now required to be submitted in a standardized XML format. It will ensure consistent tax documentation, allow for smoother automation and reduce errors. The system will also work seamlessly with Peppol’s UAE network, which will make the process more efficient. 

Gradual Deployment and System Integration

The UAE government will roll out the system in phases with a pilot in July 2026, followed by mandatory phases in 2027. Accredited Service Providers (ASPs) will be a key component, with accreditation beginning in Q4 2024 (Phase 1). Phase 2 will focus on legal adjustments starting in Q2 2025, and the final phase will ensure full registration and enforcement for VAT-registered businesses by July 2026.

Exemptions from e-invoicing in the UAE

Certain transactions are not required to follow the mandatory e-invoicing rules under Article 4 of Ministerial Decision No. 243/2025. These include:

International air travel

Services related to international passenger flights, where electronic tickets are issued, are not covered by the e-invoicing in UAE requirement.

B2C transactions

UAE E-invoicing is not required for business-to-consumer (B2C) transactions.

International goods transported by air

Air transport services for goods, where an airway bill is issued, are excluded from the e-invoicing system for up to 24 months from the system’s start date. 

Financial Services

Financial services that are either VAT-exempt or subject to a zero VAT rate are not required to use e-invoicing in UAE. 

Government transactions

Transactions carried out by government bodies in their sovereign role (not competing with private businesses) are exempt. 

Airline ancillary services

Additional services provided by airlines linked to passenger transport, where an Electronic Miscellaneous Document (EMD) is issued, are exempt. 

Other exempt transactions

The Minister of Finance may specify other transactions that are exempt from e-invoicing. 

Main Benefits of the E-Invoicing UAE System

The new UAE e-invoicing implementation offers several advantages that address issues that existed under the previous tax framework. Below are the main benefits:

• Stronger VAT compliance: The system ensures automatic compliance with the UAE’s VAT regulations, which lowers the risk of penalties, audits and overlooked submissions. 
• Cost savings: Eliminating paper, postage and manual work reduces costs, especially for businesses with high volumes of invoices. 
• Reduced risk of fraud: The system’s validation protocols make it difficult to duplicate or manipulate invoices.
• Instant reporting and increased transparency: Invoices are promptly submitted to the Federal Tax Authority (FTA). It allows for better monitoring and reduced chances of fraud. 
• Faster processing and payments: Approvals and payments become faster with real-time invoice generation and validation, which speeds up transactions between businesses. 
• Improved record keeping: Every invoice is securely stored and time-stamped. It streamlines audits and makes reconciliations quicker and more accurate. 
• Future-proofing: UAE e-invoicing implementation helps businesses prepare for global and regional standards, which enhances interoperability. 
• Improved accuracy: E-invoicing UAE reduces errors caused by manual data entry and paper invoices. It ensures consistent and structured data and reduces mistakes. 

The Bottom Line

Adapting to new systems can be tough for businesses, especially with regulatory and legal regulations. However, the UAE’s new e-invoicing system is being gradually integrated and is designed to be straightforward. Businesses should take the following steps to ensure smooth adoption:

• Hire an Accredited Service Provider (ASP), as this is required under the new system. 
• Maintain up-to-date accounting records and ensure your data is compatible with the XML format.
• Regularly visit the UAE Ministry of Finance website to stay informed about any updates or new directives.

The e-invoicing in UAE system is a positive step toward greater transparency in business practices and real-time tax monitoring. Businesses should proactively adopt the system to ensure they stay fully compliant with government regulations.

The sooner they adapt, the smoother their operations will run. Stay ahead of the 2027 e-invoicing mandate. Contact Asad Abbas & Co. today to ensure your business is fully compliant with new VAT and UAE e-invoicing standards!

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