E-invoicing in the UAE — A step towards digital transformation

The United Arab Emirates (UAE) is set to revolutionise its invoicing system with the introduction of e-invoicing by 2026. This initiative, spearheaded by the Ministry of Finance, aims to streamline and digitalise the invoicing process, benefiting both businesses and government entities.

The e-invoicing framework in the UAE will be based on a decentralised five-corner model using the Peppol network to exchange the e-invoice. The model will include five parties:

• The issuer of the invoice (the supplier)
• The accredited Peppol service provider of the issuer
• The receiver of the invoice (the buyer)
• The accredited service provider of the receiver
• The Ministry of Finance (MoF) and the Federal Tax Authority (FTA) 

The following steps provide a high-level overview of the process:

Issuance of the invoice: The invoice issuer transmits e-invoice data in an agreed format to its UAE-accredited service provider.

Validation of the invoice: The issuer’s service provider validates the e-invoice data received from the issuer against a defined standard and converts it into the UAE standard e-invoice XML format (if it was received in a different format).

Invoice transmission and acknowledgement:

• The issuer’s service provider transmits the e-invoice to the buyer’s UAE-accredited service provider.
• The buyer’s service provider acknowledges to the issuer’s service provider that the e-invoice has been received successfully and transmits the e-invoice to the buyer.

E-reporting transmission and acknowledgement:

• The issuer’s service provider reports the tax-related data of the e-invoice to the central data platform managed by the FTA.
• The FTA sends an acknowledgement to the issuer’s service provider that the e-invoice has been successfully reported.
• The issuer’s service provider forwards the buyer’s service provider exchange acknowledgment and FTA reporting acknowledgement to the issuer.

The rollout of e-invoicing will be phased, with businesses implementing the system at prescribed stages.

• Q1 2024: UAE service provider accreditation
procedures established and accreditation of service providers commences
• Q2 2025: E-invoicing-related legislation published
• Q2 2026: Phase 1 of e-invoicing reporting goes live

The MoF provides extensive resources and FAQs on its website to help businesses understand and prepare for e-invoicing. Businesses are encouraged to engage with accredited service providers and ensure their systems are compliant with the new requirements.

Avalara is a certified Peppol service provider (OpenPeppol and KoSIT) and a Peppol access point, and is accredited in Australia, New Zealand, Japan, and Malaysia (and listed as approved Peppol software in Belgium). Avalara looks forward to supporting the UAE mandate and working with the MoF and FTA to support businesses and accounting software providers in the UAE with their digital transformation journey and ensuring they are compliant with the new mandated tax reporting requirements. Speak with us today to learn more.