e-invoicing in UAE

e-Invoicing in the United Arab Emirates

The adoption of e-invoicing systems is gaining momentum in the Gulf countries. Following the Kingdom of Saudi Arabia (KSA), which has already issued regulations and announced implementation timelines, the United Arab Emirates (UAE) is also preparing to mandate e-invoicing. This shift is expected to bring significant changes to the invoicing process in the UAE, making it crucial for businesses to understand the new system.

What is e-Invoicing in the UAE?

E-invoicing in the UAE refers to the electronic issuance and receipt of invoices, replacing traditional paper invoices. While currently voluntary, it is expected to become mandatory for business-to-business (B2B) transactions by July 2025. The system will utilize a Peppol-based model for efficient data exchange.

e-Invoicing Timeline in the UAE

The UAE government has legally recognized e-invoices, but 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, including export, import, and intra-community transactions. These invoices must be sent to the SDI on a transactional basis.
• July 2026: Mandatory issuance of e-invoices 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 have not been officially announced, it is anticipated that the UAE's e-invoicing system will follow a Peppol-based approach. This model leverages Peppol's 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. According to 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, giving legal recognition to their use. The law establishes uniform rules, regulations, and standards for authenticating all electronic communications and invoicing through electronic signatures, including their validity.

Key Provisions of the Federal Law of 2006

The law allows government departments to:

• Accept the creation, submission, filing, and retention of documents in electronic mode.
• Issue decisions, approvals, licenses, and permits electronically.
• Accept fees or any other payments in electronic form.
• Call for tenders and receive bids for government procurement electronically.

The Ministry of Finance (MoF) of the UAE has adopted an e-Procurement system to automate the entire purchase cycle until fee payment is complete. This system 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 purchase orders and issue digital invoices.

Similarly, the Telecommunications Regulatory Authority’s electronic invoicing system allows all contract suppliers to issue invoices electronically and follow up on contracts, purchase orders, invoice dues, and email notifications through electronic alerts.

Essential Tips for e-Invoicing in the UAE

Here are some key rules related to e-invoicing:

• Taxpayers in the UAE must maintain electronic documents in the same format as they were created, sent, or received. They must ensure the invoice content is not altered and have necessary controls in place. The timestamp on each e-invoice ensures that the document has remained unaltered since its creation and is available for online display and print.
• Electronic invoices must be in a format that allows readability. There should also be secure online access to e-invoices for downloading as a PDF.
• The authenticity of the invoice's origin must be guaranteed. For every electronic invoice, there is an original file ready for download at any time. A certified e-signature is used to verify the issuer and authenticate the data electronically.

UAE’s Paperless Strategy 2021

The Dubai Smart Government initiative aims to go completely paper-free by 2021, eliminating over 1 billion paper pieces used annually for government transactions. This initiative aims to save time, resources, and the environment by digitizing all internal and customer-facing transactions. From 2021 onwards, the government will no longer accept or issue paper documents for its operations.

Smart Dubai is focused on adopting and implementing all the essential technologies for paper-free transactions. The initiative also aims to establish a legal framework to support digital procedures, ensuring a smooth transition to a fully digitized government.

Conclusion

As the UAE moves towards the implementation of the E-Billing System, businesses and service providers must prepare for the upcoming changes. Understanding the new e-invoicing requirements and timelines will be crucial for compliance and leveraging the benefits of electronic invoicing. The shift to e-invoicing promises to streamline processes, enhance data accuracy, and improve overall efficiency in business transactions.

By staying informed and adapting to these changes, businesses can ensure they are well-positioned to meet the new regulatory requirements and take full advantage of the opportunities presented by the UAE's move towards a digital economy.