E-invoicing in the UAE: Legal foundations, phased rollout, and strategic implications

A strategic shift in the UAE’s tax landscape

The UAE’s business landscape has undergone a remarkable transformation from an era when customs duties were the primary regulatory touchpoint to today’s sophisticated tax ecosystem. In just a few years, businesses have navigated the introduction of VAT, adapted to the complexities of corporate tax and embraced global standards, such as the OECD Pillar Two regime.

The next significant milestone is the rollout of e-invoicing - a move that signals not just a VAT-related change but a broader shift toward digitalisation and real-time tax transparency. This evolution underscores the UAE’s commitment to aligning with global best practices while challenging businesses to rethink their operational and technological readiness.

The legal backbone: Ministerial decisions 243 and 244 of 2025

The UAE’s journey toward e-invoicing is firmly anchored in a series of legislative and regulatory milestones. It began with amendments to the UAE VAT Law, which formally recognised electronic invoices and credit notes as valid tax documents and set conditions for their issuance and retention. These changes also updated definitions and compliance requirements, making e-invoicing a prerequisite for input VAT recovery and embedding it into the VAT compliance framework.

Complementing these statutory changes, the UAE VAT Regulations were revised, eliminating simplified invoices, mandating e-invoices for zero-rated supplies, and withdrawing invoicing related administrative exceptions previously granted by the Federal Tax Authority (FTA). These updates ensure that all UAE  businesses, regardless of transaction value or nature, must issue e-invoices in compliance with the UAE requirements.

The most decisive step came in September 2025, when the Ministry of Finance (MoF) issued Ministerial Decisions No. 243 and 244 of 2025. These decisions establish the operational framework and phased implementation roadmap for the e-invoicing system. Built on the PEPPOL 5-corner model, with the FTA as the fifth corner, the system mandates invoice exchange through Accredited Service Providers (ASPs), ensuring secure, real-time reporting and data storage within the UAE.

Implementation timeline: A phased rollout

To ensure a smooth transition, the UAE has adopted a phased implementation strategy exclusively for business-to-business (B2B) and business-to-government (B2G) transactions. The journey begins with a pilot program on 1 July 2026, where selected businesses will test the system under real conditions. From this date, voluntary adoption is open to all businesses, giving early movers a strategic advantage in operational readiness. 
 
The mandatory implementation will follow in two distinct phases, based on business size and type:

What about B2C transactions?

Currently, B2C transactions are excluded from the mandate until further notice. This means the initial phases focus exclusively on B2B and B2G transactions, with the possibility of B2C being introduced later through a separate ministerial decision.

Scope of application and key exclusions

While the e-invoicing framework is designed to cover all B2B and B2G transactions, the MoF has outlined specific exclusions to accommodate unique operational and regulatory scenarios. These exclusions are as follows: 

• Sovereign government activities that are not in competition with the private sector 
• International passenger transport services provided by airlines using electronic tickets 
• Ancillary airline services documented via electronic miscellaneous documents (EMDs) 
• International goods transport services supported by airway bills (transitional exemption for 24 months) 
• Financial services that are VAT-exempt or zero-rated 
• Business exclusively engaged in B2C transactions 
• Any additional categories as determined by the MoF in future decisions

These exclusions reflect the feedback received during the MoF public consultation on e-invoicing and therefore focus only on sectors and transactions that already operate under globally standardized systems or involve complex regulatory environments.

Understanding turnover and compliance thresholds

Turnover for the purposes of e-invoicing compliance is defined as the gross income earned during the most recent accounting period, based on audited financial statements or other documentation acceptable to the FTA.

The AED 50 million threshold is calculated on the total revenue from all business activities, which means businesses must include B2B, B2G, and B2C transactions when determining which implementation phase applies to them. Even though B2C transactions are currently outside the scope of mandatory e-invoicing, they still count toward the turnover calculation. This approach ensures that the overall economic scale of the business, rather than the proportion of B2B or B2G transactions alone, is considered when determining the implementation phase.

Timeline for issuing e-invoices and e-credit notes

An e-invoice or credit note must be issued within 14 days from the “Date of Business Transaction”, which is defined as the earlier of: a) The date on which the business transaction occurred, or b) The date of receipt of payment for that transaction. This 14 day rule applies to both e-invoices and e-credit notes, regardless of whether the transaction is B2B or B2G.

Use cases for issuing e-invoices and e-credit notes

E-invoices are mandatory for all in-scope business transactions, except for explicitly excluded categories. Common scenarios include: standard tax invoice; zero-rated invoice; commercial invoice; deemed supply; continuous supplies, self-billing arrangements, disclosed agent billing; exports and free zone transactions.

1. Further, an electronic credit note must be issued in the following cases: 
2. Where a business transaction is cancelled. 
3. Where the agreed consideration is reduced for any reason. 
4. Where the consideration is returned in full or in part. 
5. Where an administrative or numerical error has occurred

Note - After an invoice is issued and approved by the supplier’s ASP, the only compliant way to reverse or amend it is by generating an electronic credit note.

Storage, access, and reporting obligations

FTA has the right to access and use any data processed, received, or stored under the e-invoicing system including sharing such data with other UAE government entities or foreign authorities in line with international agreements. Also, as a mandate all e-invoices, credit notes, and related data must be stored within the UAE for the retention period specified under the Tax Procedures Law. Businesses must ensure their systems or their ASP comply with these local storage requirements and maintain secure, auditable records.

In addition to storage, the UAE’s Peppol-based model introduces a Tax Data Document (TDD) requirement. For every e-invoice or credit note exchanged via the Peppol network, the ASP must generate and transmit a TDD to the FTA in near real-time. This TDD contains key transactional data points—such as supplier and buyer TRNs, invoice type, taxable amounts, VAT breakdown, and payment details—enabling the FTA to perform real time assessments.

Appointing an ASP is not enough

ASPs are at the heart of the UAE’s e-invoicing system. These are technology partners approved by the MoF to validate and transmit e-invoices securely in compliance with PEPPOL standards. At the end of September 2025, MoF has pre-approved 5 ASPs, with more expected to join the list soon and receive final approval in the coming days.

However, appointing an ASP is not the only step of the e-invoicing journey. Before selecting an ASP, businesses must undertake a gap / readiness assessment and prepare internally by ensuring their ERP or accounting systems can generate invoices in the required structured format. They should also validate master data such as VAT registration numbers, customer details, and tax codes, and align internal processes for invoice approval, credit note issuance, and archiving within regulatory timelines.

Once an ASP is appointed, businesses need to integrate their systems with the ASP’s platform, conduct end-to-end testing for data accuracy and transmission, and train staff on new workflows. They must also establish monitoring controls to manage exceptions, handle system downtime, and ensure ongoing compliance.

In short, ASPs provide the infrastructure, but businesses remain responsible for readiness, integration, and continuous compliance.

Preparing for e-invoicing: What businesses must do

Compliance with the e-invoicing mandate requires more than just appointing an ASP. Businesses must undertake a comprehensive readiness assessment, reviewing their ERP and billing systems for compatibility with XML/PINT AE standards. Internal teams must be trained on new workflows, and data storage protocols must be aligned with the requirement to retain invoice data within the UAE.

Moreover, businesses must validate their master data, align internal processes with the new reporting obligations, and ensure that all tax and legal documentation is audit-ready. Understanding the “data dictionary” and reporting schema is essential to avoid errors and penalties.

E-invoicing represents a pivotal moment in the UAE’s journey toward digital tax transformation. It is not just a regulatory requirement - it is a strategic opportunity to enhance operational efficiency, improve governance, and future-proof business processes. By acting early, engaging with trusted advisors, and investing in robust systems, businesses can turn compliance into competitive advantage.