TLDR:
• VAT law updated for e-Invoicing mandate
• 2026 rollout of 5-corner invoicing model
• Decentralised system enhances compliance
DUBAI (The Thursday Times) — The United Arab Emirates is embarking on a transformative journey in its tax collection system, with the Ministry of Finance and Federal Tax Authority (FTA) making pivotal updates to VAT laws to integrate e-Invoicing. Announced on October 29, 2024, the revisions include comprehensive provisions for e-Invoicing, from definitions to issuance, credit notes, and recovery, marking a significant step in digital tax governance. The amendments form part of an overarching strategy aimed at modernising financial infrastructure, enhancing compliance, and ensuring efficient tax procedures across the nation.
On October 24, the FTA released new guidance on the B2B (Business-to-Business) and B2G (Business-to-Government) e-Invoicing mandate set for July 2026. This update, which includes a detailed FAQ section, outlines a phased implementation plan, with businesses rolling out the e-Invoicing system at staggered intervals. While B2C (Business-to-Consumer) invoicing will follow at a later date, the current focus remains on establishing a robust framework to ensure a smooth transition. Businesses will receive ample notice and precise timelines for meeting compliance requirements.
The 5-corner model explained
The UAE’s approach to e-Invoicing adopts a “Decentralised Continuous Transaction Controls and Exchange Model” (DCTCE), operating on a sophisticated 5-corner framework. This model, aligned with Peppol standards, allows vendors and customers to exchange e-invoices directly, eliminating the need for pre-clearance by the Ministry. Accredited Service Providers (ASPs) play a crucial role in this ecosystem, acting as intermediaries who validate invoice details and facilitate the secure transmission of data to the recipient and the FTA. The FTA serves as the “fifth corner,” receiving invoice data for compliance monitoring without requiring pre-approval.
The first version will operate as a 4-corner model, with plans to evolve into the comprehensive 5-corner system. ASPs, functioning as e-invoicing agents, ensure the integrity of the transaction process, forwarding the validated invoices to both the client and the tax authority. This decentralised approach, anchored in the Peppol PINT protocol, seeks to streamline tax reporting, enhance data accuracy, and reduce the administrative burden on businesses. As a result, companies can expect more efficient invoicing, higher compliance rates, and reduced opportunities for tax evasion.
Phased rollout and future impact
The implementation of e-Invoicing will occur in stages, starting with the release of draft technical requirements and the Accredited Service Providers process in Q4 2024. By Q2 2025, draft legislation will be introduced, followed by a detailed rollout strategy in December 2025. Phase one of the system will officially launch in July 2026, with subsequent phases to be announced. This structured timeline aims to give businesses the necessary time to adapt, while ensuring a seamless transition to the new system.
E-Invoicing is part of a broader “e-billing system” initiative spearheaded by the Ministry of Finance. This ambitious project seeks to automate tax return filing, improve tax compliance, and mitigate tax evasion. By digitising invoicing processes, the UAE aims to establish a more transparent and efficient tax environment, boosting the nation’s standing in global economic rankings. The legal recognition of e-invoices, when mutually agreed upon by transaction parties, underscores the UAE’s commitment to digital innovation.
Strategic alignment with economic goals
The move towards a fully digitised tax system is in line with the UAE’s strategic vision to foster economic resilience and global competitiveness. By embracing advanced technologies and adopting international best practices, the country is setting a new benchmark for tax governance in the region. The decentralised e-Invoicing model not only enhances operational efficiency but also aligns with global compliance standards, reinforcing the UAE’s reputation as a hub for business and innovation. As these regulations come into effect, businesses across the UAE must prepare for the digital shift, ensuring that they meet all necessary compliance criteria.
