The UAE is about to implement an advanced billing system, i.e., electronic invoicing, very soon. The preparations are in process, and the expected launch will be in 2026. It is high time for businesses to start learning about e-invoicing, how it works and how it will affect them.
Tax Gian has expert tax agents in the UAE who can help you understand the e-invoicing system and prepare your business for a smooth transition to the new system when it is live.
Defining E-Invoicing
- It is an electronic exchange of invoices between buyers and suppliers in a format that is automatically processed by the business’s IT system.
- The invoice is generated, sent and received in XML, i.e., machine-readable format.
- It will replace traditional invoicing, which was done through scanned images, Word documents and PDFs.
E-Invoicing in the UAE: Key Benefits
- It will digitalise tax compliance completely.
- Businesses will be able to enhance their operational efficiency.
- Overall tax transparency will be increased.
- It will be a significant contribution to sustainability.
- It will automate VAT compliance.
- It will bring in cost efficiency for businesses.
- Payment cycles will be faster, saving time.
- It will increase the UAE’s compatibility with global systems.
- It will help businesses in data-driven decision-making.
- VAT reporting will be simplified.
E-Invoicing in the UAE: How does it work?
UAE’s e-invoicing system will be based on “PEPPOL Five Corners Decentralised Model” where the Ministry of Finance (MoF) or Federal Tax Authority (FTA) will be placed at corner 5 and will be responsible for the collection and storage of e-invoices.
Every taxpayer will be required to commercially engage with an ASP (Accredited Service Provider), which is a technology vendor recognised by the MoF. Taxpayers will not have direct connection with the UAE’s e-invoicing infrastructure; only ASPs will have access to it. Businesses can choose to be an ASP, but this can be an impractical decision that may prove costly. In the case of tax groups, every member has to engage with the ASP while still using the group’s TRN (Tax Registration Number). Whether in a tax group or not, prepare for e-invoicing with the help of tax agents in Dubai.
E-Invoicing in the UAE: The Five Corner Model
The following is an overview of the five corner model:
- Corner 1
The invoicing process is initiated once the supplier inserts the invoice data into their business software through the ASP.
- Corner 2
The ASP makes sure that the invoice meets the standards and then forwards the invoice to the buyer ASP. The ASP also assesses customer details before sending the invoice data through the OpenPeppol network.
- Corner 3
Once the receiving ASP receives the invoice data, it sends the same to the business software of its chosen customer.
- Corner 4
The buyer receives the invoice data sent by the receiving ASP in his business software.
- Corner 5
The ASPs also send the required extracts of invoice data to the central data platform owned by the FTA.
E-Invoicing in the UAE: Key Steps Involved
According to the five corner model explained above, the following key steps are involved in the process;
- The supplier initiates the invoice by entering its data into its ERP system and transmits it through its ASP.
- The ASP assesses the invoice data to ensure that it conforms to the UAE standards.
- The invoice is then forwarded to the buyer’s ASP while making sure that Peppol standards are met.
- The ASP forwards the required invoice information to the FTA, also.
- The buyer receives the invoice through the buyer’s ASP, completely accurate and transparent.
Still confused? Ask expert tax agents in the UAE.
Scope of E-Invoicing in the UAE
In the first phase, the UAE will target large businesses; however, subsequent phases will add smaller taxpayers into the system based on some threshold. In the initial stages, the e-invoicing system will cover B2B (business-to-business) and B2G (business-to-government) transactions. It is expected that B2C (business-to-consumer) transactions will also be added to the system in the future.
VAT Groups: When it comes to VAT groups, every member will have to have a connection with an ASP while using the TRN of the group.
Export Transactions: When it comes to export transactions, these will also be included in the e-invoicing system. Foreign customers will not be required to have a connection with the UAE ASP unless they are required to register for UAE VAT or CT. Foreign customers who have a connection with the Peppol network in their resident country, their overseas Peppol address will be utilised for e-invoicing in the UAE. Those who don’t have a connection with the Peppol network will continue to receive invoices using the traditional method currently being used, i.e., PDF formats, etc. If you often do export transactions, learn from tax agents in Dubai about how e-invoicing will affect your transactions.
How can Tax Gian help you?
The MoF will continue to issue updates regarding e-invoicing. Tax Gian will help businesses keep track of all essential updates and understand the e-invoicing system beforehand. This way, businesses can prepare themselves in advance. Contact our professionals today!
