The UAE Federal Tax Authority (FTA) and Ministry of Finance have taken significant steps toward mandatory e-invoicing with the recent announcement of administrative penalties for violations. Under Cabinet Decision No. 106 of 2025, businesses face fines ranging from AED 100 per invoice to AED 5,000 per month for non-compliance with the upcoming Electronic Invoicing System.

This development reinforces the UAE’s commitment to digital tax transformation, enhancing transparency, accuracy, and efficiency in VAT and Corporate Tax reporting.

As the phased rollout approaches—starting with a voluntary pilot in July 2026 and mandatory adoption from January 2027—businesses must prepare now to avoid these penalties.

What is E-Invoicing in the UAE?

E-invoicing requires VAT-registered businesses to issue, exchange, and report tax invoices and credit notes in a structured electronic format (such as XML based on Peppol standards). This decentralized model uses Accredited Service Providers (ASPs) to validate, transmit invoices via the Peppol network, and report data to the FTA.

Unlike PDFs or paper invoices, true e-invoices ensure data integrity, traceability, and real-time reporting—aligning with global best practices while supporting seamless VAT and Corporate Tax compliance.

Key Timeline for Implementation

The rollout is phased to allow preparation time:

• July 1, 2026: Pilot phase and voluntary adoption begins. Early adopters are exempt from penalties during testing.
• January 1, 2027: Mandatory for large businesses (annual revenue > AED 50 million).
• July 2027 onward: Mandatory for remaining VAT-registered businesses, with specific deadlines for smaller entities and government bodies.

Businesses should appoint an Accredited Service Provider well in advance and integrate systems accordingly.

Penalties for Non-Compliance

Cabinet Decision No. 106 of 2025 outlines strict penalties applicable once mandatory phases begin (voluntary users are exempt):

• AED 5,000 per month: For delays in implementing the system or appointing an ASP.
• AED 100 per invoice/credit note (capped at AED 5,000 per month): For failure to issue or transmit electronically on time.
• AED 1,000 per day: For not notifying the FTA or ASP of system failures or data changes within required timelines.

These fines can accumulate quickly, leading to increased audit risk and operational challenges.

Who Must Comply?

The requirements apply to all VAT-registered taxable persons in the UAE conducting B2B and B2G transactions. B2C transactions are currently out of scope.

Regardless of size or industry, businesses issuing tax invoices under VAT law will eventually need to transition.

Benefits of Early Compliance

• Proactive adoption of e-invoicing offers significant advantages:
• Improved Accuracy: Reduces errors in VAT and Corporate Tax filings.
• Efficiency Gains: Automates processes, speeds up payments, and minimizes manual work.
• Audit Readiness: Secure, traceable records simplify FTA inspections.
• Future-Proofing: Aligns with the UAE’s digital economy vision.

Steps to Prepare Your Business

1. Assess Readiness: Review current invoicing systems and processes.

2. Select an ASP: Partner with an accredited provider for integration.

3. Update Software: Ensure ERP/accounting tools support Peppol PINT AE format.

4. Train Teams: Educate staff on new procedures.

5. Seek Expert Advice: Consult tax professionals to identify gaps and ensure smooth transition.

Conclusion

With penalties now formalized, the clock is ticking for UAE businesses to embrace e-invoicing. Starting preparation in 2026—or earlier via the voluntary phase—can prevent costly fines and position your organization for long-term efficiency.

Stay ahead of regulatory changes and turn compliance into a competitive advantage.

Have questions about e-invoicing implementation? Contact our tax advisory team for tailored guidance.