UAE Amends E-Invoicing Rules to Reduce the Operational Burden on Businesses

Pursuant to Ministerial Decision No. 197 of 2026, amending Ministerial Decision No. 243 of 2025 on the Electronic Invoicing System, transactions between members of the same tax group are exempt from the mandatory electronic invoicing requirement for 24 months, from January 1, 2027 to December 31, 2028.

Electronic invoicing (e-invoicing) is a comprehensive structured system covering the creation, transmission, receipt and storage of invoices in digital formats (XML or JSON). Once e-invoicing becomes mandatory, traditional PDF and paper invoices will no longer be considered valid for VAT accounting purposes. To participate in the electronic invoicing system, businesses must appoint an Accredited Service Provider (ASP) registered with the UAE Federal Tax Authority (FTA) and connected to the Peppol digital infrastructure. They must also ensure that their e-invoicing system is compatible with the accounting software used by the company.

Deadlines for mandatory implementation of the e-invoicing system:

• Large businesses (annual revenue exceeding AED 50 million): January 1, 2027; the deadline for appointing an ASP expired on October 30, 2026.
• Small and medium-sized enterprises: July 1, 2027; the ASP must be appointed by March 31, 2027.

At present, mandatory e-invoicing requirements apply to B2B (business-to-business) and B2G (business-to-government) transactions.

Ministerial Decision No. 197 came into effect on October 1, 2026. A tax group consists of several companies treated as a single taxable person for VAT purposes. The exemption applies exclusively to transactions between members of such a group. Transactions with counterparties outside the group remain subject to the general e-invoicing implementation deadlines.

The new Ministerial Decision also amends Article 11 of Ministerial Decision No. 243 of 2025, which governs the retention of electronic invoices and credit notes. Businesses remain required to retain electronic invoices, credit notes and related information for the full period prescribed by the Tax Procedures Law and to make these records promptly available to the FTA upon request. However, the requirement to store electronic invoices and electronic credit notes within the UAE has been removed. The emphasis has shifted towards proper record-keeping and data retention in general, as well as ensuring that the relevant information remains accessible to the FTA.

In addition, Ministerial Decision No. 197 removes the requirement under Ministerial Decision No. 243 to notify the FTA of all e-invoicing system failures within two business days.

Furthermore, Cabinet Decision No. 173 of 2026 has revised the penalties for non-compliance with e-invoicing requirements. Failure to implement the e-invoicing system, including failure to appoint an ASP, is subject to a penalty of AED 5,000, followed by an additional AED 5,000 for each month or part thereof. However, the total penalty is now capped at AED 50,000 over any consecutive 12-month period. The penalty for failing to notify the ASP of changes to information registered with the FTA has been reduced from AED 1,000 to AED 250 for each day of delay, subject to a maximum of AED 5,000 per month. Failure to issue or transmit an electronic invoice or credit note through the system remains subject to a penalty of AED 100 per document, capped at AED 5,000 per month. The penalty for failing to notify the FTA of e-invoicing system failures has been abolished.

The implementation deadlines for large businesses remain unchanged: the e-invoicing system must be operational from January 1, 2027. Businesses that have not yet appointed an ASP should do so as soon as possible, as failure to implement the system may already result in penalties. Companies belonging to tax groups should review their transactions to determine which qualify for the exemption and which remain subject to the general e-invoicing requirements.