UAE introduces e-Invoicing legislation to modernize tax collection

The UAE has unveiled new legislation aimed at revolutionizing tax collection and record-keeping for businesses, marking a pivotal move towards digital transformation in the nation’s financial sector, reported nukta.com

The Ministry of Finance (MoF) has issued Federal Decree-Law No. 17 of 2024, which revises key aspects of Federal Decree-Law No. 28 of 2022 relating to tax procedures, as well as Federal Decree-Law No. 16 of 2024, which updates several provisions of Federal Decree-Law No. 8 of 2017 concerning Value Added Tax (VAT).

These amendments lay the foundation for an e-Invoicing system, reflecting the government’s dedication to digital innovation and improving national economic efficiency. The e-Invoicing system is designed to simplify, standardize, and automate invoicing processes for businesses in the UAE, providing advantages to both private enterprises and governmental bodies.

This system facilitates the instant exchange of invoices, ensuring efficient tax reporting to the Federal Tax Authority (FTA) while enhancing tax compliance and security. Utilizing a decentralized five-corner model, it will enable sellers and buyers to share invoices through Accredited Service Providers (ASPs), which will subsequently send tax invoice data directly to the FTA.

In line with international best practices, the e-Invoicing system adopts the OpenPeppol standard, aligning with global protocols to support secure and efficient tax processing. The new laws grant the MoF the authority to outline regulations for the “e-Invoicing system,” establish effective dates, and identify which entities will be obligated to implement the system.

Amendments in Federal Decree-Law No. 16 of 2024 on VAT broaden the definitions of “tax invoice” and “tax credit note” to encompass electronic formats. These changes reinforce that VAT refunds will now depend on compliance with e-Invoicing requirements where relevant, establishing a standard for electronic documentation.

Businesses affected by this e-Invoicing initiative will be required to issue invoices and credit notes electronically and to maintain digital records that conform to new archiving standards. The MoF is developing a phased implementation plan, with additional details regarding specific businesses, types of transactions, and timelines to be announced in forthcoming decisions.

The Ministry has committed to ensuring a smooth transition by engaging with stakeholders and optimizing the benefits of this digital shift. Through these legislative advancements, the UAE continues to align with its strategic economic objectives, embracing digital transformation to bolster both national and regional competitiveness.