The United Arab Emirates has moved a step closer to implementing an electronic invoicing system set to transform the way businesses trade across the region with each other and the government.
Designed to promote transparency, improve efficiency and reduce VAT leakage, mandatory e-invoicing for business-to-business and business-to-government transactions will be introduced in phases, starting in July 2026. Business-to-consumer trading is not yet affected, but is likely to follow in due course.
Cost savings of up to 66% are reported after adoption
E-invoicing, the electronic exchange of invoice documents between suppliers and buyers, is designed to be more efficient, cost-effective and environmentally friendly than traditional paper-based methods. Processing transactions in real-time or near real-time reduces the risk of underreporting or fraudulent activity, while transparent audit trails help deter and detect illicit practices. The Ministry of Finance, which is currently providing guidelines and updates via an online portal, says organisations and governments report cost savings of up to 66% in countries where e-invoicing has been adopted.
The model
For its e-invoicing system, the UAE is deploying a ‘decentralised continuous transaction control and exchange’ model based on a framework that encompasses suppliers, customers, accredited service providers (ASPs) and the Federal Tax Authority. The system will use the Peppol network – a set of standards and technical specifications for the secure and rapid transfer of electronic documents globally.
ASPs’ key role
Accredited service providers (ASPs) will act as mandatory intermediaries for transmission of data between suppliers and buyers, and their introduction, along with related reforms, offers value creation opportunities for financial and advisory firms. The recent release of eligibility criteria for ASPs highlights the crucial part they will play in validating invoice data and transmitting it for processing and exchange.
Arslan Mushtaq, tax partner at Dubai-based consultancy athGadlang, says effective ASPs are key to the success of the whole initiative. ‘They play a fundamental role. If they fail in any way it means chaos for the business and for the government as well. To become an ASP, the requirements are very detailed. For example, you must operate in at least three countries, you need a local base here and you need prior experience.’
‘Communicating electronically with suppliers and customers means quicker payment’
However, he also notes the need for a wider range of professional support for businesses. ‘If you are not ready on the live date, your business will be on hold. You will not be able to issue or receive invoices. Businesses must approach this proactively, have their ASP sorted but also a consultant on board so all three can work collaboratively. The ASP will give you an IT platform but before you plug that into your environment there is a lot that needs to be done.’
Although SMEs, the backbone of the UAE’s economy, are likely to be challenged by the changes, they should also see benefits, he says. ‘Smaller businesses who currently use paper-based operations will have less paperwork, printing, emailing and storage of data to deal with under the new regime. Accuracy will be improved, with human errors eliminated. And communicating electronically with suppliers and customers means they will get paid more quickly.’
Opportunity
Nasheeda CC, founder and managing director of Nishe, a UAE-based firm with expertise in tax, compliance and document processes, encourages businesses, particularly SMEs, to view the shift as part of an opportunity to enhance operational efficiency rather than just as a compliance obligation.
‘It’s a mindset change as much as a process change,’ she says. ‘My advice is to use this as an opportunity to streamline operations more broadly and digitise to make them more efficient, rather than seeing it as another burden or cost. If you look at your business holistically, this offers advantages in the long run.’
‘Small traders must change their paper-based mindset’
The UAE has made substantial progress towards ambitious digitisation goals, but smaller traders are often still wedded to paper processes. ‘Trying to work with and reconcile a combination of electronic and paper transactions will bring endless duplication. They must change their mindset and adapt,’ she says, adding that Nishe is currently helping a paper-based client digitise.
‘There will be costs, but be patient and take time setting up your new system,’ she advises.
How it works
- The seller creates an invoice
- The invoice is sent to the seller’s ASP to check format and validity
- If the invoice is valid, the seller’s ASP sends it to the Federal Tax Authority
- The FTA checks the invoice and approves it
- The invoice is forwarded to the buyer’s ASP
- The buyer’s ASP delivers the invoice to the buyer.
Discipline
Nasheeda advises taking a highly disciplined approach to e-invoicing. ‘Once you send the invoice, that is final; if you want to change it, the only option is a credit note. A lot of small businesses may struggle with being disciplined,’ she says, noting that this is probably why the government is introducing the process in phases.’
With the information portal up and running and ASP accreditation now open, there are certainly opportunities for firms looking to get involved ahead of the July 2026 deadline.
