E-invoicing – Amendments to the UAE VAT legislation

30 October 2024 – The United Arab Emirates (UAE) VAT (Value Added Tax) Law and Tax Procedure Law have been amended to include provisions in preparation for the implementation of electronic invoicing (e-invoicing). This follows the recent launch of the e-invoicing website by the UAE Ministry of Finance (MoF), clearly demonstrating a commitment to implementing e-invoicing by the planned deadlines.

Key changes in the VAT legislation

Background

Amendments to the UAE VAT Law and Tax Procedures Law were signed on 30 September 2024 and published in Arabic in the Official Gazette (No.784), taking effect 30 days after publication.

Updated definitions:

Various definitions have been added/revised to facilitate the implementation of e-invoicing. The definitions now include specific terms relating to the e-invoicing system.

Recoverable input tax:

The conditions of recovery of recoverable input tax in the tax period have been amended, adding additional provisions on the possession and retention of invoices electronically.

Invoices and credit notes:

The criteria and requirements for issuing tax invoices and credit notes have been updated. Taxpayers registered to use the e-invoicing system must issue invoices and credit notes in an electronic format. 

Administrative penalties:

The administrative penalties for failure to issue tax invoices or credit notes have been extended to include failure to issue e-invoices or e-notes. 

Key takeaways from the e-invoicing website

The MoF launched its e-invoicing website on 24 October 2024. It included a description of the UAE e-invoicing model along with answers to some FAQs. Please access the website by clicking this link.

We have outlined some of the key points below:

1. Five corner model
   The e-invoicing model includes exchange and reporting. The taxpayer’s Accredited Service Provider (ASP) shall validate all fields of an e-invoice based on the UAE data dictionary before exchanging the invoice over the Peppol network. Subsequently, all tax data fields in the invoice shall be reported to the Federal Tax Authority (FTA). 
2. Accredited Service Provider 
   Businesses in the UAE must engage with an ASP to issue and receive e-invoices via the Peppol network, using the buyer's electronic address.
3. Timeline
   The MoF confirms its plans to implement phase 1 of e-invoicing reporting in July 2026. It also confirms the MoF plans to develop the e-invoicing data dictionary by Q4 2024 and release the relevant e-invoicing legislation by Q2 2025. 
4. VAT grouping
   The UAE MoF has clarified that each member of a VAT group in the UAE must be connected to an ASP individually while using the group's Tax Registration Number (TRN). 
5. Mandatory participation
   All business-to-business (B2B) and business-to-government (B2G) transactions fall within the scope of the UAE's e-invoicing regime, irrespective of the VAT or Corporate Tax registration status of the involved parties.
6. Exports
   For exports, if a foreign buyer is registered within the Peppol network, their endpoint is required. Otherwise, a dummy endpoint should be used, and the invoice can be sent outside the network, such as via email.
7. Self-billing
   In self-billing scenarios, the buyer should create and exchange the e-invoice with the seller and report it to the FTA via an ASP. This is consistent with the existing requirements under the VAT legislation.
8. Error correction
   If errors occur in validation, the ASP should return the invoice to the issuer. Separately, if errors occur in tax invoices, the supplier should issue a credit note for correction. 
9. Implementation
   The implementation will be phased, with businesses adopting the system in prescribed stages according to specific criteria. Adequate notice will be provided in advance of the requirements coming into effect.

Businesses can join the pilot program once ASPs are available, with a testing phase before full implementation to minimize issues.

Implications and next steps for businesses 

The recent amendments to the UAE VAT legislation will require businesses to adopt significant changes to their tax practices, particularly regarding e-invoicing. Businesses must now comply with updated definitions and conditions for the retention of e-invoices and credit notes. 

When preparing for the implementation of e-invoicing, businesses will need to partner with ASPs to issue and validate e-invoices via the Peppol network.

It is crucial for businesses to prepare now by considering the impact of the implementation to minimize errors and avoid administrative penalties.

How Deloitte can help

Deloitte offers a comprehensive range of services to assist businesses in effectively managing the implementation of the e-invoicing. We can provide an impact assessment to help getting ready for the implementation. Additionally, we can support to raise awareness internally and build the necessary knowledge within your organization.

Please reach out to your trusted Deloitte advisor if you would like to discuss the impact of the e-invoicing on your business and how you can prepare for the changes. 

Contacts 

Our Tax experts listed below would be happy to discuss the above matters in more detail, or support you through a further discussion on your specific requirements.

Mark Junkin
majunkin@deloitte.com

Kate Bacon
kabacon@deloitte.com

Jack Sims
jacksims@deloitte.com

Shata Ataie
sataie@deloitte.com

Marjolein van Delft
marvandelft@deloitte.com

Doukje De Haan 
dodehaan@deloitte.com 

Kenneth Lei
kelei@deloitte.com