The spread of e-invoicing has become one of the major themes in global tax over the past few years, with tax authorities around the world looking to increase compliance and reduce tax abuse and fraud.
E-invoicing systems take many forms but, essentially, they involve the transmission of invoices between suppliers and buyers in a standardised, machine-readable format, such as XML, rather than relying on paper or PDF invoices. The process is supported by protocols and verification that ensure increased levels of certainty and security for both buyers and sellers. Additionally, the process has the potential to allow the tax authorities to gather and store information on taxpayer transactions. The exchange of information is facilitated by prescribed networks, such as PEPPOL, DBNA or similar communication protocols. Depending on the capabilities of the relevant network and standards set by the relevant tax authorities there could be “hard clearance,” i.e., real time validation of invoices by the tax authorities’ systems or “soft clearance,” i.e., a preliminary clearance without final validation by the tax authorities.
Saudi Arabia was the first of the GCC countries (i.e., Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE) to begin the implementation of e-invoicing. The rollout began in December 2021, with a phased approach that has gradually brought more and more businesses within scope.
The UAE has joined this movement, with the publication of an e-invoicing framework that will begin to be rolled out from quarter two of 2026. Like the Saudi system, this is expected to be a phased implementation, although final details have not yet been released.
Oman was the third GCC country to announce its plans for e-invoicing, with implementation expected to commence in the third quarter of 2026.
This article focuses on the UAE system, which is moving forward quickly, with new information and guidance regularly emerging from the Ministry of Finance. Although each e-invoicing system has its own individual characteristics, many of the points of interest and practice points that are highlighted by the UAE system will be helpful to businesses that need to deal with implementing e-invoicing in other jurisdictions.
The UAE authorities typically refer to the e-invoicing system as ‘eInvoicing’ (without a hyphen but with a capital ‘I’) and we will use that name going forward. The system uses a ‘five-corner model’, as illustrated in the diagram below. The five corners, or parties, being the seller, the seller’s authorised service provider (ASP), the buyer, the buyer’s ASP and the UAE authorities, the Federal Tax Authority (FTA) and the Ministry of Finance.
The diagram offers a high-level outline of the five-corner model. It does not illustrate the full complexity of data flows or the functions and actions of each corner.
The key component of the PEPPOL-based five-corner model is the ASP. This is an independent service provider that offers a digital platform allowing the taxpayer to meet its eInvoicing obligations. The ASP essentially acts as a bridge between the taxpayer and the FTA, helping to generate, transmit, receive and store eInvoices in a compliant format. The ASP must meet the technical standards set by the eInvoicing legislation and must be approved by the FTA.
The scope of the eInvoicing initiative is very broad, encompassing all B2B (business-to-business) and B2G (business-to-government) supplies that are taxable for VAT purposes. This covers:
With such a significant change on the horizon, businesses will need to be properly prepared for the change and will have to start planning well in advance. Some of the key steps businesses should be taking are outlined below.
Firstly, it is important that all businesses keep abreast of the proposals and the timelines by reviewing and understanding all new official announcements and guidance. As implementation will probably take place in phases, the FTA should notify taxpayers of their integration deadline. Nonetheless, taxpayers should be proactive and stay on top of the process and news flow.
One of the key steps to successful implementation will be to review current invoicing and ERP/accounting systems to establish whether the current system can generate invoices in the required format and whether there are any barriers to integration. Following this review, the business will know whether upgrades or other adaptations are required and will be able to begin the process of identifying an appropriate ASP.
As part of the process, the business will need to train finance, accounting, tax and IT teams on the new eInvoicing procedures, update operating manuals and ensure all internal stakeholders are properly briefed.
Proper coordination of all these steps is critical and a project team with an experienced leader and clear terms of reference will be essential, particularly for larger businesses. It is also important to engage with all parts of the organisation that might be affected— this should not be regarded as a purely tax- or finance-driven initiative.
E-invoicing is sweeping the world and the GCC is pushing toward the forefront of this movement, with the UAE system and its five-cornered model introducing new levels of sophistication. The changes might seem daunting at first, but they should bring significant benefits in the long run, with the potential for greater data security, increased transparency, reduced costs and a reduction in tax avoidance and evasion.
Ashish Athavale
BDO in United Arab Emirates
E-invoicing systems take many forms but, essentially, they involve the transmission of invoices between suppliers and buyers in a standardised, machine-readable format, such as XML, rather than relying on paper or PDF invoices. The process is supported by protocols and verification that ensure increased levels of certainty and security for both buyers and sellers. Additionally, the process has the potential to allow the tax authorities to gather and store information on taxpayer transactions. The exchange of information is facilitated by prescribed networks, such as PEPPOL, DBNA or similar communication protocols. Depending on the capabilities of the relevant network and standards set by the relevant tax authorities there could be “hard clearance,” i.e., real time validation of invoices by the tax authorities’ systems or “soft clearance,” i.e., a preliminary clearance without final validation by the tax authorities.
Saudi Arabia was the first of the GCC countries (i.e., Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE) to begin the implementation of e-invoicing. The rollout began in December 2021, with a phased approach that has gradually brought more and more businesses within scope.
The UAE has joined this movement, with the publication of an e-invoicing framework that will begin to be rolled out from quarter two of 2026. Like the Saudi system, this is expected to be a phased implementation, although final details have not yet been released.
Oman was the third GCC country to announce its plans for e-invoicing, with implementation expected to commence in the third quarter of 2026.
This article focuses on the UAE system, which is moving forward quickly, with new information and guidance regularly emerging from the Ministry of Finance. Although each e-invoicing system has its own individual characteristics, many of the points of interest and practice points that are highlighted by the UAE system will be helpful to businesses that need to deal with implementing e-invoicing in other jurisdictions.
Highlights of the UAE System
The UAE authorities typically refer to the e-invoicing system as ‘eInvoicing’ (without a hyphen but with a capital ‘I’) and we will use that name going forward. The system uses a ‘five-corner model’, as illustrated in the diagram below. The five corners, or parties, being the seller, the seller’s authorised service provider (ASP), the buyer, the buyer’s ASP and the UAE authorities, the Federal Tax Authority (FTA) and the Ministry of Finance.
The Five-Corner Model
The diagram offers a high-level outline of the five-corner model. It does not illustrate the full complexity of data flows or the functions and actions of each corner.The key component of the PEPPOL-based five-corner model is the ASP. This is an independent service provider that offers a digital platform allowing the taxpayer to meet its eInvoicing obligations. The ASP essentially acts as a bridge between the taxpayer and the FTA, helping to generate, transmit, receive and store eInvoices in a compliant format. The ASP must meet the technical standards set by the eInvoicing legislation and must be approved by the FTA.
The scope of the eInvoicing initiative is very broad, encompassing all B2B (business-to-business) and B2G (business-to-government) supplies that are taxable for VAT purposes. This covers:
- Taxable supplies (standard and zero-rate supplies for VAT)
- Deemed supplies, such as business assets used for personal use
- Exports of goods and services
- Self-billed invoicing
- Credit notes.
Taxpayer Action Steps
With such a significant change on the horizon, businesses will need to be properly prepared for the change and will have to start planning well in advance. Some of the key steps businesses should be taking are outlined below.Firstly, it is important that all businesses keep abreast of the proposals and the timelines by reviewing and understanding all new official announcements and guidance. As implementation will probably take place in phases, the FTA should notify taxpayers of their integration deadline. Nonetheless, taxpayers should be proactive and stay on top of the process and news flow.
One of the key steps to successful implementation will be to review current invoicing and ERP/accounting systems to establish whether the current system can generate invoices in the required format and whether there are any barriers to integration. Following this review, the business will know whether upgrades or other adaptations are required and will be able to begin the process of identifying an appropriate ASP.
As part of the process, the business will need to train finance, accounting, tax and IT teams on the new eInvoicing procedures, update operating manuals and ensure all internal stakeholders are properly briefed.
Proper coordination of all these steps is critical and a project team with an experienced leader and clear terms of reference will be essential, particularly for larger businesses. It is also important to engage with all parts of the organisation that might be affected— this should not be regarded as a purely tax- or finance-driven initiative.
BDO Insights
E-invoicing is sweeping the world and the GCC is pushing toward the forefront of this movement, with the UAE system and its five-cornered model introducing new levels of sophistication. The changes might seem daunting at first, but they should bring significant benefits in the long run, with the potential for greater data security, increased transparency, reduced costs and a reduction in tax avoidance and evasion. Ashish Athavale
BDO in United Arab Emirates