ELECTRONIC INVOICING REQUIREMENTS: SCOPE (B2B, B2G), PINT-AE FORMAT, AND MANDATORY CERTIFICATION
The UAE e-invoicing system primarily applies to business-to-business (B2B) and business-to-government (B2G) transactions, requiring all VAT-registered natural and legal persons to issue electronic invoices for taxable supplies.
Business-to-consumer (B2C) transactions are exempt, with a focus on high-value transactions between entities. The required format is PINT-AE. Accreditation for all eligible businesses begins with the accreditation of service providers to ensure tamper-proofing and full compliance with the standards.
To ensure a smooth transition to the e-invoicing system, ongoing communication with accredited service providers will be crucial, and periodic detailed reporting to the FTA will ensure compliance with laws and regulations. E-invoicing will be rolled out gradually to allow businesses time to adapt.
The first pilot phase of the e-invoicing system is set to start in January 2026 for companies with specific activities to test the new system, followed by full mandatory implementation to being in July 2026 for all B2B and B2G transactions. Note service providers will be accredited in the last quarter of 2025, and ongoing audits will be conducted post-implementation. Businesses must fully comply with the e-invoicing system by mid-2026 to avoid administrative penalties and fines.
THE IMPACT OF IMMEDIATE VERIFICATION OF TRANSACTIONS AND INVOICES BEFORE SUBMITTING A VAT RETURN
VAT returns are submitted periodically, and the tax period for companies may be monthly or quarterly (depending on the company’s tax period specified by the Federal Tax Authority). Sometimes, delaying the filing of tax returns can lead to incorrect tax returns. The control system provides continuous control over transactions, where invoices are verified before they are issued and received by the customer. This immediate verification system reduces the risk of tax fraud and evasion.
THE IMPACT OF ELECTRONIC INVOICING ON IMPROVING AND DEVELOPING AUDIT QUALITY
BEFORE ELECTRONIC INVOICING:
The basis for VAT audits is based on the submission of monthly and quarterly tax returns, which results in the inability to verify data at the time of filing and sometimes causes delays for companies’ filing tax returns.
The Federal Tax Authority conducts tax audits after tax returns are submitted. These audits often occur months or years after the tax returns are submitted, allowing for the possibility of undeclared transactions or discrepancies between the actual transaction value and the declared value.
AFTER E-INVOICING:
Real-time audits reveal patterns in corporate structures, ranging from duplicate transactions between companies to non-compliant entity reporting. This significantly enhances regulatory visibility by enabling the audit of invoices individually before they are received from the customer.
THE ANTI-TAX EVASION AND MANIPULATION AUTHORITY UNCOVER LOOPHOLES IN GROUP STRUCTURES.
NON-COMPLIANCE WITH TRANSFER PRICING AUDITS BETWEEN RELATED COMPANIES:
Services and management fees are now visible and disclosed. Electronic invoice data will highlight non-arm’s-length pricing in related-party transactions, helping the Federal Tax Authority (FTA) conduct tax audits in accordance with corporate tax and VAT rules.
INCONSISTENCIES AND DISCREPANCIES IN VAT GROUPS
Immediate and direct detection of any errors in group membership or the nature of supplies. Any non-compliant or mismatched invoices within VAT groups— such as undeclared intra-group supplies—will be identified.
PERMANENT ESTABLISHMENT (PE) TRIGGERS
The nature or types of transactions between the UAE and foreign entities may indicate the presence of a taxable establishment within the UAE. Recurring and periodic cross-border invoices may indicate the presence of a fixed place of business or an agent affiliated with the permanent establishment within the country, prompting the Federal Tax Authority to initiate a tax audit and assess undeclared taxable income in the UAE.
GOVERNMENT AUDIT READINESS
Internal audit plays an important role in monitoring immediate compliance. It involves the ongoing review of tax invoices and transactions, and the transition from annual or quarterly audits to ongoing processes.
TAKEAWAY
In conclusion, e-invoicing in the UAE will uncover any discrepancies or non-compliance in transfer pricing between related parties, as well as any errors in actual tax filing or collection. However, this obligation can be turned into an opportunity for businesses to enhance compliance, strengthen tax planning, and improve operational efficiency.
For more information on how Creation Business Consultants can assist with tax services and advisory in the UAE, connect for an initial free expert consultation on email: [email protected].
