Other BriefingsUAE Introduces Penalties for Non-Compliance with New E-Invoicing Regime
The UAE has introduced a formal penalty framework for non-compliance with its upcoming mandatory e-invoicing system, marking a significant milestone in the country’s transition toward fully digital tax administration. The move is expected to enhance transactional transparency, strengthen real-time compliance monitoring, and improve the overall efficiency and effectiveness of VAT enforcement.
On December 10, 2025, the United Arab Emirates (UAE) Ministry of Finance (MoF) issued Cabinet Decision No. 106 of 2025 On the Violations and Administrative Penalties Resulting from Violation of the Legislation Regulating the Electronic Invoicing System (hereinafter, the “Decision”), establishing a dedicated framework of violations and administrative penalties for non-compliance with the legislation governing the new UAE electronic invoicing (e-invoicing) system.
The Decision provides the legal basis for enforcement as the country moves toward the phased implementation of mandatory e-invoicing, offering greater regulatory clarity to taxpayers ahead of the system’s full rollout.
By formalizing penalties for failures to implement, issue, transmit, or report electronic invoices and electronic credit notes, the Decision reinforces taxpayer obligations under the new digital invoicing regime. It also signals the authorities’ intention to ensure consistent compliance once e-invoicing becomes mandatory, thereby supporting the UAE’s broader objectives of enhancing tax transparency, strengthening VAT administration, and ensuring certainty in enforcement as the national e-invoicing framework is brought into force.
Scope of the Decision
The Decision applies to any person required to issue, transmit, share, exchange, or report electronic documents in accordance with the UAE e-invoicing system. This includes obligations relating to both electronic invoices (e-invoices) and electronic credit notes (e-credit notes), covering the full lifecycle of electronic invoicing activities from issuance to transmission and reporting.
The scope of the Decision is aligned with the compliance obligations established under the UAE’s e-invoicing framework, ensuring that all parties involved in electronic invoicing are subject to a clearly defined enforcement regime.
However, the Decision explicitly excludes businesses that participate in the e-invoicing system on a voluntary basis prior to their mandated implementation phase. These taxpayers will not be subject to the administrative penalties set out in the Decision during the voluntary or pilot stages.
Key definitions
The Decision introduces several key definitions that clarify the scope of obligations and responsibilities under the UAE e-invoicing system:
- E-invoice: Is defined as a structured, machine-readable electronic document that is issued, transmitted, and received through the e-invoicing system in accordance with the prescribed technical standards.
- Electronic credit note (e-credit note): Refers to a structured electronic document used to adjust or correct previously issued invoices and processed through the same system.
- Issuer: Refers to any person required to issue, transmit, share, and exchange e-invoices and e-credit notes.
- Recipient: Is any person required to receive such documents through the system.
- System failure: Is defined as a technical malfunction or unavailability of the e-invoicing system that prevents an issuer or recipient from fulfilling their compliance obligations within the prescribed timelines.
Administrative penalties
The Decision establishes a comprehensive set of administrative penalties applicable to violations related to the UAE e-invoicing system. These penalties are intended to ensure timely implementation, accurate issuance and transmission of electronic invoices and credit notes, and proper communication with the tax authorities and accredited service providers.
All penalty amounts are set out in a dedicated table annexed to Cabinet Decision No. 106 of 2025. The penalties apply to specific compliance failures, including delays in implementing the e-invoicing system, failures to issue or transmit electronic documents within prescribed timelines, and failures to notify system outages or changes in registered data. Together, these measures form the enforcement backbone of the UAE’s mandatory e-invoicing regime, providing greater certainty for taxpayers as the system moves toward full implementation.
| Penalties for Non-Compliance with the UAE New E-Invoicing System | |
| Description of the violation | Amount |
| Failure by the Issuer to implement the Electronic Invoicing System including the failure to appoint an Accredited Service Provider within the timeline prescribed by the Minister. | AED 5,000 in case of delay for each month or part thereof |
| Failure by the Issuer to issue and transmit an Electronic Invoice to the Recipient through the Electronic Invoicing System within the timeline prescribed by the Minister. | AED 100 for each Electronic Invoice up to a maximum of AED 5,000 per calendar month. |
| Failure by the Issuer to issue and transmit an Electronic Credit Note to the Recipient through the Electronic Invoicing System within the timeline prescribed by the Minister. | AED 100 for each Electronic Credit Note up to a maximum of AED 5,000 per calendar month |
| Failure by the Issuer to notify the Authority of a System Failure within the timeline prescribed by the Minister. | AED 1,000 for each day of delay or part thereof. |
| Failure by the Recipient to notify the Authority of a System Failure within the timeline prescribed by the Minister. | AED 1,000 for each day of delay or part thereof. |
| Failure by the Issuer or the Recipient to notify the appointed Accredited Service Provider of changes to the data registered with the Authority within the timeline prescribed by the Minister. | AED 1,000 for each day of delay or part thereof. |
Implementation timeline for UAE e-invoicing
The UAE has adopted a phased approach to implementing mandatory e-invoicing, allowing taxpayers to transition gradually while providing regulatory certainty on future obligations.
A voluntary pilot phase will begin in July 2026. Taxpayers participating during this period will be temporarily exempt from the administrative penalties set out under Cabinet Decision No. 106 of 2025, offering an opportunity to test systems and processes ahead of mandatory enforcement.
From January 1, 2027, e-invoicing will become mandatory for taxable persons with annual turnover exceeding AED 50 million (US$13.61). These businesses are required to appoint an accredited service provider (ASP) by July 1, 2026, effectively advancing compliance preparations well before the formal start date.
The regime will be extended to all remaining VAT-registered taxable persons from July 1, 2027. For this group, the deadline to appoint an ASP is March 31, 2027. The final phase will apply to business-to-government transactions from October 2027, completing the nationwide rollout of the e-invoicing system across both private and public sector transactions.
Compliance Implications for Businesses
From 2027 onward, compliance exposure will increase significantly, particularly for high-turnover businesses and entities issuing large volumes of invoices. The recurring nature of monthly and daily penalties heightens the financial impact of prolonged non-compliance or operational disruptions.
Businesses will need to address operational and IT readiness challenges, including system integration, data validation, and real-time monitoring of invoice flows. Robust internal controls and clear escalation procedures will be essential to manage system failures and ensure timely communication with both the tax authorities and ASPs.
Strategic considerations for affected taxpayers
Early assessment of e-invoicing readiness will be critical, especially for multinational groups operating complex ERP environments. Selecting and onboarding an ASP should be approached as a strategic decision, taking into account system compatibility, scalability, and compliance support.
Alignment between ERP, invoicing, and tax reporting systems will be necessary to ensure seamless data flows and minimize manual intervention. Businesses should also invest in staff training and establish governance frameworks that clearly allocate responsibilities for compliance oversight, system monitoring, and regulatory reporting.
Outlook and Conclusion
The introduction of a formal penalty framework marks a significant milestone in the UAE’s transition toward fully digital tax administration. Mandatory e-invoicing is expected to enhance transparency, improve compliance monitoring, and increase the efficiency of VAT enforcement.
As one of the most comprehensive e-invoicing initiatives in the region, the UAE’s framework further positions the country as a regional leader in tax digitalization. Businesses that prepare early and integrate compliance into broader digital transformation strategies will be better placed to manage regulatory risk and operate efficiently as the phased implementation progresses.
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