UAE Tax Updates (October, 2025)

1. Ministerial Decision No. 243 of 2025 – Electronic Invoicing System

Issued: 12 September 2025
Effective: Upon publication

Overview

The Ministry of Finance has formally introduced the Electronic Invoicing System, establishing the legal and operational framework for mandatory issuance, transmission, exchange, and reporting of electronic invoices and credit notes for Business Transactions conducted in the UAE.

Key Provisions:

• The Decision applies to all Persons conducting Business in the UAE, except where a Person or transaction is specifically excluded. The Minister retains discretion to expand application to additional categories.
• The following transactions are expressly excluded from the E-Invoicing requirement:
• Sovereign-capacity activities by Government Entities
• International passenger transportation where an Electronic Ticket is issued
• Ancillary airline services supported by Electronic Miscellaneous Documents
• International cargo transport via Airway Bills (transitional 24-month exclusion)
• Exempt or zero-rated financial services under Article 42 of the VAT Executive Regulations
• Any other transactions determined by the Minister
• Persons may still opt-in voluntarily, in which case full compliance with the system applies.

Key Obligations

• Electronic Invoices and Credit Notes must be issued in a structured electronic format enabling automated processing.
• Issuers and Recipients must appoint an Accredited Service Provider.
• Invoices/Credit Notes must be transmitted within 14 days of the Business Transaction (subject to VAT Law timelines).
• Both parties must report electronic documents to the FTA as per timelines prescribed by the Minister.
• System failures must be reported within 2 Business Days.

Impact

This marks the UAE's first comprehensive move toward mandatory digital invoicing, aligning with global e-reporting standards. Businesses should evaluate technological readiness, ERP compatibility, and onboarding requirements ahead of the phased rollout.

2. Ministerial Decision No. 244 of 2025 – Implementation of the Electronic Invoicing System

Issued: 17 September 2025
Effective: Upon publication

Overview

This Decision operationalises Ministerial Decision No. 243 by specifying who is subject, the phased implementation timeline, and the Pilot Programme commencement.

Key Provisions:

• Pilot Programme – 1 July 2026: The Ministry will establish a Taxpayer Working Group consisting of selected businesses who agree in writing to participate. These entities will test the system under the Ministry's supervision and must adhere to all technical requirements.
• Voluntary Implementation:Any Person may adopt the system voluntarily starting 1 July 2026, subject to full compliance with all technical and reporting obligations.
• Mandatory Implementation Timeline:

• Business-to-Consumer (B2C) transactions are excluded until a further decision is issued.

Impact

Businesses must identify the relevant Revenue threshold, plan onboarding, and ensure alignment with accredited providers. ERP integration, data mapping, and workflow redesign should be initiated well ahead of the implementation date.

3. Cabinet Decision No. 129 of 2025 – Amendments to Administrative Penalties

Issued: 9 October 2025
Effective: 14 April 2026

Overview

This Decision introduces significant amendments to Cabinet Decision No. 40 of 2017 on Administrative Penalties for violations of UAE tax laws. The amendments apply across VAT, Excise Tax, and the Tax Procedures Law.

Key Provision:

• Tables 1 and 3 (Tax Procedures Law & VAT violations) have been extensively updated.
• Monetary penalties for several violations (including failure to maintain records, delayed submission of returns, voluntary disclosure obligations, and failure to pay tax )have been adjusted.
• Certain penalties now carry monthly accruals, including:
  • 14% per annum for unsettled Payable Tax
  • 1% per month on Tax Difference for late voluntary disclosures
• VAT-related violations (Table 3) introduce fixed penalties of AED 2,500 per detected case for failure to issue invoices, credit notes, or to comply with electronic invoice issuance conditions.

Impact:

The revised structure reinforces the FTA's shift toward taxpayer accountability, timely reporting, and data accuracy, especially in light of the upcoming E-Invoicing regime. The new penalty system is more granular and may:

• Increase exposure for recurring non-compliance
• Require stronger internal controls
• Necessitate alignment between ERP systems and evolving FTA requirements

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.