TL; DR
On 24 November 2025, the UAE Ministry of Finance (MoF) issued Cabinet Decision No. 106 of 2025 (the Cabinet Decision), introducing the country’s first comprehensive penalty framework for violations related to the mandatory e-invoicing system. This Decision applies to all persons who fall within the mandatory scope of e-invoicing, with the only exception being voluntary participants, meaning that businesses adopting the system ahead of their mandated phase-in date are not subject to penalties during their voluntary period.
The Cabinet Decision introduces a structured penalty regime, with sanctions that underscore the importance of timely compliance. Penalties range from AED 5,000 per month (approximately USD 1,360/EUR 1,250) for failure to implement the system or appoint an Accredited Service Provider, to AED 100 per invoice (approximately USD 27/EUR 25) for failure to issue and transmit electronic invoices or credit notes, capped at AED 5,000 per month. In addition, failures related to system-failure reporting or updating information with the ASP may trigger daily penalties of AED 1,000 (approximately USD 272/EUR 250). These amounts highlight the financial exposure for UAE businesses not prepared for their e-invoicing obligations.
A Significant Step in the UAE’s Digital VAT Journey
The penalty framework completes a regulatory sequence that began with:
- Introduction of the e-invoicing concept at the E-Invoicing Exchange Summit in February 2024.
- Launch of the MoF e-invoicing portal in October 2024.
- Publication of the Data Dictionary consultation in February 2025.
- Issuance of Ministerial Decisions Nos. 243 and 244 of 2025, defining the scope and timelines of the system.
- Amendments under Federal Decree-Law No. 17 of 2025, effective January 2026, aligning VAT legislation with e-invoicing requirements.
The Cabinet Decision now introduces the enforcement mechanism, signalling that the UAE is entering the final implementation phase. In practical terms, this entails that the e-invoicing framework will be implemented and monitored through the existing VAT administration mechanisms of the UAE Federal Tax Authority (FTA), leveraging the current VAT compliance infrastructure for registration, reporting, audits and administrative enforcement. The introduction of penalties confirms that e-invoicing will be operationalized as part of the VAT system, rather than remaining a standalone or purely technical initiative.
Administrative Penalties: What Is Now Clear
The Cabinet Decision introduces a detailed framework of administrative penalties applicable to a range of e-invoicing non-compliance scenarios. These include delays in implementing the e-invoicing system or appointing an Accredited Service Provider, failure to issue or transmit electronic invoices or credit notes, failure to notify the Federal Tax Authority of system failures (whether as issuer or recipient), and failure to keep registered data updated. Depending on the nature of the breach, penalties may apply on a monthly, per-invoice or daily basis, ranging from AED 100 per invoice (approximately USD 27/EUR 25) to AED 5,000 per month (approximately USD 1,360/EUR 1,250), with daily penalties of AED 1,000 (approximately USD 272/EUR 250) in certain cases. The penalties will become effective upon publication of the Decision in the Official Gazette.
Who Is Impacted?
The Decision applies to all taxpayers subject to the UAE e-invoicing mandate, except businesses participating voluntarily. This includes companies falling within the phased implementation timelines defined by Ministerial Decisions Nos. 243 and 244, which, together with the recent VAT law amendments, are scheduled for staged entry into force beginning January 2026.
Affected sectors include retail, hospitality, restaurants, services, trading, and all B2B/B2G operations once they fall within the phased implementation windows.
Practical Implications for UAE Businesses
With both the legal framework (Federal Decree-Law No. 17 of 2025) and the penalty framework (Cabinet Decision No. 106 of 2025) now in place, the compliance expectations are clear:
- E-invoicing readiness must be prioritised: companies must ensure they can issue, transmit, and archive structured electronic invoices in line with MoF technical requirements.
- Appointment Service Provider regarding of an Accredited Service Provider (ASP) will be essential, as failure to do so is now explicitly penalised.
- Systems must support real-time or near-real-time transmission. Manual or PDF-based invoicing will not meet requirements.
- Businesses must prepare to report system failures promptly. Delayed reporting carries daily penalties.
- Master data governance becomes critical. Any changes must be reflected immediately to avoid noncompliance.
What Organisations Should Do Now
With mandatory adoption and enforcement approaching, UAE businesses should:
- Conduct a comprehensive assessment of their invoicing, reporting, and archiving processes.
- Engage with technology providers and confirm Peppol-based e-invoicing capabilities.
- Establish internal processes for system failure reporting and change notifications.
- Train finance, accounting, and operational teams on the new requirements.
- Develop a phased implementation plan aligned with MoF timelines.
- Monitor ongoing MoF and FTA publications as further technical details are expected ahead of the 2026 go-live.
NOEMA Insight
The issuance of Cabinet Decision confirms that the UAE’s e-invoicing regime is no longer theoretical, it is now fully enforceable. With administrative penalties clearly defined and the first VAT law amendments entering into force in January 2026, businesses should treat e-invoicing readiness as a priority compliance project.
As the UAE moves toward a digitally integrated VAT system, early preparation will help organisations avoid penalties, reduce operational friction, and position themselves for a smoother transition into the new regulatory landscape.
NOEMA remains available to support companies in assessing their readiness and developing tailored compliance strategies for the UAE’s upcoming digital VAT era.
More information on the e-invoicing system in the UAE is available here.
