With UAE e-Invoicing on its way to impact businesses, it is crucial to understand what is in store for your business if you choose to remain non-compliant with the new government directives. In this article, we break down all that is likely to happen in case your business remains non-compliant to the new e-invoicing system introduced in the UAE FTA norms.
If your UAE business is not yet ready to implement the UAE e-invoicing guidelines, you are likely to face stiff penalties from the government and the FTA, including fines for late invoices, rejected invoices, payment delays, cash flow issues, and potential audits, which will disrupt operations and erode customer trust.
The UAE has brought in penalties for e-invoicing UAE non-compliance under Cabinet Decision No. 106 of 2025, effective July 2026, with fines up to AED 5,000 per month/incident for failing to implement the system, delaying invoices/credit notes (AED 100/invoice, with a cap of AED 5,000 monthly), or not reporting system failures (AED 1,000 daily). Most of the associated fines and penalties with regard to e-invoicing target issues such as delays in system setup, failure to issue compliant e-invoices or credit notes, as well as not reporting system failures or data updates on time to the Federal Tax Authorities (FTA).
Specific penalties for non-compliance with e-invoicing regulations
- Delay of system implementation
The fine for a delay in system implementation of e-invoicing can be up to AED 5,000 (or part thereof) for not getting the e-invoicing system in place or an Accredited Service Provider (ASP) partnered with before the deadline.
- Delay of e-invoices or credit notes
If a business remains unprepared for the rollout of e-invoices, there can be a significant delay in sending out the mandatory e-invoices to the customers, or even credit notes. There is a fine of AED 100 for every missing or late e-invoice or credit note, which is capped at a total of AED 5,000 for each month.
- System failure notification
There is a fine of AED 1,000 (or part thereof) for not informing and notifying the FTA (Federal Tax Authority) of system failures and malfunctions.
- Data update failure
There is a stipulated fine of AED 1,000 per day (or part thereof) for not notifying the ASP about changes in registered data to the FTA.
- Failure to keep records of e-invoices
The FTA has specified a certain time period for which e-invoices need to be stored securely within the UAE. Failure to keep records of e-invoices can lead to a stiff penalty of AED 10,000 (doubling to AED 20,000 for repeat offences).
Operational disruptions for non-compliance
There are also some operational setbacks that your business is likely to face if you don’t comply with the new e-invoicing regulations of the UAE government. These include:
- Invoice rejection:
Non-compliant invoices will not be processed, and hence you will not receive the payment for them unless you pay the fine and make changes to the e-invoice in order to make them compliant again. This also delays VAT recovery.
- Payment delays and cash flow issues:
Invoice rejections will disrupt the flow of cash through your business by preventing income from coming through to your entity.
- Audits by the FTA:
Detecting a lack of compliance gets easier for the FTA once the new e-Invoicing in the picture. If they find any irregularities, they will initiate an audit, disrupting operations.
- Customer strain:
Customers will not be able to claim input VAT on your invoices if they are found to be non-compliant, thus eroding trust in your business and leading to a strain on the relationship.
Next steps
If you have not started the preparations for integrating the new e-invoicing system, know that there is still time. Here are some of the things you can do to increase compliance with the new regulations:
- Assess your existing systems
Do a gap analysis of your existing ERP or accounting software against the new FTA requirements.
- Engage an Accredited Service Provider (ASP)
To handle integration and compliance, you will have to partner with an Accredited Service Provider.
- Train staff
Train and educate staff on new workflows across departments such as IT, Finance and Accounting, and help them learn what needs to be done in case an e-invoice is rejected.
- Clean all your master data
Ensure that all your master data (customers, tax codes, product data) is updated and correct.
- Pilot and test
The FTA in UAE has issued different pilot phases for different-sized companies. You may participate in this pilot phase according to your company's size and test your system.
For many businesses in the UAE that are VAT registered, switching to the new system of regulatory frameworks can be challenging, but it will be well worth it in the end because they will align themselves to the new digital economy, prevent fraud, and streamline business with their customers and the FTA.
