e-Invoicing Penalties Under Cabinet Decision 106/2025: Fines & Non-Compliance

UAE Cabinet Decision 106/2025 introduces an administrative penalty regime for mandatory VAT e-invoicing. As rollout phases begin in 2026-2027, UAE VAT registered businesses must adopt compliant e-invoice systems or face recurring monthly, per-document, and daily fines.

Key takeaways

• The UAE will roll out mandatory e-invoicing in phases starting with testing in July 2026, full compliance for large taxpayers from January 2027, and all VAT-registered businesses by July 2027, including B2G transactions by October 2027.
• Businesses that fail to implement the e-invoicing system or appoint an approved service provider within their deadline will be fined AED 5,000 for each month of non-compliance.
• Each invoice or electronic credit note not issued in the required format will attract a penalty of AED 100, capped at AED 5,000 per month for each category.
• Companies that do not promptly notify the Federal Tax Authority of system failures preventing e-invoicing will incur a daily penalty of AED 1,000 until notification is made.
• A daily penalty of AED 1,000 will also apply if required registration or master data changes are not reported to the approved service provider on time.

e-Invoicing Mandate in the UAE

The UAE's e-invoicing system, aligned with VAT law, mandates businesses to issue invoices in a structured digital format (like XML) readable by computer systems. These invoices must be generated via an approved system and transmitted to the Federal Tax Authority (FTA) in real time. The initiative began in 2024, with legal backing from Federal Decree-Law No. 17 of 2025. Cabinet Decision 106 of 2025 sets penalties for non-compliance.

Key Requirements:

• Issue structured electronic invoices (not PDFs)
• Use FTA approved invoicing software or service providers
• Transmit invoices in real time
• Comply with all FTA technical guidelines
• Report any system failures promptly

Penalties Under UAE e-Invoicing – Cabinet Decision No. 106 of 2025

To support the nationwide rollout of mandatory e-invoicing, the UAE Cabinet issued Decision No. 106 of 2025 on November 24, 2025. The decision establishes a comprehensive framework of administrative penalties to enforce compliance with the electronic invoicing system under UAE VAT law.

The decision aims to:

• Ensure timely issuance and transmission of structured electronic invoices and credit notes.
• Promote full system integration with the Federal Tax Authority (FTA).
• Deter delays, non-compliance, and system misuse as the UAE transitions to real-time digital tax reporting.

Cabinet Decision 106/2025 includes:

• Legal definitions of key terms such as "Electronic Invoice," "Issuer," "Recipient," "System Failure," and others.
• A detailed annexed table of violations and corresponding amount of penalties
• Stipulations that voluntary adopters of the system before their mandatory phase are not subject to penalties during their voluntary period.
• Integration references to existing laws (such as Cabinet Decision No. 40 of 2017 on tax penalties) to harmonize enforcement under the FTA’s administrative structure.

Implementation Timeline

The penalties will be enforced in line with the phased rollout of e-invoicing:

Implementation Process

The enforcement will be carried out by the Federal Tax Authority (FTA) through its electronic tax systems and possibly automated reconciliation. Penalties will be automatically calculated and issued when businesses fail to comply with e-invoicing requirements, such as non-issuance, late reporting, or lack of system integration. The FTA will monitor real-time invoice submissions via approved service providers. Notifications and fines will be issued digitally, and persistent non-compliance may trigger audits, system blocks, or suspension of VAT-related services.

Key e-Invoicing Violations and Penalties

The table below summarizes the major violations of the UAE e-invoicing regulations under Cabinet Decision No. 106 of 2025, along with their corresponding administrative fines.

Notes on Enforcement

• Penalties increase based on duration and recurrence.
• Failing to implement the system entirely can incur AED 60,000 annually.
• The AED 5,000 monthly cap applies per violation type (invoices, credit notes, etc.).
• Daily penalties can quickly accumulate if system issues or data changes are not addressed.
• Fines only apply once a business enters its mandatory e-invoicing phase.
• These penalties are in addition to standard VAT fines and apply strictly to e-invoicing compliance.

System Failure Notification to the FTA

Under the Cabinet Decision, businesses using the UAE's e-invoicing system are required to report any System Failure (defined as a technical issue preventing compliance, including ASP outages, network disruptions, or software malfunctions) to the Federal Tax Authority (FTA) within two business days of occurrence.

Timely reporting allows the Authority to assess whether non-issuance of invoices is due to legitimate disruptions rather than willful non-compliance. Prompt notification helps protect the business from escalating penalties and supports continued eligibility for VAT processing and input tax claims during downtime.

Who Must Report

• Issuers: Entities obligated to issue and transmit electronic invoices
• Recipients: Entities obligated to receive electronic invoices

Each party must independently report system failures affecting their ability to meet e-invoicing obligations, even if both are impacted by the same issue.

Deadline and Penalties

• Deadline: 2 business days (excluding weekends and UAE public holidays)
• Penalty: AED 1,000 per day (or part thereof) for late notification
• Accrual: Begins after the second business day. Even partial delays count as full days for penalty purposes

Notification Process

As of now, the FTA has not officially published the full submission protocol, but notifications are expected to be made via:

• EmaraTax portal communication channels
• FTA-designated email (to be announced)
• Appointed Accredited Service Provider (ASP), if applicable

Notifications must follow FTA-prescribed formats once issued and include:

• TRN and contact details
• Date and time of failure, discovery, and restoration
• Clear failure description and scope of impact
• Screenshots or technical logs showing errors and timestamps
• Browser, operating system, and device details
• Subject lines should follow the format: "System Failure Notification – [Brief Description]"

Compliance Guidelines for Businesses

To ensure seamless compliance with UAE’s e-invoicing requirements and avoid penalties, businesses must prioritize the following:

Implement a Certified E-Invoicing System: Select and integrate an accredited service provider. Upgrade ERP or POS systems to issue structured e-invoices that meet technical and legal requirements. Manual or PDF formats will not be accepted.

Train Relevant Teams: Equip finance, sales, and operations staff with clear procedures for issuing e-invoices, handling credit notes, and resolving rejections. Standardize workflows to ensure every transaction generates a compliant e-invoice.

Ensure Master Data Accuracy: Maintain up-to-date VAT registration details and customer tax information. Mismatched or outdated data can cause invoice errors or transmission failures, leading to fines.

Establish Error & Discrepancy Protocols: Handle mistakes using structured credit notes and avoid arbitrary invoice deletion. Promptly fix transmission issues to prevent violations.

Prepare for System Downtime: Develop and maintain a documented incident response plan that includes:

• Designated personnel for monitoring, escalation, and FTA notification
• Clear escalation triggers (e.g., downtime longer than 30 minutes)
• Communication procedures with the appointed Accredited Service Provider (ASP)
• Templates and workflows for timely FTA notification within the 2-business-day limit
• Archiving all incident-related communication and supporting documentation for at least 5 years
• Queuing or batch resubmission processes once the system is restored

Coordinate Effectively with Your ASP: Businesses must clarify with their appointed ASP-

• Whether the ASP is responsible for notifying the FTA during platform outages
• Whether the ASP can co-submit or relay failure notifications
• SLA terms and escalation paths for reporting failures and updates
• Whether ASP data change notifications (a separate legal obligation) are promptly handled

Apply Across All Business Entities: Free zone companies registered for VAT are also required to comply. No VAT-registered operational setup is exempt from issuing compliant e-invoices.