Cabinet Decision No. 106 of 2025, effective 15 October 2025, establishes six categories of administrative penalties for violations of the UAE Electronic Invoicing System. Penalties range from AED 100 per missing invoice (up to AED 5,000/month) to AED 5,000 per month for failing to implement the system, and AED 1,000 per day for system failure notification breaches. Abdelhamid & Co. (FTA TAAN 20033908) provides compliance reviews to help businesses avoid these penalties.
Overview of Cabinet Decision No. 106 of 2025
Cabinet Decision No. 106 of 2025 was issued on 9 October 2025 and entered into force on 15 October 2025 — five weeks before the penalties start applying to compliance violations. It was issued pursuant to Federal Decree-Law No. 28 of 2022 on Tax Procedures, Cabinet Decision No. 40 of 2017 on Administrative Penalties, and the presentation by the Minister of Finance. The Decision applies to violations of the legislation regulating the Electronic Invoicing System, consistent with the Tax Procedures Law framework.
Importantly, Article 2(2) explicitly excludes voluntary participants — persons who issue Electronic Invoices and Electronic Credit Notes on a voluntary basis are not subject to these penalties. Penalties apply only to those who are legally obligated but fail to comply. Our tax dispute forensic audit team can assist if a penalty is wrongly assessed.
The Six Violation Categories and Their Penalties
Violation 1 — Failure to Implement the System
Description: Failure by the Issuer to implement the Electronic Invoicing System, including failure to appoint an Accredited Service Provider within the timeline prescribed by the Minister.
Penalty: AED 5,000 per month (or part thereof) of delay.
This is the foundational penalty. If a Phase A business (revenue ≥ AED 50M) has not appointed a service provider by 31 July 2026, the penalty clock starts immediately. A three-month delay costs AED 15,000. A six-month delay costs AED 30,000. This penalty captures both failure to appoint a provider and failure to activate the system itself.
Violation 2 — Failure to Issue and Transmit an Electronic Invoice
Description: 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.
Penalty: AED 100 per Electronic Invoice, up to a maximum of AED 5,000 per calendar month.
This per-transaction penalty targets individual compliance failures. A business issuing 200 invoices per month that are all sent outside the system would incur AED 5,000 (the monthly cap). A business that misses just 10 invoices in a month incurs AED 1,000. The monthly cap of AED 5,000 prevents disproportionate penalties for high-volume issuers with systemic failures.
Violation 3 — Failure to Issue and Transmit an Electronic Credit Note
Description: 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.
Penalty: AED 100 per Electronic Credit Note, up to a maximum of AED 5,000 per calendar month.
This mirrors Violation 2 but applies to credit notes. Credit notes are required for transaction cancellations, price reductions, refunds, and administrative errors. Businesses with high adjustment volumes (e.g., distributors, wholesalers) face elevated exposure here.
Violation 4 — Failure by the Issuer to Notify of a System Failure
Description: Failure by the Issuer to notify the Federal Tax Authority of a System Failure within the timeline prescribed by the Minister.
Penalty: AED 1,000 per day (or part thereof) of delay.
Under Article 12 of Ministerial Decision No. 243, notification must occur within 2 business days of the system failure. Missing the 2-day window triggers AED 1,000/day. A 7-day delay costs AED 7,000. This penalty is particularly relevant during the early implementation period when technical teething issues are most likely.
Violation 5 — Failure by the Recipient to Notify of a System Failure
Description: Failure by the Recipient to notify the Federal Tax Authority of a System Failure within the prescribed timeline.
Penalty: AED 1,000 per day (or part thereof) of delay.
Recipients — often overlooked in compliance planning — carry parallel notification obligations. The definition of System Failure covers any malfunction or unavailability that prevents the Recipient from meeting their obligations, not just failures on the issuer's side. Recipients must have their own monitoring process.
Violation 6 — Failure to Notify the Service Provider of Registration Data Changes
Description: Failure by the Issuer or the Recipient to notify the appointed Accredited Service Provider of any changes to the data registered with the Authority within the prescribed timeline.
Penalty: AED 1,000 per day (or part thereof) of delay.
Under Article 5(3) of Ministerial Decision No. 243, changes to FTA-registered data must be communicated to the Accredited Service Provider within 5 business days of receiving FTA confirmation. A VAT registration address change, entity name change, or TRN amendment that is not timely communicated triggers this daily penalty.
Key Compliance Thresholds Summary
- Failure to implement: AED 5,000/month
- Missing invoice (per invoice): AED 100 (max AED 5,000/month)
- Missing credit note (per note): AED 100 (max AED 5,000/month)
- System failure notification delay (Issuer): AED 1,000/day
- System failure notification delay (Recipient): AED 1,000/day
- Service provider data update delay: AED 1,000/day
Penalties Do Not Apply to Voluntary Participants
Article 4(3) of Ministerial Decision No. 243 confirms that voluntary participants — persons who issue, transmit, or share Electronic Invoices voluntarily for excluded transactions — are subject to the system's technical rules but not to the administrative penalties in Cabinet Decision No. 106. This is an important protection for early adopters testing the system before their mandatory deadline arrives.
Frequently Asked Questions
What is the penalty for not implementing the UAE e-invoicing system on time?
Cabinet Decision No. 106 of 2025 imposes AED 5,000 per month (or part thereof) of delay for failure by the Issuer to implement the Electronic Invoicing System, including failure to appoint an Accredited Service Provider within the Minister-prescribed timeline.
How much is the penalty for each missing electronic invoice in the UAE?
AED 100 per Electronic Invoice not issued through the system, up to a maximum of AED 5,000 per calendar month. The monthly cap prevents disproportionate penalties for high-volume issuers with systemic failures.
What happens if a business does not report a system failure to the FTA?
Both the Issuer and Recipient face AED 1,000 per day of delay in notifying the FTA of a System Failure. Notification must occur within 2 business days of the failure's occurrence under Ministerial Decision No. 243 of 2025.
Do voluntary e-invoicing participants face penalties under Cabinet Decision 106?
No. Article 2(2) of Cabinet Decision No. 106 of 2025 explicitly excludes voluntary participants from these penalties. Penalties apply only to legally obligated persons who fail to comply with mandatory requirements.
What triggers the AED 1,000/day penalty for data change notification?
Failure by the Issuer or Recipient to notify their appointed Accredited Service Provider of any change to FTA-registered data within the timeline prescribed by the Minister. Changes must be communicated within 5 business days of receiving FTA confirmation of the amendment.
Related Services
- Tax Agency Service — licensed FTA representation and dispute handling
- Forensic Audit for Tax Disputes — penalty challenge expert reports
- VAT Reconsideration Requests — formal FTA penalty appeals
- Insights & Tax Updates — compliance alerts
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