For corporate groups with UAE VAT Group registrations, one of the most practically significant provisions in the UAE Electronic Invoicing System framework is the grace period that defers the intercompany e-invoicing obligation. Article 10(2) of Ministerial Decision No. 243 of 2025 provides that supplies made between members of the same Tax Group are exempt from the Electronic Invoicing System requirements for a period of 24 months from the date of mandatory implementation — which, for Phase 1 entities, means the grace period runs from 1 January 2027 to 31 December 2028. Understanding precisely what this grace period covers, and — critically — what it does not cover, is essential for group tax and finance teams planning their e-invoicing compliance scope.
The Legal Basis and Duration
A Tax Group (also referred to as a VAT Group) is a group of two or more legal entities that are registered as a single taxable person for UAE VAT purposes under Article 40 of the VAT Decree-Law. Supplies made between Tax Group members are disregarded for VAT purposes — they are neither taxable supplies nor exempt supplies in the standard sense, because the supplier and recipient are treated as a single entity. This disregard treatment is the basis for the MD 243 grace period: where the supply is disregarded for VAT, the intercompany invoice is not a Tax Invoice in the statutory sense, and the grace period defers the obligation to process it through the Electronic Invoicing System.
The 24-month period runs from 1 January 2027 for Phase 1 entities, expiring on 31 December 2028. After that date, intercompany transactions between UAE VAT Group members become subject to the full Electronic Invoicing System obligations — they must be processed through the Peppol network, reported to Corner 5, and comply with the PINT-AE standard.
What the Grace Period Covers
The grace period applies to supplies between entities that are registered within the same UAE Tax Group at the date of supply. Both the issuing entity and the receiving entity must be members of the same Tax Group. The supply must be one that is treated as disregarded (out of scope) for UAE VAT purposes under the Tax Group treatment — typically, the supply of goods or services between Tax Group members in the normal course of intercompany transactions.
During the grace period, intercompany invoices between Tax Group members may continue to be issued as paper or PDF invoices without being processed through the Electronic Invoicing System. There is no requirement to issue them as PINT-AE compliant electronic invoices, no requirement to transmit them through the Peppol network via an ASP, and no requirement to report them to Corner 5. The FTA's real-time data visibility during the grace period does not extend to these intercompany transactions.
What the Grace Period Does Not Cover
Third-Party External Transactions
The grace period is confined to intercompany supplies within the Tax Group. Any supply from a Tax Group member to a third-party customer outside the Tax Group is a standard taxable supply and is subject to the Electronic Invoicing System from the mandatory go-live date. A Phase 1 entity that issues 80% of its invoices to intercompany counterparties and 20% to external customers is still subject to full PINT-AE compliance for the 20% external volume from 1 January 2027. The grace period does not reduce the scope of external compliance obligations.
Entities Outside the Tax Group
Many corporate groups include UAE entities that are not registered within the same Tax Group — separate entities that operate independently for VAT purposes. Intercompany transactions between a Tax Group member and a UAE entity that is not a member of the same Tax Group are not covered by the grace period. They are standard business-to-business supplies that require PINT-AE compliant electronic invoices from the mandatory date.
Transactions With Government Entities
Supplies to UAE government entities — federal or emirate-level — are not covered by the grace period regardless of the Tax Group status of the supplier. Government entity transactions follow their own implementation timeline under MD 244, but where a Phase 1 Tax Group member supplies a government entity, the e-invoicing obligation for that supply category applies from the date the government entity is in scope, not from the end of the grace period.
The Storage and Record-Keeping Obligation
The grace period exempts intercompany transactions from the Electronic Invoicing System exchange requirement — it does not exempt them from the general Tax Procedures Law record-keeping obligation. Intercompany invoices issued during the grace period in paper or PDF format must still be retained for the applicable period under the Tax Procedures Law, and the VAT Group's tax records must be complete and accurate. The grace period defers one specific obligation; it does not create a general documentation exemption.
Planning the Post-Grace-Period Transition
The 24-month grace period creates a planning risk that is easy to overlook in the immediate pressure of the Phase 1 go-live preparation. With the grace period expiring on 31 December 2028, the post-grace-period implementation for intercompany transactions requires its own design and build programme — one that must be planned during the 2027-2028 window, not in the final weeks before the grace period ends.
The intercompany transaction volume for large UAE corporate groups can be significant. Where a holding company charges management fees, treasury services, IT shared services, and recharges to multiple UAE subsidiaries, the intercompany invoice volume may exceed the external invoice volume. Implementing PINT-AE compliance for these transactions requires: configuring the ERP to generate PINT-AE compliant XML for intercompany billing documents (which may use different billing processes than customer-facing invoices), provisioning Peppol Participant Identifiers for all Tax Group member entities, and establishing ASP routing between entities within the group.
Practitioner Insight: The grace period is sometimes interpreted as permission to deprioritise intercompany e-invoicing entirely until 2028. That interpretation is strategically correct for the implementation scope but risks creating a resource cliff: a second implementation programme for intercompany transactions that arrives in 2028 when the organisation's e-invoicing implementation team has already been deployed elsewhere. The better approach is to include intercompany requirements in the gap assessment and design phase during 2026-2027, so that when the implementation timeline is agreed, the intercompany scope is already scoped and estimated — even if execution is scheduled for 2027-2028.
Tax Group Membership Changes During the Grace Period
Corporate groups are not static — entities are acquired, restructured, or deregistered during the grace period. Where a new entity joins the Tax Group during the grace period, supplies to and from that entity may qualify for the grace period exemption from the date of Tax Group membership. Where an entity leaves the Tax Group during the grace period, supplies to and from that entity are no longer covered by the exemption from the date of departure — they become standard third-party B2B transactions subject to full PINT-AE compliance.
This means the Tax Group membership register must be kept current and aligned with the e-invoicing compliance programme. Where a restructuring is planned that changes Tax Group membership, the e-invoicing compliance implications must be assessed alongside the VAT structural implications. A demerger that removes an entity from the Tax Group may increase the in-scope intercompany e-invoicing volume from the demerger date — a compliance consequence that must be planned for rather than discovered in the first billing cycle post-restructuring.
The GCC and International Dimension
The UAE Tax Group grace period applies to UAE VAT Group registrations — entities registered within a single UAE Tax Group. It does not create any exemption for cross-border intercompany transactions between UAE entities and non-UAE group entities. An invoice from a UAE entity to its UK parent or Indian subsidiary, or a recharge from a European headquarters to a UAE operating entity, is a cross-border supply that falls outside both the VAT Group disregard treatment and the grace period. These cross-border intercompany transactions require PINT-AE compliant electronic invoices from the Phase 1 mandatory date where the UAE entity is the issuing party.