A contractor billing a milestone under a construction contract has always shown the retention deduction on the face of the invoice. Under the Electronic Invoicing System that calculation moves off the document. The Guidelines require the milestone amount and the retained amount to be worked out in a separate commercial document, and the Electronic Invoice to carry neither calculation. For any business whose revenue arrives in instalments, the billing document itself has to change shape.
What Scenario 5 Covers
Scenario 5 applies to a supply provided on an ongoing or recurring basis, or one that includes periodic invoicing. The Guidelines give three examples: a monthly advisory services retainer, delivery of building materials in instalments, and milestone based payments. The scenario applies to Commercial Invoices as well as to electronic Tax Invoices, so a business making exempt or out-of-scope supplies on a recurring basis sits inside it on the same terms as a Taxable Person.
The definition is broad enough to capture a large share of ordinary UAE service revenue. Managed services contracts, maintenance agreements, subscription billing, professional retainers and staged construction work all fall within it, because the scenario is defined by billing rhythm across every sector.
Retention: A Separate Document, Then a Later Invoice
The Guidelines state that for Business Transactions involving retention payments, a separate commercial document should be issued detailing the calculation of the milestone amount and the deduction of the retained amount, and that these calculations should not appear on the Electronic Invoice. When payment of the retention amount falls due, an electronic Tax Invoice should be issued with the applicable VAT amount.
That produces a two-stage document trail. The commercial document explains the arithmetic to the customer and supports the payment application. The Electronic Invoice carries the amount actually being invoiced. The retention sits outside the Electronic Invoicing System until it becomes payable, at which point it is invoiced in its own right with VAT applied. The field-level mechanics of the retention invoice, and the worked example the Guidelines provide, are set out in Appendix 5 and covered separately in the Appendix 5 analysis.
Why This Is a Billing System Change
Most contracting ERP configurations produce one document per milestone, with gross value, retention deduction and net payable on the same page. Splitting that into a commercial document and an Electronic Invoice means the billing run now has two outputs with different destinations: one to the customer directly, one through the ASP to Corner 3 and Corner 5. The retention balance also has to be tracked as an obligation that will generate its own Electronic Invoice at a later date, which means the retention register becomes a source of future invoicing rather than a memorandum account.
Businesses that manage retention in spreadsheets outside the ERP will feel this first. A retention amount tracked outside the billing system has no system event to trigger the electronic Tax Invoice the Guidelines require when it falls due, and the omission stays invisible until the customer asks for the invoice or the receivable ages past explanation.
Scenarios Combine
The Guidelines confirm that a single Electronic Invoice can carry more than one scenario, and that where several apply, the specific requirements of each must be included. A milestone billing to a Free Zone entity engages Scenario 5 and Scenario 1 together, so the retention treatment and the beneficiary requirement both attach to the same document.
The decision worth taking early is where the retention calculation is going to live once it leaves the invoice. Keeping it inside the billing system preserves the link between the milestone, the retained amount and the invoice that eventually releases it. Moving it to a manual document created outside the system breaks that link at precisely the point where the Electronic Invoicing System expects a further invoice to appear.