As per the VAT decree Law, the invoice should always be in UAE Dirham. It means that even if the transaction is done in currency other than UAE Dirham then said amount has to be converted into UAE Dirham. The rates at which it is converted should be according to the exchange rate approved by UAE central Bank at the date of supply.
The UAE Central Bank began publishing exchange rates on 17 May 2018. Businesses are required by the VAT Decree-Law to use this exchange rate on any tax invoice issued in a currency other than the UAE Dirham from this date onwards. Businesses are seeking clarity in respect of the FTA’s approach for the period from 1 January 2018 up until 16 May 2018. FTA clarified vide circular No: VATP004
The invoices for the period from 1 January 2018 up until 16 May 2018 should be converted using a reliable source. FTA clarified reliable sources as from:
- Thomson Reuters;
- The exchange rate published by a UAE bank.
However, the above listed list is not exhaustive. In the event a tax invoice is issued post 17 May 2018 but where the date of supply was prior to 17 May 2018, businesses should use the historical rates as published by the Central Bank.
While using the published exchange rates, some things to be kept in mind:
- The exact exchange rate as published by the UAE Central Bank, which includes the same number of decimal places. Rounding off to nearest decimal is not permitted.
- The exchange rates are published on website each day on or after 6pm, to cover the rate applicable for that day. Where a tax invoice is issued prior to 6pm on any given day, it will be acceptable to use the exchange rate published on the UAE Central Bank website at the time the tax invoice is raised, i.e. the rate for the day before.
- It is acceptable to use the date of the invoice as the date of supply of the imported service and use the exchange rate applying as per that date.
- For goods, the VAT due on import shall be automatically calculated based on the import declarations submitted via the relevant Customs Department. This value is automatically populated in Box 6 of the VAT return.