The Federal Tax Authority has released a clarification on use of exchange rates for VAT purposes. Article 69 of the UAE VAT Decree Law read with Article 59 of the UAE VAT Executive Regulations states that where a supply was made in a currency other than UAE Dirham, the amount stated on the tax invoice should be converted to UAE Dirham according to the rates approved by the UAE Central Bank at the date of supply.

The UAE Central Bank began publishing its rates on 17th May 2018. The FTA has provided a clarity on its approach towards treatment of tax invoices from 1st January 2018 to 16th May 2018 since the exchange rates were published on 17th May 2018.

Key Highlights

  1. There is no requirement for the businesses to rework the tax invoices issued prior to 17th May 2018 where they do not use the UAE Central Bank exchange rate provided:
    1. The exchange rate used is from a reliable source; and
    2. The same source has been used consistently from 1st January to 16th May 2018.
    3. The examples of reliable sources may include UAE banks and other similar sources such as Thomson Reuters, Oanda.
    4. There is no requirement to use the historical rates published by the UAE Central Bank on its website for the periods prior to the issue date unless the date of supply was prior to 17th May 2018 but the invoice was issued post 17th May 2018.
    5. Businesses must use the exact exchange rate as published by the UAE Central Bank i.e. the rounding off is not permitted.
    6. 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.
    7. Where the businesses import services from foreign suppliers which are subject to VAT under RCM, the exchange rate shall be applicable on the date of invoice which can be used as the date of supply for the service imported.
    8. For goods imported into UAE,the VAT due on import shall be automatically populated in Box No 6 of the VAT Return. For exchange rate difference between the UAE Central Bank and the customs, the businesses shall be permitted to use the Exchange rates applied by customs for declaring VAT due on the import. No Adjustment in Box no 7 of the VAT Return is required to be made for variance in exchange rates with customs.