In the context of UAE’s Value Added Tax (VAT) regulations, when goods or services are supplied in a currency other than UAE Dirhams, they must be converted into UAE Dirhams. This is particularly relevant for businesses involved in exporting goods or services and issuing invoices in a different currency, such as the US dollar ($).
Now, the key question is: What exchange rate should be applied in the VAT Invoice?
**Exchange Rate for VAT Invoices:**
The amount specified on the tax invoice must be converted into UAE Dirhams using the exchange rate officially approved by the UAE Central Bank on the date of the supply. The Central Bank commenced the publication of exchange rates on May 17, 2018.
For instance, if an invoice was issued on September 15, 2018, for the supply of goods valued at 2500 US dollars, the exchange rate used in the VAT invoice should align with the one authorized and published by the UAE Central Bank. Suppose the exchange rate published by the UAE Central Bank on September 15th was AED 3.672500. In that case, the US dollar should be converted into UAE Dirhams at the rate of 3.672500, resulting in a total amount of AED 9181.25.
You can find the exchange rates published by the UAE Central Bank by [clicking here](link to the Central Bank’s exchange rate page).
**Exchange Rate for VAT Invoices Before May 17, 2018:**
The UAE Central Bank initiated the publication of exchange rates starting from May 17, 2018. Therefore, invoices issued from that date onward can use the exchange rate as provided by the UAE Central Bank. However, the concern arises regarding invoices issued before May 17, 2018, when the Central Bank had not yet begun publishing exchange rates.
For these previously recorded invoices, where the amounts were converted into UAE Dirhams using exchange rates from various other reliable sources (due to the absence of rates from the UAE Central Bank), businesses are not required to revise these invoices. This is especially true if the same source has been consistently used. Trustworthy exchange rate sources include Thomson Reuters, Oanda, and exchange rates published by UAE banks.
Visiting the UAE Central Bank’s website provides access to historical exchange rates for the period before May 17, 2018. As mentioned earlier, there’s no obligation for businesses to reissue historical tax invoices issued prior to May 17, 2018, to reflect the Central Bank’s exchange rate, provided the source used is reliable and consistent.
In cases where a tax invoice is issued after May 17, 2018, but the supply date falls before this date, businesses should employ the historical rates published by the Central Bank.
**Decimal Precision:**
Businesses are required to use the exact exchange rate as published by the UAE Central Bank, including the same number of decimal places. For instance, if the exchange rate for US Dollars is published as AED 3.672500, the full exchange rate with all decimal places should be used for the tax invoice. Rounding off the exchange rate to fewer decimal places, like AED 3.7, is not permitted.
**Time of Publication:**
The UAE Central Bank updates exchange rates on its website each day, typically on or after 6 PM, covering the rate applicable for that day. In cases where a tax invoice is issued before 6 PM on any given day, it is acceptable to use the exchange rate published on the UAE Central Bank’s website at the time the tax invoice is generated, which corresponds to the rate for the previous day.
You can also register VAT Registration in our website:
https://www.vat-registration-uae.com/
