Issue
Article 69 of Federal Decree-Law No. 8 of 2017 (“VAT Decree-Law”) requires that where a supply was made in a currency other than UAE Dirham that the amount stated on the issued tax invoice should be converted into the UAE Dirham according to the exchange rate approved by the UAE Central Bank at the date of supply.
The UAE Central Bank began publishing exchange rates on 17 May 2018, therefore businesses are seeking clarity in respect of the FTA's approach for the period from 1 January 2018 up until 16 May 2018, and the approach which should be adopted since the publication of exchange rates by the UAE Central Bank.
Summary
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.
Any tax invoices issued in a foreign currency prior to 17 May 2018 should have been converted to UAE Dirham using a reliable source for exchange rates. Provided this is the case, and the same source has been used consistently, there will be no need to rework tax invoices issued prior to 17 May 2018 where they do not use the UAE Central Bank exchange rate.
Detailed Discussion
Tax invoices issued prior to 17 May 2018
Where a tax invoice was issued prior to 17 May 2018 in a currency other than UAE Dirham, the tax invoice should have been converted to UAE Dirham using an exchange rate from a reliable source.
The source used to obtain the exchange rate should have been consistently used by the business for all tax invoices issued in foreign currencies during the period from 1 January to 16 May 2018.
Examples of reliable exchange rate sources include, but are not limited to:
Use of historical rates published by the Central Bank: