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.
The FTA has laid down a clarification called VATP004:
TAX INVOICES ISSUED PRIOR TO MAY 17,2018
Where a tax invoice was issued prior to May 17 in a currency other than UAE Dirham, then the tax invoice should be converted into UAE Dirham using an exchange rate from a reliable source.
However, the source which has been used must be consistently used by the business for all the tax invoices issued in foreign currencies during the period from 1 January to May 16, 2018.
USE OF HISTORICAL RATES PUBLISHED BY THE CENTRAL BANK
For the period prior to May 17, 2018, the UAE Central Bank has published historical rates on its website. The business should use the historical rates published by the Central Bank in the event any tax invoice is issued post-May 17,2018 but where the date of supply is prior to May 17, 2018.
USE OF EXCHANGE RATES FROM MAY 17,2018 ONWARDS
The exchange rate that has been published by the UAE Central Bank is to be used to convert the foreign currency to UAE Dirham where a tax invoice is issued from May 17, 2018. The business is required to use the exact exchange rate published by the UAE Central Bank.
USE OF EXCHANGE RATES FOR IMPORT OF SERVICES
If in case the business imports services from a foreign supplier that is subject to VAT under the reverse charge mechanism, then the business are required to use the UAE Central Bank exchange rate applicable on the date of supply in order to calculate the VAT liability that is to be reported in the VAT return.
If in case, a foreign supplier who is not VAT registered in UAE issues a tax invoice that is not a tax invoice for UAE VAT purposes then it is acceptable to use the date of invoice as the date of supply of the imported service and the use of exchange rate which is applying as per that date.
Source: Federal Tax Authority – VATP004