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24 May 2018 UAE Central Bank begins publishing daily foreign exchange rates for VAT purposes On 17 May 2018, the Central Bank of the United Arab Emirates (UAE Central Bank) began publishing daily foreign currency exchange rates that UAE VAT-registered businesses should use when converting the Value Added Tax (VAT) due on a tax invoice from a price denominated in a foreign currency. This is a requirement provided by Article (69) of the Federal Decree-Law No. (8) of 2017 on Value Added Tax (the VAT Law). The UAE Central Bank has confirmed that these exchange rates are published solely for VAT reporting and compliance purposes. Consequently, this is likely to result in reconciliation differences with amounts converted to Dirhams in accordance with accounting rules. It is EY's understanding from informal discussions with the tax authorities that the Federal Tax Authority (FTA) will now require all tax invoices to show the gross amount of VAT payable in Dirhams, together with the rate of exchange published by the UAE Central Bank, under Article 59(1)(k) of the Cabinet Decision No. (52) of 2017 on the Executive Regulations. The daily exchange rates, published by the UAE Central Bank from Monday to Friday at 6 pm local time, are applicable to tax invoices issued or received on the following day. Article 69 of the VAT Law specifies that the exchange rate applicable is the rate published by the UAE Central Bank at the date of supply, i.e., the rate published on the date of the supply as opposed to the date published for the date when you process the tax invoice for the supply. However, the UAE Central Bank has clarified that, where specific markets do not operate due to "local holidays," the relevant rate will be the rate published on the day before that local holiday. However, the UAE Central Bank has not given any guidance on the application of the exchange rate on Sundays (the first working day of the week in the UAE) for which the UAE Central Bank does not publish an exchange rate the previous day. Since most international markets operate on Fridays, EY understands that the exchange rates to be applied on a Sunday should be the exchange rate published on the UAE Central Bank website on the preceding Friday, provided a Saturday is considered by the UAE Central Bank to be a "local holiday." Click here for the official press release and here for the UAE Central Bank's official website with published exchange rates.
Document ID: 2018-5693 |
