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23 July 2018 UAE publishes public clarification on use of exchange rates for VAT purposes Since the start of June 2018, the United Arab Emirates (UAE) Federal Tax Authority (FTA) has commenced the publication on its website of various public clarifications on complex Value Added Tax (VAT) matters and issues on the application of Federal Decree-Law No. (8) of 2017 on Value Added Tax (the Law) and Cabinet Decision No. (52) of 2017 on the Executive Regulations of the Federal Decree-Law No. (8) of 2017 on Value Added Tax (the Executive Regulations). One of the new public clarifications addresses the use of exchange rates for VAT purposes. The provisions of the public clarification are outlined below. The public clarification provides details on how to deal with invoices that were issued before 17 May 2017, invoices issued from 17 May 2018 onwards, as well as invoices relating to imported goods and services. Under Article 69 of the Law, where a supply was made in a currency other than UAE Dirham, 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 (Central Bank) at the date of supply. The Central Bank has begun publishing daily exchange rates as of 17 May 2018 and provides updates on the exchange rates on its website (https://www.centralbank.ae/en/) daily from 6 pm onwards. Taxpayers are required to use the exchange rate published on the Central Bank's website at the time the tax invoice is raised. These tax invoices should have used the conversion rate of a reliable source provided that the same source has been used consistently. In this case, there will be no need to re-issue tax invoices that did not use the Central Bank's exchange rate. For tax invoices issued on or after 17 May 2018, businesses must use the specific applicable exchange rate as published by the Central Bank, which includes using the same number of decimal places as published. For example, if the exchange rate for US Dollars is published as 3.672500, the full exchange rate should be used on the tax invoice, and rounding the exchange rate to fewer decimal places, e.g., 3.7 is not permitted. With regards to imported services which are subject to the reverse charge, businesses should use the Central Bank's exchange rate applicable on the date of supply. It is acceptable to use the date of the invoice as the date of supply for imported services. Invoices which relate to imported goods shall be calculated by the relevant Customs Department based on the import declarations submitted to the Customs Department. This figure will be automatically pre-populated in Box 6 of the VAT return. If the Customs Department's exchange rate differs from the Central Bank's rate, businesses are permitted to use the Customs Department exchange rate for the purposes of declaring the VAT due on import. Businesses will not be required to convert the value of the import based on the Central Bank's exchange rate and declare any adjustment due within Box 7 of the VAT return.
Document ID: 2018-5894 |
