Firms, individuals have to use exchange rates on the date of supply for VAT
The currency exchange rates are updated Monday to Friday and are based on forex rates prevailing at 6pm UAE time each day.
Dubai - All those UAE companies and individuals who raise tax invoices in a currency other than the UAE dirham will have to use the exchange rates approved by the Central Bank as on the date of supply.
Pratik Shah, Partner, WTS Dhruva Consultants, said apart from mentioning the foreign currency, the tax invoice should also mention the gross amount and VAT amount in UAE dirham along with the exchange rate applied.
He noted that businesses, which import concerned services from outside the UAE, are required to account VAT under reverse charge mechanism on the invoice amount in foreign currency into UAE dirham as per applicable exchange rate.
"In this regard, the Central Bank of the UAE has recently made available facility to access exchange rates against UAE dirham for VAT related obligations in its website. With this, businesses need to ensure that due VAT has been accounted as per the applicable exchange rate notified by the Central Bank are followed. In the event of failure to comply with the aforesaid, it may entail penal consequences related to maintenance of required records as per the Tax Law, failure to account due tax on imports etc.," Shah added.
The currency exchange rates are updated Monday to Friday and are based on forex rates prevailing at 6pm UAE time each day. In instances where specific markets are closed due to local holiday, then the relevant rate will be the prevailing rate of the previous day at 6pm. All rates used are the mid rates of the concerned currency pairs, the apex bank said.