Whether the mandatory requirement to follow the central bank of UAE exchange rate in the foreign currency tax invoices can be overridden by VAT Administrative exception request?
Basis of opinion
Article 69 of the VAT Decree-Law – Currency Used on Tax Invoices
Applicable to the registrants issuing Tax invoices in foreign currency.
Application of the Law
As per Article 69 of the VAT Decree Law, if the supply is in a currency other than the UAE Dirham, then for the purposes of the Tax Invoice, the amount stated in the Tax Invoice shall be converted into the UAE Dirham according to the exchange rate approved by the Central Bank at the date of supply.
ABC LLC (Here in after referred to as “The Company”) is a UAE mainland company operating from Dubai.
The company is registered for VAT with the FTA.
The company is using XYZ software for maintaining the books of accounts.
The company provides services within and outside the UAE and issues Tax invoices to customers in foreign currency.
The foreign currency Tax invoice is converted into AED using the exchange rate from the XYZ software.
According to the company, it is not in a position to convert foreign currency Tax invoices to AED using the central bank of UAE exchange rate as it is difficult to reflect these exchange rates in XYZ software.
Whether the company can apply for a VAT administrative exception to FTA to grant an exception for the exchange rate to be followed for the foreign currency Tax invoices?
A VAT Administrative Exception is a mechanism which provides registrants with concessions /exceptions from the VAT Law if difficult circumstances prevent them from following certain procedural aspects of the Law.
VAT Administrative Exceptions only be granted where the Decree Law or Executive Regulation provides for such exception and as is the case under Article 59 (7) (a) of the Executive regulation for particulars to be mentioned on the Tax invoice.
Article 69 of the VAT Decree-Law explicitly requires that, for purpose of tax invoice, the amount stated in the tax invoice in a currency other than UAE dirham shall be converted into AED according to the exchange rate approved by the central bank at the date of supply.
This is not an administrative aspect but a legal requirement and cannot be overridden by the administrative exception mechanism.
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