VAT q&a: 'How do I invoice a client in another currency?'

The reader is also concerned about how to apply the tax to a fluctuating exchange rate

A two euros coin showing the effigy of Simone Veil, is pictured on June 14, 2018, in Paris / AFP / ALAIN JOCARD
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I invoiced a client in euros and mentioned the dirham value in the invoice as per that day’s exchange rate, as approved by the Central Bank of the UAE. I received my payment after 60 days. Since the exchange rate had changed, the payment was significantly different from the dirham value on the invoice. Should I pay the VAT as per the dirham value mentioned in the invoice, or as per the actual payment received? AG, Dubai

The VAT legislation does allow for registered companies to raise sales invoices in a currency other the dirham. Article 69 of the legislation states that if the supply is in another currency, then the amount stated in the tax invoice should be converted into the dirham according to the exchange rate approved by the Central Bank at the date of supply. This is not necessarily the date of invoice or the date the payment was received.

The date of supply is covered by Article 25 of the Decree Law and is defined as the earliest of several dates, which are: the date the goods were transferred to or received by the customer, the date the provision of services was completed, the date the payment was received or the date the invoice was issued.

Therefore, every sale invoiced in a currency other than the dirham needs to determine the date of supply and use the exchange rate for that date. This you will find on the Central Bank website, which includes daily exchange rates for every currency. Once you have raised the invoice using the correct exchange rate, then any difference between the invoice amount converted to dirhams and the amount actually received is due to foreign currency movements between the date of supply and the date of payment, which are not subject to further VAT.


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We claimed a VAT refund in first quarter of Dh48,235.50. The refund showing on our Federal Tax Authority account is under review. Our next return shows we must pay Dh2,204.68 in the second quarter. Can we adjust the current payable amount with the refundable amount or should we pay the Dh2,204.68 now? AVN, Dubai

Until the FTA approves the refund, you should make a full payment for your second quarter VAT return. By not making the full payment you are likely to incur interest penalties for an underpaid return until the date that the refund is approved. The refund will be made separately and should not be combined with the current VAT payment.


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Last year I bought a new car and separately purchased a three-year service contract.  I have just taken the vehicle to be serviced for the first time and the dealership has insisted I pay VAT on the service contract even though I paid the agreed price in full last year. They would not let me handover the car until I had paid the tax, leaving me with little choice. Are they allowed to do this? It seems very unfair. TL Abu Dhabi

The answer to your query depends entirely on the wording of the service contract.  The relevant legislation is called Transitional Provisions and is set out in Article 80 of the Decree Law and Article 70 of the Executive Regulations.

The dealership is correct that where a service contract was entered into before the law came into force, but covers any period after January 1, VAT is payable on the portion that falls after that date.

However, unless the contract specifically includes clauses relating to tax, then the amount you have already paid is considered to be inclusive of VAT. Look at your service contact detailed Terms and Conditions and see if VAT or tax was mentioned.  If it says that the amount you paid is exclusive of VAT, then unfortunately you are liable to pay it now. If there is no mention of VAT or tax in the contract, then you are not liable for any additional payment.

The detailed VAT legislation and Executive Regulations came out relatively late in 2018 and many businesses had not included any mention of the tax in contracts signed earlier in the year. The legislation dictated that business had to pay over VAT on already concluded contracts even though they had not charged this onto their customers and built it into their pricing In an attempt to protect their profitability many businesses have tried to charge VAT when legally they should not.

Lisa Martin, a chartered accountant with more than 20 years commercial finance experience, is the founder of accounting, auditing and VAT consultancy, The Counting House. Email any VAT queries to