The UAE VAT Exchange Rate Rule: Which Rate to Use When Invoicing in Foreign Currency
Quick Answer
If your business issues a tax invoice in a currency other than the dirham, you must convert the value to AED using the exchange rate published by the Central Bank of the UAE (CBUAE) for the date of supply. You must use the exact published rate, including all decimal places, with no rounding. The Central Bank updates its rates daily at 6 pm. Invoices raised before 6 pm on a given day should use the rate published the day before.
Why Exchange Rates Matter for VAT
Many UAE businesses invoice in US dollars, euros, or other foreign currencies, especially if they serve international clients or import goods and services. But the Federal Tax Authority (FTA) only accepts VAT figures in dirhams. That means every foreign-currency tax invoice has to be converted to AED, and the FTA is specific about how that conversion must happen.
Get the rate wrong, and you risk misstating your VAT liability, triggering discrepancies during a return review, or having to reissue invoices.
The link to CBUAE foreign exchange rates is here.
Use the Central Bank Rate at the Date of Supply
Where a supply is made in a currency other than the UAE dirham, the amount on the tax invoice must be converted to AED using the exchange rate the CBUAE has approved for the date of supply. This applies whether you’re invoicing a customer directly or accounting for VAT under the reverse charge mechanism (RCM).
In practice, this means:
- You check the CBUAE’s published exchange rate for the relevant currency on the date of supply
- You apply that exact rate to convert your invoice value into AED
- You report the AED figure on your tax invoice and in your VAT return
Example: Your firm issues a tax invoice for EUR 10,000 to a client on 2 June 2026. The CBUAE’s published EUR/AED rate for that date is 4.212549. Your tax invoice should show the AED value as AED 42,125.49, calculated using that precise rate, not a rounded approximation.
No Rounding Allowed
The Central Bank publishes its rates to several decimal places, and you’re required to use the rate in full. You cannot round it down for convenience.
Example: If the published USD rate is 3.6725, you must use it in your calculation. Using a rounded figure like 3.7 is not permitted, even though it looks like a minor simplification. Over a large volume of invoices, small rounding differences can add up to a real discrepancy between your books and what the FTA expects to see.
Timing: The 6pm Cut-Off
The Central Bank updates its published rates each day at or after 6pm, and that updated rate covers the day it’s published for. This creates a practical timing question: what rate applies if you issue an invoice earlier in the day, before that update happens?
The answer is straightforward — if you raise a tax invoice before 6 pm on any given day, you can use the exchange rate that was showing on the CBUAE website at that time, which will be the rate published the previous day. You don’t need to wait for the evening update or apply it retroactively.
Example: You issue an invoice at 2 pm on Tuesday. The CBUAE hasn’t yet published Tuesday’s rate (that happens after 6 pm). You use the rate that was published on Monday evening, which was live on the website at the time you raised the invoice.
Reverse Charge on Imported Services
If your business imports services from an overseas supplier and those services fall under the RCM, you’ll typically receive an invoice in a foreign currency. To calculate the VAT due and report it correctly in your VAT return, use the CBUAE exchange rate applicable on the date of supply.
Foreign suppliers who aren’t VAT-registered in the UAE won’t issue a proper UAE tax invoice, since the concept doesn’t apply to them. In that case, it’s acceptable to treat the date on their invoice as the date of supply, and use the exchange rate that applied on that date.
Example: Your business receives an invoice from a UK-based consultancy dated 5 June for services subject to reverse charge VAT. You use the CBUAE’s GBP/AED rate for 5 June to calculate the AED value and the VAT due under the RCM.
Imported Goods
Exchange rates for imported goods work a little differently because Customs handles the conversion, not the business directly.
When you import goods into the UAE, the VAT due is calculated automatically based on the import declaration submitted through Customs, and the AED value is auto-populated in your VAT return. If the Customs department’s exchange rate differs from the Central Bank’s published rate, you’re permitted to use the Customs-applied rate for declaring the VAT due on that import, and you don’t need to recalculate the value using the CBUAE rate and adjust your return.
This means for goods imports specifically, you can rely on the rate Customs has already applied, rather than cross-checking it against the CBUAE figure.
Digital Currency Payments
If your business deals in digital or cryptocurrency payments, a separate valuation method now applies. Under a 2026 FTA directive, businesses must select three approved digital currency exchange platforms and use the average of the rates from those three platforms to convert digital currency transactions into AED for VAT purposes, rather than relying on a single Central Bank rate. If this applies to your business, it’s worth treating it as its own compliance area rather than assuming the standard foreign-currency rule covers it.
Common Pitfalls to Avoid
- Rounding the exchange rate for simplicity — always use the full published figure
- Using a random third-party rate (a bank app, a Google search result) instead of the official CBUAE published rate
- Applying the wrong day’s rate by not accounting for the 6 pm publication cut-off
- Treating goods and services imports the same way — remember Customs handles the conversion for goods
- Overlooking reverse charge invoices — the same conversion rule applies even though you’re not the one issuing the original invoice
- Assuming digital currency payments follow the standard rule — they now have a separate averaging methodology
Frequently Asked Questions
What exchange rate should I use for VAT invoices in foreign currency?
Use the exchange rate published by the Central Bank of the UAE for the date of supply, applied in full with no rounding.
What if I issue an invoice before the Central Bank updates its daily rate?
If you issue the invoice before 6 pm, you can use the rate that was published and live on the CBUAE website at that time — effectively the previous day’s rate.
Can I round the exchange rate to make calculations simpler?
No. The FTA requires you to use the exact rate as published by the Central Bank, including all decimal places.
Does the same rule apply to imported services under reverse charge?
Yes. You use the CBUAE rate for the date of supply to calculate the VAT due, whether you’re issuing an invoice or accounting for VAT on an import under reverse charge.
Does this rule apply to imported goods too?
Not quite. For goods, Customs converts the value as part of the import declaration, and you can rely on the Customs-applied rate for your VAT return, even if it differs slightly from the Central Bank’s rate.
Where can I find the official Central Bank exchange rates?
They’re published daily on the Central Bank of the UAE’s official website.
This guide is intended for general educational purposes and does not constitute tax or legal advice. Every business’s circumstances differ, and VAT compliance requirements can change. Please contact us for guidance specific to your situation.
