If your UAE business invoices or buys in foreign currency, you can keep doing that. But the tax side always ends in dirhams. VAT on a tax invoice must be shown in AED, converted at the Central Bank of the UAE's rate for the date of supply. For corporate tax, figures kept in another currency are converted to AED using Central Bank rates in a fixed order: spot rate first, then monthly average, then annual average. Between the invoice and the payment, the rate can move, and that difference has to be booked too.
This guide is for agencies billing overseas clients, traders buying from suppliers abroad, and startups with investors or revenue in dollars, euros or pounds.
The rules in one table
| Where | What the rule says | Source |
|---|---|---|
| VAT invoice | VAT amount and total shown in AED, plus the exchange rate used | FTA tax invoice requirements |
| VAT exchange rate | Rate approved by the Central Bank of the UAE on the date of supply | VAT Decree-Law, Article 69 |
| VAT return and payment | Reported and paid in AED | EmaraTax |
| Corporate tax conversion | Central Bank spot rate, else monthly average, else annual average | FTA Decision No. 13 of 2023 |
| Corporate tax method | Use one method consistently and document why | FTA Decision No. 13 of 2023 |
| Accounting standards | IFRS, or IFRS for SMEs if revenue is AED 50 million or less | Ministerial Decision No. 114 of 2023 |
VAT: invoicing in foreign currency
You can price and bill in any currency. The FTA's list of what a tax invoice must show includes:
- the amount payable for each line, in AED
- the total amount payable in AED
- the VAT amount in AED, and the exchange rate applied
Article 69 of the VAT law says the rate must be the one approved by the Central Bank of the UAE on the date of supply. The Central Bank publishes monthly schedules of exchange rates for VAT purposes, so you have an official rate for each date.
Worked example. You invoice a Dubai client EUR 10,000 plus 5% VAT for consulting delivered on 15 March. Say the Central Bank's rate that day is 4.00 (an illustrative figure). Your invoice shows EUR 10,500 total, plus:
- value in AED: 40,000
- VAT in AED: 2,000
- rate used: 4.00
AED 2,000 is the output tax that goes on your VAT return, whatever the euro does next.
The US dollar is the easy one. The dirham is pegged at 3.6725 per US dollar, and the Central Bank's VAT schedules show that same rate. Dollar invoices rarely create exchange differences. Euros, pounds, rupees and most other currencies move against the dirham, so they do.
Exports of services and goods outside the UAE are often zero-rated, but they still go on your return in AED. The same conversion rule applies.
Corporate tax: converting your figures to AED
Many UAE companies, especially those with foreign owners or dollar revenue, keep their books in a currency other than dirhams. That is allowed, but your corporate tax return is in AED. FTA Decision No. 13 of 2023 sets the order you must follow:
- Spot rate published by the Central Bank on the date of each transaction, if your software can convert each one or there are few enough to do by hand.
- Monthly average Central Bank rate, if spot is not practical and the average gives an acceptable estimate.
- Annual average Central Bank rate, if neither of the above is practical.
Two conditions come with it. You must use the same method throughout the tax period, and you must keep records of which method you chose, why, and the rates you applied. If you change method, document the reason.
In practice, good accounting software makes option 1 easy: it pulls a rate for every transaction automatically. The key is that the rates it uses line up with the Central Bank's.
The bookkeeping side: gains, losses and revaluation
This part is accounting rather than tax law, but it is where most multi-currency books go wrong.
Functional currency. Under IFRS, which UAE companies use for corporate tax, every company has a functional currency: the currency of the main economic environment it operates in. For most UAE businesses that is the dirham. If you earn and spend mainly in dollars, it might be the dollar. Decide this once, with your accountant, and stick to it.
Realised gains and losses. You invoice EUR 10,000 at 4.00 (AED 40,000). The client pays a month later when the rate is 3.95, so you receive AED 39,500. The AED 500 difference is a realised foreign exchange loss. It is real money and belongs in your profit and loss.
Unrealised gains and losses. At month end, any unpaid foreign currency invoices, bills and foreign currency bank balances should be revalued at the closing rate. The movement is an unrealised gain or loss. Skip this and your balance sheet shows receivables and bank balances at old rates that no longer reflect reality.
Bank fees are not exchange losses. Transfer fees and bank charges on foreign payments are expenses in their own right. Mixing them into exchange differences hides what your bank is costing you.
Since accounting profit is the starting point for corporate tax, these gains and losses flow into your taxable income. That is another reason to get them right every month instead of guessing at year end.
Common mistakes we see
- Showing VAT only in the foreign currency. The FTA requires the VAT amount in AED on the invoice.
- Using the bank's rate or a website rate for VAT instead of the Central Bank rate for the date of supply.
- Recording the receipt at the invoice amount. When a EUR 10,000 invoice pays AED 39,500, the AED 500 gap has to go somewhere. Writing the invoice off as "paid in full" hides a loss.
- One bank account for everything. Keep a separate account in your books for each currency you hold, so every balance reconciles in its own currency.
- Switching conversion methods mid-year for corporate tax without documenting why.
- Revaluing only at year end. Monthly revaluation makes your management accounts reliable and your year end painless.
Setting up your software
Most cloud accounting tools handle this well once set up properly. In Zoho Books, Xero or QuickBooks you should:
- set your base currency (normally AED) correctly when you create the organisation, because it is hard to change later
- add each foreign currency you trade in
- create a bank account in the books for each foreign currency account at the bank
- check the exchange rate feed and how it compares with Central Bank rates
- make sure your VAT invoice template prints AED amounts and the rate
Our comparison of Zoho Books, Xero and QuickBooks for UAE businesses covers how each one handles VAT.
How TaxBox handles multi-currency books
TaxBox runs client books on Zoho Books, which supports multi-currency and FTA-compliant VAT invoices. Multi-currency accounting is included in our Business Growth plan, from AED 1,490 per month on yearly billing, and in CEO Advantage. Each month we record transactions at the right rates, reconcile every currency account, book realised and unrealised exchange differences, and carry the AED figures into your VAT return and corporate tax filing.
Compare plans on our pricing page, see what our monthly bookkeeping includes, or get an instant quote. Startups billing international clients can also look at our outsourced accounting for startups.
For the VAT basics that apply to every registered business, read our VAT compliance checklist.
Frequently asked questions
Can I issue a VAT invoice in US dollars in the UAE? Yes. You can invoice in a foreign currency, but the VAT amount must also be shown in AED, along with the exchange rate used. The rate should be one approved by the Central Bank of the UAE on the date of supply.
Which exchange rate do I use for UAE VAT? The rate approved by the Central Bank of the UAE on the date of supply, under Article 69 of the VAT law. The Central Bank publishes monthly schedules of exchange rates for VAT purposes.
Can my company keep its accounts in US dollars for corporate tax? You can keep accounts in another currency, but for the corporate tax return you must convert amounts to AED using Central Bank rates: the spot rate on the transaction date where practical, otherwise the monthly average, otherwise the annual average. You must apply the method consistently and document it.
Are foreign exchange gains taxable in the UAE? Foreign exchange gains and losses are generally part of your accounting profit, which is the starting point for corporate tax. Get advice on unusual items, such as large unrealised gains on long-term balances.
Do US dollar transactions create exchange differences? Rarely, because the dirham is pegged to the US dollar at 3.6725. Currencies such as the euro, pound or rupee move against the dirham, so invoices in those currencies usually create gains or losses between invoice and payment.
Sources
- Federal Tax Authority: Federal Decree-Law No. 8 of 2017 on VAT and its amendments (Article 69)
- Federal Tax Authority: Get to know your tax obligations (tax invoice contents)
- Federal Tax Authority: Decision No. 13 of 2023 on converting amounts in a currency other than AED for corporate tax
- Ministry of Finance: Ministerial Decision No. 114 of 2023 on accounting standards for corporate tax
- Federal Tax Authority: Accounting Standards and Interaction with Corporate Tax guide
- Central Bank of the UAE: Exchange rates against the UAE dirham for VAT obligations (September 2026 schedule)
This article is general information, not tax or accounting advice. The euro rate in the example is illustrative only. Rules change, so check the Federal Tax Authority and the Central Bank of the UAE before you act.