Answer:
For UAE Corporate Tax purposes, all financial amounts must be reported in the United Arab Emirates dirham (AED), regardless of the original currency in which the transaction was conducted. This requirement applies to income, deductions, and credits.
When converting foreign currency to AED, the taxpayer must apply the exchange rate set by the Central Bank of the UAE. In principle, conversion should be done on a transaction-by-transaction basis using the spot rate on the date of the transaction.
However, if it is not practical due to the number or nature of transactions, the taxpayer may apply either:
- the monthly average exchange rate, or
- the annual average exchange rate published by the Central Bank, provided this results in a reasonably accurate estimate of the tax due.
Regardless of the method selected, the following conditions apply:
- The taxpayer must consistently use the chosen conversion method throughout the tax period.
- Proper records must be maintained to justify the selected method, the applicable rates, and the rationale for their application.
- If the taxpayer chang...