Manage VAT Transactions Involving Multiple Currencies with Tally.ERP 9

Tally Solutions | Updated on: February 10, 2020

As a business owner, you could be dealing with customers or suppliers who prefer doing business with different currencies as part of their operations.

A lot of trade takes place between the GCC States. If you have a business in any one of these States, you could be engaged in trade that involves multiple currencies. You could be an importer or an exporter of goods and services. You could be engaged in business with foreign subsidiaries which are set up in the Gulf region. You could be trading products with businesses from various countries across the globe.

Implications of using multiple currencies on VAT

As per GCC VAT, if you have made transactions in other currencies apart from your local currency, VAT has to be calculated as per the base currency, i.e., as per the local currency of the country in which you reside.

The tax invoice must show tax calculation as per the base currency with the exchange rate. Your VAT return must also reflect calculations as per the base currency.

How to make sure that VAT is calculated accurately for all your business transactions involving multiple currencies? After all, you have to file your VAT returns correctly.

Create transactions and print invoices involving multiple currencies

Let’s consider a scenario. ABC Company based in Dubai, sells goods worth $6000 to XYZ Company which runs its business operations in dollars. The exchange rate of dollar on the particular day was 3.67 Emirati Dirhams. The value of VAT is $300 (5% of $6000).

Now, VAT has to be calculated on the basis of dirhams.

When printing the invoice for this transaction, since VAT has to be shown in dirhams, Tally.ERP 9 will automatically convert dollars to the value of dirhams which is the base currency.

In the tax breakup, Tally.ERP 9 will show the sale value as AED 22020 (6000*3.67 Dirhams) and VAT as AED 1101 (300*3.67 Dirhams).

Tally.ERP 9 lets you configure exchange rates of currencies any time. You can do this on the fly and get all the VAT calculations right.

As per your business requirement, you may need to print invoice with foreign currency stating the sale value and the VAT in foreign currency. However, as per VAT, your invoice must also show the tax breakup in base currency. Tally.ERP 9 takes care of both these needs.

File VAT return accurately with Tally.ERP 9

From a compliance perspective, the invoices must capture the base or local currency conversion rate of the foreign currencies involved in the transactions. The VAT return has to reflect calculations in base currency.

Tally.ERP 9 generates VAT return as per the regulations of the FTA (Federal Trade Authority) if you are in the UAE and GAZT (General Authority of Zakat & Tax) if you are in KSA. It generates your VAT return by converting the value of foreign currencies into the value of your local currency and ensures that you file your VAT return accurately.

With Tally.ERP 9, you can stay confident and do business with customers from any part of the globe and with any of their currency preference.