Payments
Multicurrency invoices and exchange rates
The commercial currency can be different from the currency used for tax reporting. A good invoice keeps the customer's payable amount clear and preserves a traceable conversion for the accounting record.
Decision summary
- Name the currency with an unambiguous code.
- Use one consistent rate source and conversion date.
- Show locally required tax conversions separately.
- Explain who bears bank and currency-conversion charges.
Choose the commercial currency before pricing
Agree the currency in the contract or purchase order and repeat it on the invoice. Currency symbols such as $, £ and ¥ can be ambiguous, so use the three-letter code beside totals and payment instructions.
Price risk should be allocated deliberately. A long payment term in a volatile currency can change the supplier's home-currency proceeds even when the customer pays the invoice exactly.
Record the source, date and purpose of each rate
A tax authority may prescribe or permit particular exchange-rate sources and dates. The rate used for tax reporting can differ from the bank's settlement rate and from a management-accounting rate.
Record the rate source, timestamp or date, source currency, target currency and result. Do not edit the issued customer total merely because the home-currency value later changes.
- Contract or invoice currency
- Tax reporting currency
- Rate source and date
- Rounding method
- Settlement difference or bank fee
Keep the payable amount visually dominant
The invoice should have one clear amount due in the agreed currency. If a tax amount must also be shown in a local currency, label it as a reporting conversion rather than a second amount the customer must pay.
Apply rounding consistently at line, tax-category or document level according to the applicable rule. Small mismatches often come from rounding each line differently from the accounting system.
Reconcile the amount received
Correspondent charges, payment-provider fees and customer-side conversion can reduce the amount reaching the supplier. State fee responsibility in the contract and invoice instructions where needed.
Record the receivable at the appropriate accounting rate and recognise settlement differences according to the business's accounting policy. The invoice generator calculates the document; it does not post foreign-exchange gains or losses.
Common questions
Can I issue a VAT invoice in a foreign currency?
Often yes, but a jurisdiction may require the VAT amount or reporting value in local currency. Follow the authority's conversion rules.
Which exchange rate should I use?
Use the rate source and date permitted by the relevant tax and accounting rules, applied consistently. A bank settlement rate is not automatically the tax rate.
Should both currencies be included in the total?
Keep one contractual amount due. Show any required tax conversion separately and label it so the customer does not interpret it as another payable balance.
Primary sources
Use these current public sources to verify the treatment for your transaction.
- VAT on foreign currency transactionsHM Revenue & Customs
- Euro foreign exchange reference ratesEuropean Central Bank