This move is set to streamline tax compliance and bolster the jewellery and precious metals sector.
The decision, formalized in Cabinet Decision No. (127) of 2024, supersedes the previous Cabinet Decision No. (25) of 2018, which specifically governed VAT on gold and diamonds among registered dealers.
Under the new ruling, VAT-registered businesses supplying eligible goods will no longer need to charge or collect VAT from other VAT-registered customers. Instead, the buyer assumes responsibility for calculating, declaring, and reporting the VAT in their tax returns.
Scope of the New VAT Rules
The updated regulations apply to:
– Precious metals: Gold, silver, palladium, and platinum.
– Precious stones: Diamonds (both natural and manufactured), pearls, rubies, sapphires, and emeralds.
– Jewellery: Items primarily composed of these precious metals or stones.
For these rules to apply, the value of the precious metals or stones must exceed the value of any other components in the item.
Impact on the Industry
This expansion of the reverse charge mechanism is aimed at simplifying VAT compliance, reducing administrative burdens, and fostering growth within the UAE’s thriving precious metals and jewellery sector. The Ministry of Finance emphasized that the move aligns with global best practices and reinforces the government’s commitment to enhancing the sector’s competitiveness.
Understanding the Reverse Charge Mechanism
The reverse charge mechanism is a VAT framework where the responsibility for reporting and paying tax shifts from the seller to the buyer. In this case, sellers do not charge VAT on sales but must ensure that buyers meet the conditions for using this mechanism.
Economic Benefits for the UAE
The revised VAT rules are expected to create a more efficient regulatory framework, support business growth, and promote investment in the jewellery and precious metals sector. By reducing compliance complexities, businesses can focus on their core operations while maintaining adherence to tax regulations.
The Ministry of Finance reiterated its commitment to fostering a strong and sustainable business environment, ensuring that these new regulations contribute positively to the economic landscape of the UAE.
