U.A.E VAT UPDATES: On Gold and Diamonds

The FTA has recently published Cabinet Decision No. (25) on the mechanism for applying VAT on Gold and diamonds trade between registrants in the State effective from 1/6/18.

Highlights:

  1. The VAT treatment pertains to the supply of non-investment gold, diamond and any product where the principal component is gold or diamond.
  2. The decision would apply only to commercial transactions between VAT registered dealers.
  3. Where the VAT registered recipient is purchasing the goods to either resell, use in production or manufacture of products where principal component is gold or diamonds, the supplier shall not be required to account for VAT and disclose in his VAT Return.
  4. The VAT registered recipient shall be required to account for VAT under Reverse Charge Mechanism.
  5. The supplier should obtain a written declaration from the recipient that it is registered for VAT at the date of supply, the purpose for obtaining goods is as per the given decision and that the recipient shall account for VAT under RCM.
  6. This mechanism shall not apply to goods that are subject to zero-rate such as export of gold and diamond and supplies of investment precious metals.

This is a welcome step in UAE as it will help in stabilizing the gold and diamond sector and stimulating investment in this sector.