Gold and jewellery shoppers in the UAE will not experience any additional costs following the recent changes to the country’s VAT regulations, which were introduced by the Ministry of Finance last week. Shoppers will continue to pay the standard 5% VAT on their purchases, a practice in place since early 2018. Tourists will also remain unaffected, as they can reclaim the 5% VAT when they exit the country.
In response to the change, jewellery retailers acted swiftly over the weekend to reassure both residents and tourists that the new VAT regulations will not impact their purchases. The revised rules are part of the government’s implementation of the “Reverse Charge Mechanism,” which now includes precious metals and stones in the list of VAT-registered businesses.
Gold prices have remained high, with the current price of an ounce standing at $2,689. Meanwhile, the UAE’s 22K gold price is set at Dh301.75 per gram, a slight increase from Dh294.5 at the start of the year.
Impact on Retailers and Tax Compliance
The new rules will, however, simplify tax processes and improve cash flow for businesses in the gold and jewellery sector.
Under the new regulations, UAE jewellery retailers will now serve as tax collectors for the government, managing VAT collection directly from customers. Joy Alukkas, Chairman and Managing Director of Joyalukkas, one of the UAE’s largest jewellery retailers, explained, “We will be acting as tax collectors on behalf of the government.”
The jewellery sector is a key part of the UAE economy, and the government has made efforts to streamline business operations in the industry. The Ministry of Finance emphasized its ongoing commitment to supporting the precious metals and gemstones trading sector in the UAE.
Details of the New VAT Rule for Precious Metals and Stones
Under the new VAT system, suppliers who are VAT-registered will no longer be required to charge VAT on goods sold to VAT-registered business customers, such as wholesalers and retailers. Instead, the VAT-registered customer, such as a gold retailer, will be responsible for calculating and reporting VAT on their purchases in their VAT returns.
For example, on a Dh100 transaction, a bullion seller will not charge VAT to the retailer. This will be considered an “out of scope transaction.” The retailer will then report the Dh5 VAT liability in their return and simultaneously claim the same amount as VAT credit. This process ensures that there is no cash flow impact for the buyer, with the only effect being a debit and credit of Dh5 in the retailer’s VAT return.
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