Dubai’s New VAT Rules for Gold and Jewellery

Dubai, as part of the UAE, has implemented new VAT rules for gold and jewellery effective January 1, 2025. The key change is the introduction of the reverse charge mechanism for VAT-registered businesses trading in precious metals, gemstones, and jewellery where the value of precious components dominates.

Here’s a breakdown of the new rules:

What is the Reverse Charge Mechanism?

• Traditionally, the seller charges VAT and remits it to the government.
• Under the reverse charge mechanism, the buyer is responsible for calculating and paying the VAT to the government.
• The seller issues a VAT invoice with no VAT charged, but includes both parties’ Tax Registration Numbers (TRNs).

Who is Affected?

• VAT-registered businesses in the UAE that trade in:
  • Gold, silver, platinum, palladium
  • Gemstones (natural or manufactured diamonds, pearls, rubies, sapphires, emeralds)
  • Jewellery where the value of precious components exceeds other materials
• Consumers are not directly affected. They will continue to pay 5% VAT on their purchases, as before.

How Does it Work?

1. Supplier: Issues a VAT invoice with no VAT charged, but includes both parties’ TRNs.
2. Buyer:
   • Calculates the VAT amount (5% of the transaction value).
   • Declares this VAT in their VAT return.
   • Remits the VAT to the Federal Tax Authority (FTA).

Benefits of the New Rules:

• Simplified compliance for suppliers.
• Improved cash flow for businesses.
• Reduced administrative burden on the gold and jewellery sector.
• Enhanced competitiveness of the UAE as a global trading hub for precious metals and gemstones.

Key Points for Consumers:

• The price of gold and jewellery remains unchanged for consumers.
• Consumers will continue to pay 5% VAT on their purchases.
• Tax invoices must clearly display the VAT amount.

Important Notes:

• Businesses must be VAT-registered with the FTA to utilize the reverse charge mechanism.
• Proper documentation, including tax invoices and certificates of authenticity (where applicable), is crucial for compliance.

For further information, you can refer to these resources:

• UAE Ministry of Finance: https://www.mof.gov.ae/en/
• Federal Tax Authority: https://www.tax.gov.ae/en/

By implementing these new VAT rules, Dubai aims to support the growth and development of its gold and jewellery sector while aligning with international best practices.

Dubai’s new VAT rules for gold and jewellery do not impose extra costs on shoppers. They will continue to pay the existing 5% VAT, which tourists can reclaim upon exiting the UAE. Retailers assure customers that prices remain unchanged despite the introduction of a ‘Reverse Charge Mechanism’ for VAT registered businesses.

This new regulation simplifies cash flow and compliance for jewelers, who will now act as tax collectors. Bullion dealers must comply with VAT law and obtain a valid TRN for resale. The changes aim to support the UAE’s gold and jewellery sector, crucial to the economy. Under the new rules, VAT-registered suppliers no longer charge VAT on sales to other VAT-registered businesses; instead, the buyers must calculate and declare VAT on their purchases.