VAT on Gold in UAE

VAT Exemption on Gold in the UAE: Key Updates and Insights

The recent VAT policy changes in the UAE have significantly impacted the gold, diamond, and precious metals markets. To position the UAE as a global hub for gold trading, the government has introduced a VAT exemption for registered businesses trading gold within the country. This exemption reduces trading costs, making gold investments and transactions more appealing and aligning with the UAE’s broader economic goals.

This guide delves into the 2024 updates on VAT for gold in the UAE, outlining eligibility criteria, compliance requirements, and strategies to navigate the new regulatory environment effectively.

Overview of VAT on Gold in the UAE: Recent Updates

VAT (Value Added Tax) is generally applied at 5% on most goods and services in the UAE. However, the new VAT exemption specifically targets gold, platinum, and silver transactions between VAT-registered businesses. This initiative is designed to enhance trading volumes and establish the UAE as a leading destination for precious metals trading. It is crucial to note that the exemption is applicable only to business-to-business (B2B) transactions and not consumer purchases.

For businesses involved in gold trading, this exemption reduces operational costs and increases profitability, creating a competitive edge in the global market.

Key Advantages of the VAT Exemption on Gold Transactions

The removal of VAT on gold trading between registered businesses offers several benefits:

1. Increased Market Attractiveness: The exemption enhances the financial appeal of trading gold and other high-purity metals in the UAE.
2. Boosting Trade Volumes: By lowering transaction costs, the initiative encourages higher trading volumes and attracts global investors.
3. Supporting Economic Growth: This policy aligns with the UAE’s vision to solidify its position as a global leader in the precious metals market.

Eligibility for VAT Exemption on Gold Transactions

The VAT exemption applies under specific conditions:

1. High-Purity Metals: Only gold, silver, and platinum with a minimum purity of 99% are eligible.
2. Investment-Grade Products: Qualifying items include gold bars, coins, and bullion meeting the purity requirement.
3. VAT-Registered Businesses: Both parties in the transaction must be VAT-registered entities within the UAE.

Compliance and Documentation Requirements

To take advantage of the VAT exemption, businesses must meet strict compliance standards, including:

• Accurate Records: Maintain comprehensive transaction details, VAT invoices, and supporting documents.
• VAT Registration Proof: Both buyer and seller must provide proof of VAT registration.
• Adherence to UAE Tax Laws: Compliance with local tax regulations is mandatory to avoid penalties.

Broader Impact: VAT on Gold in Dubai and Beyond

The VAT exemption extends to the import and export of eligible high-purity gold, platinum, and silver products, fostering international trade. This policy strengthens the UAE’s competitive position in the global market, with Dubai emerging as a preferred hub for precious metals trading.

Practical Tips for Navigating the VAT Exemption Landscape

1. Stay Updated: Regularly consult official sources or tax advisors to remain informed about regulatory changes.
2. Maintain Compliance: Ensure all eligibility criteria are met and keep detailed documentation to secure the benefits of the VAT exemption.
3. Monitor Market Trends: Stay aware of market dynamics to make well-informed trading decisions.

Clarifications on VAT for Gold Jewellery and Making Charges

In 2022, the Federal Tax Authority (FTA) clarified the application of VAT on gold-making charges (VATP029). Businesses must distinguish between different types of supplies:

1. Single Composite Supply: If gold and making charges are combined into a single price, VAT applies to the total amount under the Reverse Charge Mechanism (RCM).
2. Multiple Supplies: When making charges are billed separately, the standard 5% VAT rate applies to those charges, while the gold component may fall under the RCM.

Reverse Charge Mechanism for Gold Transactions

The reverse charge mechanism, introduced under UAE Cabinet Decision No. 25 of 2018, applies to certain gold transactions under these conditions:

• Recipient Registration: The recipient must be VAT-registered on the transaction date.
• Intended Use: The gold must be used for production, manufacturing, or resale.
• Supplier Declaration: A declaration confirming the intended use and VAT registration status is required.

Under the reverse charge mechanism, the VAT responsibility shifts to the buyer, exempting the supplier from charging VAT.

Gold VAT in the UAE: What to Remember

• Applicability: The exemption applies only to high-purity gold (99%+) in B2B transactions involving VAT-registered entities.
• Compliance: Proper documentation and adherence to eligibility criteria are essential.
• Reverse Charge Mechanism: This applies only to gold items, not related services like making charges, unless treated as a single composite supply.

Summary

The UAE’s VAT exemption on gold transactions is a significant step toward establishing the country as a leading global hub for precious metals trading. By understanding the new regulations, eligibility requirements, and compliance obligations, businesses can maximise the benefits of the VAT exemption, reducing costs and driving growth in the gold trade sector.