The United Arab Emirates (UAE) Ministry of Finance has announced amendments to the VAT law, extending the application of the reverse charge mechanism to precious metals, stones and jewellery.
Under the new provisions, VAT-registered businesses supplying goods will no longer be required to pay VAT or collect it from other VAT-registered customers. The onus is now on the buyer to calculate, declare and report the VAT in their tax returns.
The updated rules apply to gold, silver, palladium and platinum, diamonds (natural or lab-grown), pearls, rubies, sapphires and emeralds, as well as jewellery made of these precious metals and stones. However, the value of the precious metals or stones must exceed the value of the other components.
As noted, the wider application of the reverse charge mechanism is aimed at stimulating the precious metals and stones trading sector by simplifying VAT compliance for businesses. The Ministry of Finance emphasized that this decision reflects the government’s commitment to supporting the growth of the sector in line with global best practices.
The reverse charge mechanism places the responsibility of the buyer, not the seller, for reporting and payments to the government. The seller does not charge VAT on the sale, provided that the buyer falls under the mechanism.
The updated rules are designed to reduce the administrative burden and create a more robust regulatory framework to facilitate the growth and prosperity of businesses in the UAE, and provide significant benefits to businesses trading in precious metals and stones. This will make it easier for them to navigate VAT regulations and allow them to focus on their core business.
Hélène Tarin, Editor-in-Chief of the Asian Bureau, Rough&Polished
