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Everything You Need to Know About VAT on Gold in Dubai

Everything You Need to Know About VAT on Gold in Dubai

Get clarity on VAT on Gold in Dubai. Understand Dubai gold VAT regulations and how they impact gold investors, traders, and tourists.

Oct 25, 2024

Dubai's tax-free policies make it an attractive destination for investors, traders, and tourists to buy gold.

You’ve heard that right! It’s a popular saying.

But have you verified this famous saying with a credible source?

Do you know all about the VAT tax rates on gold in Dubai?

As a leading gold trading dealer in Dubai, we’re here to share everything you need to know about VAT on gold in Dubai.

We’ll answer your questions and share facts you might not have heard before:

  • Is there any VAT on gold in Dubai?
  • How much VAT on gold purchases in Dubai?
  • Are there any VAT exemptions on gold in Dubai?
  • What are the new Dubai gold VAT regulations?
  • How does VAT affect gold traders and tourists in Dubai?

So, let’s get started to help you make the right decisions and be prepared for the applicability of VAT on gold in Dubai.

Understanding VAT on Gold in Dubai

On January 1, 2018, the UAE introduced a Value Added Tax (VAT) with a standard rate of 5%, the lowest in the world.

According to Article (3) of the Federal Decree Law on VAT and Article (36) of the Executive Regulation on VAT, the supply or import of investment-grade precious metals is zero-rated.

This means that these transactions are subject to a zero percent tax on gold or VAT.

There is no import and export duty on raw gold materials, like gold bars and TT bars.

However, a 5% import duty applies to jewelry imported for sale in the country.

This value added tax on gold is important for helping the country diversify its income beyond oil, supporting a more sustainable economy.

Although Dubai’s VAT system is generally straightforward, businesses in the gold sector need to be aware of specific regulations that can affect their finances and operations.  

New VAT Regulations for Gold

In 2024, important updates were made to VAT regulations for gold.

Old Regulation: Before this change in VAT, when a company sold gold, it had to charge VAT after registering for VAT in the UAE. The buyer could only reclaim the UAE VAT after submitting a return. This system caused cash flow problems for businesses buying gold and diamonds.

New Regulation: The new rules are a relief for the industry. Gold bullion and jewelry with 99% purity or higher are exempt from VAT if certain conditions are met.

This exemption aims to improve the UAE’s position in the global gold market. However, it only applies to transactions between UAE-registered businesses, highlighting the need to follow legal and regulatory guidelines.

To benefit from VAT exemptions, businesses must keep careful records.

This includes invoices and certificates of authenticity. Proper documentation helps the Federal Tax Authority (FTA) validate VAT exemptions, apply reverse charge mechanisms, and ensure accurate VAT returns.

However, for commercial dealers in gold and diamond jewelry, the VAT law was amended by Cabinet Decision No. 25 of 2018.

This change introduced a reverse charge mechanism for the supply of gold, diamonds, and gold and diamond jewelry.

VAT Reverse Charge Mechanism on Supply of Gold Items

 A registered supplier of gold items, as defined in Article 1 of Cabinet Decision No. 25 of 2018, will not charge VAT on the supply if all the following conditions are met:

1/ The recipient is registered for VAT.

2/ The supplier obtains a written declaration from the recipient confirming that:

  • The recipient will use the gold items to produce or manufacture other gold items or to resell the gold items received.
  • The recipient is registered for VAT on the supply date.
  • The recipient is in charge of calculating the tax on the value of the goods they receive.

If these conditions are met, the recipient can apply the special reverse charge and is responsible for all tax obligations related to the supply.

The new VAT Public Clarification (VATP029), issued in June 2022, clarifies that the special reverse charge mechanism under Cabinet Decision No. 25 of 2018 applies only to goods, not related services. 

If a supplier offers both gold items and related services, they must determine whether it is a single composite supply of gold or multiple supplies of goods and services.

VAT Charges on Single Composite Supplies of Gold Items

When a supplier charges a single price for a gold item, which includes the making charge, it can be treated as a single composite supply. This happens if:

The supply has a main part (the gold item) and additional elements (the making service) that are closely related. It would be unnatural to separate them.

The same supplier provides both the gold item and the making service.

If these conditions are met, the entire supply of gold items, including the making service, can qualify for reverse charge treatment if all requirements of Cabinet Decision No. 25 are satisfied.

In this case, both the supplier and recipient must keep proper records. This includes a valid tax invoice that shows one total price for the gold item and states that the reverse charge mechanism is applied.

VAT Charges on Multiple Supplies of Gold Items

If the supplier charges separately for the gold items and the making service, this is treated as multiple supplies. In such cases, the supplier must handle each part separately and apply the correct tax rules to each one.

For multiple supplies, only the VAT on the gold items can be accounted for under the reverse charge mechanism, assuming all requirements of Cabinet Decision No. 25 are met.

The making service does not qualify for this special reverse charge. Therefore, the supplier must charge VAT on the making service if they are a taxable person.

The supplier must also issue valid tax invoices for the making service when it is treated as a separate supply. These invoices should include the issue date and the original date of supply.

If the recipient is VAT-registered, they can recover the input tax according to the standard recovery rules.

Correction Of Errors

The new Public Clarification states that if a supplier has applied the wrong VAT treatment, they must submit a voluntary disclosure.

How Does VAT Affect Gold Traders and Tourists in Dubai?

Impact on Traders

When a UAE-registered gold trader sells gold bullion (99% purity) to another business in the UAE, this transaction can be exempt from VAT. However, the buyer must meet all documentation requirements. This way, the buyer handles VAT through the reverse charge mechanism, meaning there is no cash outflow at the point of sale.

Impact on Tourists

In Dubai, a 5% VAT applies to the purchase of gold and related products. This is one of the lowest VAT rates worldwide.

VAT Refund Scheme for Tourists

One of the most attractive aspects of buying gold in Dubai is the VAT refund on gold in Dubai for tourists. Tourists are eligible to receive a refund on the 5% VAT paid on purchases, including gold jewelry.

To claim a refund, tourists must:

  • Purchase gold from a registered retailer participating in the VAT refund scheme.
  • Present valid receipts and travel documents.
  • Claim the refund at designated refund points in airports or other exit points.

This VAT refund system provides additional savings for tourists and further solidifies Dubai’s appeal as a destination for gold shopping.

Conclusion

The VAT regulations on gold in Dubai have brought much-needed relief to gold and diamond traders.

These rules help improve cash flow, especially for businesses dealing with high-value goods and longer payment terms.

For investors in gold and diamond trading, the updated VAT system makes it easier to manage their operations. This ensures a smoother business environment and helps stabilize the market.

Whether you're a trader, jeweler, or investor, understanding VAT on gold is key to navigating Dubai's thriving gold industry with confidence.

If you’re looking to buy gold in Dubai, consider Ashoka Global. 

As an international bullion house, we are among the leading gold trading dealers in the region. We specialize in a wide range of renowned bullion gold products.

With Ashoka Global, you can enjoy a seamless gold-buying experience.


Written By

Ashoka Global

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