The UAE Government announced updated VAT laws to promote the trade of jewelry and precious metals. By extending the Reverse Charge Mechanism to gold, silver, platinum, diamonds, pearls, and more, the government shows its commitment to fostering the sector’s expansion.
How does the reverse charge Mechanism work?
Normally, the supplier provides the items and collects VAT on behalf of the client, who then pays the government. Reverse charge methods involve the buyer or final consumer paying the government directly.
Why is reverse charging necessary?
When suppliers do not operate in the United Arab Emirates, the FTA finds it difficult to monitor their business dealings and guarantee VAT compliance. Recipients who live in the United Arab Emirates are therefore required to pay VAT on a reverse charge basis.
Cross-border transactions are the primary use for the Reverse Charge Method. It frees non-resident suppliers from having to register and account for VAT in the location of their buyers.
New Regulation Overview
The United Arab Emirates has implemented important new Value Added Tax (VAT) regulations concerning the trade of Precious Metals and Stones. The previous Cabinet Decision No. (25) of 2018 has been replaced by this new directive, which encompasses Gold, Silver, Palladium, Platinum, Pearls, Rubies, Sapphires, Emeralds, as well as both Natural and Synthetic Diamonds.
Cabinet Decision No. (127) of 2024, issued by the UAE Ministry of Finance, extends the VAT Reverse Charge Mechanism to transactions involving precious metals and stones between companies that are registered for VAT.
The law that has been revised encompasses the following provisions:
- Gold, Silver, Platinum and Palladium are considered precious metals.
- Including gemstones, Rubies, Sapphires, Emeralds, Synthetic and Natural Pearls, and Diamonds are considered precious stones.
- Valuables like Stones or Jewelry made or created from these precious metals.
How will it help the UAE?
In order to promote corporate expansion and prosperity in the United Arab Emirates, the new regulations lessen administrative burdens and establish a stronger regulatory framework.
Businesses that deal in Precious Metals and Stones stand to gain a great deal from this development. They will be able to concentrate on their primary business operations and more easily handle VAT laws.
According to a statement from the Ministry, this update demonstrates the UAE’s commitment to strengthening its regulatory environment, maintaining competitiveness, and fostering a flourishing Trading Industry.
Challenges of RCM
Increased compliance burden.
RCM incurs extra administrative expenses. As such, businesses are required to invest time and resources in understanding the intricacies of the system, as well as seek expert tax advice.
Difficult Documentation Requirements
These businesses who claim ITC are under RCM must have proper documentation. But when it comes to keeping complete records, it can be hard. It can also lead to penalties and interest in case of non-compliance due to intentional or inadvertent errors.”
Unicorn Global Solutions specializes in guiding businesses through the setup process, ensuring a smooth and efficient start for your precious metals and jewellery venture. We understand the unique challenges of the precious metals and jewellery industry and ensure your business complies with the latest regulations, empowering you to focus on crafting exceptional products and thriving in the UAE’s dynamic market.
With the introduction of new rules for precious metals and jewellery, compliance has never been more crucial. From documentation to regulatory approvals, we simplify the entire process, ensuring your business is set up for success in this competitive industry.
Contact us today via WhatsApp or phone to make your jewellery and precious metals business setup seamless and compliant!
