- City Fajr Shuruq Duhr Asr Magrib Isha
- Dubai 04:52 06:05 12:13 15:36 18:15 19:28
The Federal Tax Authority, FTA, has asserted that the new Cabinet Decision issued to regulate Value Added Tax, VAT, incurred by gold and diamond dealers registered with the FTA seeks to establish the adequate legislative environment and infrastructure for the gold and diamonds sector to thrive.
The Decision also improves cash flow among registered suppliers of gold and diamonds, reduces their tax burden, helps them maintain smooth commercial operations, and cements the UAE’s status as a leading global hub for the gold, diamond and jewellery trade sector.
In a press statement issued today, the Authority noted that the decision only pertains to commercial transactions between registered dealers. As per the reverse charge mechanism, registered dealers shall not charge VAT when supplying another tax registered merchant with gold, diamonds or products where the principal component is of gold or diamonds, as long as the latter intends to resell such products, or use them to manufacture gold, diamonds or products where the principal component is of gold or diamonds. The registered recipient must include such supplies in his tax returns.
The Cabinet Decision maintains that Taxable Persons are generally entitled to deduct the tax they incur on their inputs in their tax returns; hence registered gold and diamonds recipients can recover the tax they incurred on their purchases in the same tax return in which they calculate their due taxes, thus maintaining liquidity and cash flow.
Non-registered businesses are still required to pay the five percent VAT on their purchases of gold and diamonds. The tax due will be stated in the tax invoice issued by the registered merchant, who, in turn, pays it forward to the FTA.
FTA Director-General, Khalid Ali Al Bustani, said, "This Decision from the Council of Ministers builds on the government’s efforts to facilitate the implementation of the tax system in the UAE, ensuring its consistency with the highest international standards. The Decision also supports the local gold and diamonds sector, and ensures its stability and competitiveness."
"The Federal Tax Authority seeks, first and foremost, to help the businesses comply with tax regulations and procedures in accordance with international best practice and transparency standards, as well as to maintain the UAE’s international standing and competitiveness. The Authority is also committed to ensuring businesses are fully aware of its role as their partner, who has their best interest – as well as that of consumers – at heart," he added.
Al Bustani explained that the reverse charge mechanism applies on supplies of gold and diamonds between registered businesses. This includes three categories of supplies - gold, diamonds or products where the principal component is of gold or diamonds, such as jewellery. This procedure does not apply to zero-rated supplies, namely exports of gold, diamonds or products where the principal component is of gold or diamonds; as well as the supply of investment grade precious metals.
The FTA outlined that four conditions have to be met for supplies to be eligible for the reverse charge mechanism on gold and diamonds. The conditions include that the recipient must be registered for VAT with the FTA on the date of supply; the purchase must be made with the intention to resell the supplies, or use them to manufacture or products where the principal component is of gold or diamonds; the recipient must declare to the supplier (in writing) that he/she is registered with the FTA at the date of supply and that his/her intention from purchasing the supplies is to resell them or to produce or manufacture products where the principal component is of gold or diamonds; and finally, the recipient must state his/her intention to account for the tax on this supply in his/her tax return.
The Federal Tax Authority has published a template that the registered recipient can provide the supplier to ensure the above four conditions are met. The Authority also called on the supplier to verify the recipient’s registration status using the Tax Registration Number, TRN, Verification tool available on the FTA website.
The Federal Tax Authority invites all parties working in the field of gold or diamonds trading to refer to FTA channels of communication for details of the decision.
Follow Emirates 24|7 on Google News.