New VAT mechanism to facilitate gold and diamond trade in UAE
The UAE cabinet announced the amendment of VAT at the wholesale level for gold, diamonds & jewellery.
As informed by the leading media and government sources (Department of Finance), the UAE cabinet announced on May 1st 2018 the amendment of VAT at the wholesale level for gold, diamonds & jewellery.
For the wholesale jewellery trade (all B2B transactions), VAT will be charged on reverse charge basis. This means that the buyer and seller will both book VAT as being collected and paid at the same time. These entries will cancel any liability to pay any VAT. The VAT will only be a book entry, no payment or collection will be required. However, the transactions (including VAT) must be recorded at every stage, and proper books of accounts are to be maintained. Under the reverse charge mechanism, the seller passes the obligation to collect the VAT onto the buyer hence, no actual payment of VAT at the wholesale level. There will only be documented entries of VAT in the books of both buyer and seller and no payment of the VAT will be required at any stages of wholesale.
Retail/B2C: as of now, retail jewellery trade (all B2C transactions) will attract 5% VAT; hence retailers may continue collecting the VAT from consumers It is to be noted that these changes have been made with immediate effect as per the UAE cabinet decision.
Source: Dubai Gold and Jewellery Group Trade Circular