Corporations buying gold and diamonds are compelled to remit VAT at the moment of the sale in the VAT system. The FTA has opted to use the reverse charge method on the acquisition of diamonds and gold by listed firms after realizing these problems.
What Are the New VAT Changes in the Gold and Diamond Sector?
The VAT approach of craftsmanship solutions provided by Signatories in the Region while selling gold and diamonds has changed, according to a statement from the Finance Ministry (MOF).
The settlement states that gold, diamonds and the certain items whose key part is gold or gems, that either may encompass workmanship solutions straightforwardly linked to the stockpile of these goods will be a backup option for the interpretation of “commodities” detailed in Article (1) of Cabinet Inference No. (25) of 2018 on the Framework of Assigning Value Added Tax on Gold and Diamonds among Enrollees in the Union. It should be noted that the duration specified in the aforementioned Ministerial Decree No. (25) of 2018 (commodities) will be taken back beginning on Jan 1, 2023. This change will take effect from June 1, 2018, through Dec 31, 2022. However, FTA will make further clarification to the taxpayers about the supposed changes.
Moreover, the introduction of a reverse charge mechanism has set up new grounds for investors in gold, diamond, and other precious metals. UAE has eliminated the 5% value added tax over these items where you get enrolled for it but do not pay 5% VAT. The main goal behind this step is to stabilize the sector of diamond and gold. It will encourage investment and reduce pressure on investors in the country. It’s important to note that wholesale relief will only be covered by VAT relief. In other words, retailers will still be exposed to a 5% value added tax on transactions of Jewelry items.
Read More : VAT Refunds For Businesses In UAE
Value Added Tax on Diamond and Gold
A company is not obligated to impose VAT on the sale of gold and diamonds made to a VAT-registered individual who is buying the items to resell them or to create or produce products made of gold and diamonds. Rather, the receiver is responsible for keeping track of the VAT owed on the sale and declaring it in their Tax returns. If the sale satisfies the requirements for input VAT collection, the receiver may also claim a VAT refund on the sale within the subsequent VAT refund.
New VAT Regulations for Gold and Diamonds
Formerly, whenever a company enrolled for VAT sold gold or diamonds to some other registrar, the seller was required to charge the consumer VAT on the sale (after VAT registration in UAE). Only when a VAT return was submitted by the consumer, it was an input tax on the sale liable for reimbursement. As a result, established enterprises that bought gold and diamonds experienced cash flow challenges.
Therefore, the industry will undoubtedly be relieved by the adjustment in the application of VAT on the trade of gold and diamonds between licensed enterprises. For firms buying gold and diamonds, the early implementation of VAT about forward charge, in which VAT is gathered by the provider at the time of issuance, resulted in cash shortages. It’s been modified to a reversal charge, in which the recipients can declare the VAT payable on the sale and reclaim input taxation on the supplier in a similar VAT return, and the seller will not retrieve VAT on the sale. This guarantees that there won’t actually be a cash crunch due to VAT for companies buying gold and diamonds.
How Does the Vat Regime Operate?
UAE VAT regime is a consumer taxation with the option to use or offset the input tax rebate, or tax paid on inputs, towards the VAT liabilities, or taxes paid on sales. Like other UAE industry sectors, the gold and diamond industries are required to file VAT registration.
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Read More : Applicability Of VAT On Commercial Property And Real Estate In UAE
