The UAE Cabinet has adopted a law to introduce the VAT Reversed Charge mechanism for investors in gold, diamond and precious metals, meaning that while there will only be documented entries of five per cent VAT in the books of both buyers and sellers, there will be no payment fee.
“We welcome the move of VAT exemption by the UAE cabinet on the gold and diamond trade in the B2B market. One of the major tourist attractions of the UAE is the jewellery sector that generates billions of dollars in revenue every year and by exempting tax, the benefits to the business and the overall economy are immense. I hope that the UAE Government extends a similar exemption to the retail sector which will not only benefit the jewellery retailers but also tourists and consumers,” said Firoz Merchant, Founder & Chairman of Pure Gold Group.
This provision will allow investors in gold, diamond and precious metals to conduct business with ease and will contribute to stabilising the gold and diamond sector in the UAE as well as stimulating investment in the sector, according to a report by state news agency WAM, adding that the law includes investments in precious metals such as gold, silver and platinum, used in trade in accordance with internationally accepted standards with a purity of 99 percent or more.
The decision came after interest in gold jewellery in the UAE dropped substantially in the first quarter, with wholesale sales in Dubai fell 50 to 60 per cent in Q1 from a year earlier following the implementation of VAT on 1 January, said Chandu Siroya, Vice Chairman of the Industry Association Dubai Gold & Jewellery Group, it was reported.
Gold demand in the UAE hasn’t recovered since the 2008 global financial crisis and dropped to a 20-year low in 2017, according to date provided by the World Gold Council.