UAE outlines new tax rules for gold, diamond dealers, events companies

The UAE’s Federal Tax Authority (FTA) has outlined rules regulating gold, diamond and precious metals dealers and conference and events firms following a government decision to roll back value added tax on both industries.

The VAT reversed mechanism announced earlier this month applies to “precious metals such as gold, silver and platinum, used in trade in accordance with internationally accepted standards with a purity of 99 per cent or more” at the wholesale level but not at the retail level.

Read: UAE rolls back tax on gold, diamonds, precious metals

The FTA said the decision would improve cash flow among suppliers, reduce their tax burden and maintain the UAE’s status as a hub for gold, diamond and jewellery sector.

Only commercial transactions between registered dealers are covered by the reverse charge mechanism, according to the authority.

The recipient must be registered for VAT on the date of supply and declare in writing that he/she is registered, while also outlining that the transaction is to resell the supplies or use them to manufacture products.

“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 FTA said.

The change does not apply to zero-rated supplies used for exports including gold, diamond, gold jewellery and precious metals.

The recipient must include the supplies in their tax returns and is generally entitled to deduct the tax they incur on their inputs in the returns.

Non-registered businesses must still pay the 5 per cent tax on purchases of gold and diamonds.

Similarly the FTA said conferences and events companies must meet six conditions to recover VAT on services provided.

Read: UAE to refund VAT for conferences, events companies

Refunds can be claimed for two activities – the granting of the right to access, attend or participate in a conference and the granting of the right to occupy space for the purpose of conducting a conference or an exhibition.

“The supplier must request the refund on their tax return for the same tax period where the services were supplied; the amount claimed must be equal to or less than the tax imposed on the supply of services for exhibitions and conferences; the recipient of services must not have a permanent establishment or fixed establishment in the UAE; the recipient must not be registered or required to register for tax in the UAE; the recipient must not have paid tax to the supplier; and finally, the supplier must receive a written confirmation from the recipient corroborating the three previous conditions,” according to a statement.

The cabinet decision applies to any exhibition held under a permit from the competent local authority for a period not exceeding seven days.

The UAE introduced the 5 per cent value added tax on January 1 and it applies to most goods and services.

Read: UAE warns VAT payment deadline approaching