Government

The UAE Ministry of Finance has announced significant updates to its Value Added Tax (VAT) regulations, introducing new provisions under Cabinet Decision No. (127) of 2024. The changes, aimed at bolstering the country’s precious metals and jewellery trade, expand the application of the reverse charge mechanism to include a wider range of precious metals, stones, and jewellery.

This update replaces Cabinet Decision No. (25) of 2018, which previously focused only on VAT for gold and diamonds among registered dealers.

Key Changes in the VAT Law

1. Scope of the Reverse Charge Mechanism Expanded:
   The updated rules now cover:

   • Precious metals: Gold, silver, palladium, and platinum.
   • Precious stones: Natural and manufactured diamonds, pearls, rubies, sapphires, and emeralds.
   • Jewellery: Items primarily composed of these precious metals or stones.

   To qualify, the value of the precious components must exceed other materials used in the product.

2. How the Reverse Charge Mechanism Works:

   • VAT-registered businesses supplying covered goods no longer need to charge or collect VAT from other VAT-registered customers.
   • Instead, the buyer calculates, declares, and reports the VAT in their tax returns.

3. Administrative Simplification:
   The updated rules aim to reduce administrative burdens for businesses, making it easier to comply with VAT requirements.

Supporting Growth in the Precious Metals Sector

The Ministry of Finance stated that these changes align with global best practices and are designed to enhance the UAE’s regulatory framework, ensuring a competitive edge for the country’s trading sector.

“This decision reflects the government’s commitment to supporting the sector’s growth while fostering a robust and efficient regulatory environment,” the Ministry emphasized.

Benefits of the Update

• Ease of Compliance: Businesses can focus on their core operations without the added complexity of charging and collecting VAT.
• Sectoral Growth: Simplifying VAT regulations is expected to encourage further investment and trade in the precious metals and stones industry.
• Global Alignment: The changes reinforce the UAE’s reputation as a leading hub for precious metals and jewellery trade.

This development underscores the UAE’s proactive approach to adapting its tax regulations to meet evolving market demands while supporting economic prosperity.

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