The Ministry of Finance announced on Friday that it is expanding the application of the reverse charge mechanism to include precious metals and stones among VAT-registered businesses in the UAE.

The Ministry announced the issuance of Cabinet Decision No. (127) of 2024, expanding the application of the reverse charge mechanism. This, in turn, repeals the earlier Cabinet Decision No. (25) of 2018 on the application of VAT on gold and diamonds among registered dealers.

Under the new provisions, VAT-registered businesses supplying goods covered by this decision no longer need to charge or collect VAT from other VAT-registered customers. Instead, the responsibility shifts to the buyer, who must calculate, declare, and report the VAT in their tax returns.

The updated rules apply to:

Precious metals: Gold, silver, palladium, and platinum.

Precious stones: Diamonds (natural and manufactured), pearls, rubies, sapphires, and emeralds.

Jewellery: Items made with these precious metals or stones.

This is provided that the value of the precious metals or stones exceeds the value of other components.

This broader application of the reverse charge mechanism aims to boost the precious metals and stones trading sector by simplifying VAT compliance for businesses. The Ministry of Finance highlighted that this decision reflects the government’s commitment to supporting the sector's growth while aligning with global best practices.

What is the reverse charge mechanism?

It is a VAT rule where the buyer, not the seller, is responsible for reporting and paying the government. The seller does not charge VAT on the sale but must ensure the buyer meets the conditions for this mechanism.

How will it help the UAE?

The updated rules reduce administrative burdens and create a more robust regulatory framework to foster business growth and prosperity in the UAE.

This change offers a significant advantage for businesses trading in precious metals and stones. It will make it easier for them to navigate VAT regulations and focus on their core operations.

This update underscores the UAE’s dedication to enhancing its regulatory environment, ensuring competitiveness, and supporting a thriving trading sector, the Ministry said in a statement.

This expansion, under the conditions outlined in Cabinet Decision No. (127) of 2024 aims to significantly benefit the country's precious metals and precious stones trading sector.

The Ministry emphasised that the new decision is a step in the right direction, reflecting the government's ongoing commitment to supporting the country's precious metals and gemstones trading sector.

With these improvements to VAT regulations, the Ministry of Finance said it reaffirms its commitment to creating a strong regulatory framework that supports business growth and prosperity while keeping abreast of global best practices.

Courtesy: Gulf News