Understanding VAT on Gold in the UAE

Apeiron Accounting has expert accountants and tax consultants.

Gold has traditionally been an important asset in the UAE. Due to its involvement in gold trading, the UAE has a prosperous market for gold bullion, jewelry and similar goods. Yet, it is important for both companies and people who trade gold to know how VAT works. Here at Apeiron Accounting, we clarify the VAT for gold in the UAE to ensure you make the right decisions.

What is the purpose of VAT?

Value Added Tax (VAT) applies to the purchase and use of goods and services. Since January 1, 2018, all sales in the UAE are taxed at the standard rate of 5%. Even though most goods and services are subject to this rate, gold has special regulations because investment-grade gold is treated differently than gold used for jewelry and other purposes.

Types of Gold and VAT Applicability

1. Investment-Grade Gold

Bars, ingots or wafers made from gold with at least 99% purity are called investment-grade gold and can be found in the bullion market.

There is no VAT applied to this service because the rate is zero (Zero-rated).

Conditions:

• The gold should be greater than 99% pure.
• It should be able to move in global bullion markets.
• A transaction must meet the documentation requirements as listed by the Federal Tax Authority (FTA).

Therefore, if you sell or purchase investment-grade gold, VAT will be payable, but the transaction should be reported as it is an international deal.

2. Gold Jewelry

While gold jewelry and pieces of art are valued differently.

• The VAT rate here is 5% (For most goods and services)

Applies to:

• It is made when gold is mixed with other metals.
• Precious jewelry, irrespective of how pure it is.
• Dealing with customers who purchase for themselves.

Thus, if you purchase any gold rings, necklaces or various accessories, VAT will be applied at the regular rate.

VAT Reverse Charge Mechanism on Gold

Under certain circumstances, the reverse charge mechanism (RCM) is used for B2B gold business in the UAE. It means that the recipient is responsible for sorting out their VAT payment.

Applicable When:

• The supply is carried out between businesses registered with the tax authority in the UAE.
• Among the assets offered is gold or goods mostly created from gold.
• The buyer means to sell or use the products for making other goods.

Benefits:

• Supports the cash flow of businesses.
• No need to pay VAT upon the first sale.
• Ensures that gold in the UAE is bought and sold transparently.

Important:

Businesses should check that their documents and VAT returns are accurate to avoid being charged late fees.

VAT Compliance Requirements

Gold sector business owners need to ensure that they handle VAT properly.

• VAT Registration: Must be done if your annual taxable supplies are more than AED 375,000.
• Record Keeping: Keep documents related to gold purity, your sales and VAT for over 5 years.
• VAT Invoices: Include on the invoice whether it was billed as zero-rated, standard-rated or liable to the reverse charge.
• Filing VAT Returns: The task must be completed quarterly or monthly for registered businesses. 

Common Mistakes to Avoid

• Assuming all gold is zero-rated – Only investment-grade gold qualifies.
• Incorrectly applying RCM – Reverse charge applies only to B2B supplies in specific conditions.
• Missing documentation – You must maintain invoices, gold purity certificates, and VAT treatment justification.
• Late registration or returns – Penalties for non-compliance can be substantial.

How Apeiron Accounting Can Help 

Apeiron Accounting specializes in VAT advisory services for businesses in the precious metals and jewelry industries. Among the services we provide are:

• Ensure your business follows the rules and processes for VAT.
• Guidance on how to use the reverse charge mechanism.
• Ensure that recorded sounds are audited and improved when needed.
• Still getting help with VAT filings and any disagreements.

We make it easy for you to understand all applicable rules, stick to them and prevent paying expensive fees in the UAE gold market.

Final Thoughts

Gold is dealt with differently under VAT in the UAE and telling investment-grade gold apart from other gold products is essential. No matter if you are buying, selling or handling gold as a trade input, VAT management will ensure you are compliant with the law and pay only the required tax.

Whatever your gold business involves, consult Apeiron Accounting for support in ensuring you are compliant with VAT.