As per ‘cabinet decision no. 25 of 2018 on the mechanism of applying value added tax on gold and diamonds between registrants in the state’ gold and diamond jewellery traders were subject to special vat treatment subject to special conditions.
Conditions for special treatment:
- Supply of gold, diamonds and any products where the principal component is gold or diamonds, only.
- Supply is not an export of such goods or supply of investment precious metals
- A supplier makes a supply of goods to a registrant recipient in the state, and the recipient intends to either resell such goods or use them to produce or manufacture any of the goods.
- The supplier obtains the written declaration for the same from the recipient.
- The supplier shall not be liable for calculating the tax in relation to the supply of the goods and shall not include it in his tax return, in cases where the registrant recipient declares in writing the following:
- The acquisition of the goods is for the purpose of resale or use to produce or manufacture any of the goods
- The recipient is registered on the date of supply.
- The recipient shall calculate tax on the value of the goods supplied to him.
- The recipient of the goods shall calculate the tax on the value of the goods supplied to him and shall be responsible for all applicable tax obligations related to the supply and for calculating the due tax in respect of such supplies.
- As mentioned above, the special treatment is applicable only on the supply of ‘gold items’ and not services supplied separately at the time of supply of such goods, for instance making charges. therefore, the public clarification vatp029 has been issued by fta to clarify the vat treatment in such scenarios.
Where the supplier supplies gold items and making services, the supplier needs to consider whether the supply constitutes a single composite supply of a gold item or multiple supplies consisting of both goods and services.
Single Composite Supply:
If the supplier charges a single price for the gold item, including the making charge on gold items.
However, where the taxable persons supplying gold jewelry reflect the gold price and making charges separately on the tax invoice issued for the supply, the supplier is required to impose vat on the service component.
Likewise, proper tax invoices will be issued. therefore, if errors have been made previously, a voluntary disclosure should be filed.
AMCA, being a top audit and accounting firm in uae, has a team of fta-approved tax agents to help you with your vat queries and to guide you regarding correct tax treatment so you can avoid any inconvenience and make sure your filing is done efficiently.
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