Proposed changes in the VAT implementation mechanism for the gold & jewellery sector in Dubai

According to the Dubai Gold & Jewellery Group they have been informed by DMCC that the sector may receive the below mentioned special considerations for VAT and these changes in the implementation could be in effect in a few months’ time:

1. Wholesale/B2B: for the wholesale jewellery trade (all B2B transactions), VAT will be charged with 5% on full value but to be implemented via the ‘Reverse Charge Mechanism’, hence  no actual payment of VAT on B2B transactions. Under the Reverse Charge Mechanism, there will only be documented entries of 5% VAT in the books of both buyer and seller and no payment of the 5% VAT will be required.

2. Retail/B2C: for retail jewellery trade (all B2C transactions) will attract 5% VAT only on making charges/value additions and not on the gold value.

3. Designated Freezone: Almas Tower will be declared a Designated  Zone for VAT. The intention is to implement it with a digital fencing rather than physical fencing. This will enable Almas Tower to obtain all concessions/special treatments that are stipulated for the Designated Freezone as per the Executive Regulations.

It is to be noted that these changes have been agreed to at the highest levels of the Executive Council in Dubai; the Federal Authority approval is expected shortly. The time frame expected to reflect the above changes in the VAT implementation is about 3 months. The Dubai Gold & Jewellery Group hopes to receive a formal communication on this soon.