VAT Public Clarification On Gold-Making Charge in UAE

Sreekanth Karicheri, Tax Analyst

image

HLB HAMT - Accounting Firm in UAE

Phone:- +971 4 327 7775
Mobile:- +971 50 677 5860
WhatsApp:- +971 56 219 1607
Email:- dubai@hlbhamt.com

    Schedule a Consultation




    Gold-Making Charge

    • The Public Clarification provides guidance on the application of the VAT legislation with regards to making charges received by gold jewellers.
    • This clarification only applies to gold and products consisting mostly of gold, that do not qualify for zero-rating.
    • Tax registrants supplying gold are not required to impose VAT on the supply of gold and products which mostly consist of gold, if the conditions of Cabinet Decision No. 25 of 2018 are met.
    • The reverse charge mechanism only applies to the supply of goods by the registrant.
    • If the supplier charges separate considerations for the gold and the making service or reflects the price of these components separately, the supplier is required to impose VAT on the service component.

    Practical example

    ABC Gold LLC a VAT-registered entity in the UAE mainland supplied gold to another VAT-registered entity XYZ Jewelry LLC in the mainland. The invoice split is as follows:

    1. Gold items: AED 100,000/-
    2. Making charges: AED 6,000/-

    The accountant of ABC Gold LLC is of the opinion that the company is not required to charge VAT on entire consideration i.e., AED 106,000/- as long as the customer provides a declaration as per Cabinet Decision No. 25 of 2018.

    Whether the argument of the accountant is correct?

    Solution: Tax registrants supplying Gold Items, shall not impose VAT on the supply if the following requirements are met:

    • The recipient is registered for VAT
    • The supplier retains a written declaration from the recipient confirming all of the following:
      • The recipient will use the Gold Items to produce or manufacture other Gold Items, or to
        re-sell the Gold Items received.
      • The recipient is registered for VAT on the date of supply.
      • The recipient shall account for the VAT on the Gold Items supplied to him.

    It is important to note that the special reverse charge mechanism under Cabinet Decision No. 25 only applies to goods and not to services. 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.

    If the supplier charges separately for the Gold Items and for the making service, or where the price of these components is separately reflected, the supplier is regarded as making multiple supplies. In these cases, the supplier is required to treat each component as a separate supply and apply the correct tax treatment to each separate component.

    In instances of multiple supplies, only the VAT related to the Gold Items may be accounted for under the reverse charge mechanism, provided all the requirements of Cabinet Decision No. 25 are met.

    The supply of the making services does not fall under the special reverse charge mechanism under Cabinet Decision No. 25 in cases of multiple supplies. Hence, the supplier is required to account for VAT on this service if the supplier is a taxable person.

    In the present case, ABC Gold LLC can supply the gold worth AED 100,000/- to XYZ Jewellery LLC under a special reverse charge mechanism if they provide the declaration under Cabinet Decision 25 of 2018. But the making charges worth AED 6,000/- will attract VAT at standard rate.

    *Important Note: Cabinet Decision No. (25) of 2018 on the Mechanism of Applying Value Added Tax on Gold and Diamonds between Registrants in the State was implemented in 01/06/2018. Therefore, the tax registrants should consider the applicability of this public clarification with effect from this date.

    Any questions or queries on this, please revert to tax@hlbhamt.com

     

    Would you like to rate us on Google?         

     

    Varun R Chandra
    Varun R Chandra
    07:38 25 Apr 21
    HLB Hamt is highly recommended! They have the quality of services that would satisfy your needs. I'm glad I found them.
    Giuseppe Assi
    Giuseppe Assi
    06:20 31 Jan 21
    I HAD A GOOD EXPERIENCE WITH HLB HAMT DUBAI. THEY HAVE A VERY PROFESSIONAL TEAM, GOOD QUALITY OF SERVICES, GOOD VALUE... FOR PRICE.I RECOMMEND THIS COMPANY.read more
    Mohamed Sheriff
    Mohamed Sheriff
    16:16 28 Jun 20
    Experience with HLB Hamt in audit experience is great pleasure. They deploy well qualified accounts team for audits.... And the amount of checking they perform give the management of the company confidence that internal controls are well in place. We are glad to see they have high standard of audit practices.read more
    218141 JOSEPH THOMAS
    218141 JOSEPH THOMAS
    16:20 23 Jun 20
    Professionally managed firm with commitment to the engagements taken. My company and its group are assigning our... requirements for last 12 years to HLB and we don’t have any negative remarks on any assignments.read more
    PMI
    PMI
    07:14 23 Jun 20
    In my opinion, HLB Hamt is one of the best professional firms in UAE after big4. Excellent client service, professional... and competent staff and timely delivery are their strength. Over the years they have developed the infrastructure and skill set to handle multiple verticals ie, audit, tax services, consulting, IT support etc.Wishing HLB Hamt team all the very best.read more
    RAVI CHOKSI
    RAVI CHOKSI
    08:28 21 Jun 20
    Thank you Team HLB hamt...Your internal auditing team put the good amount of time and inputs in helping the... organisation making considerable improvements throughout the organisational working structure and helps in building the better business.Thanks.read more
    Maharajan Subramaniam
    Maharajan Subramaniam
    18:17 06 Jun 20
    High-Performing IT Teams, I'm impressed with the knowledge level of their deputed staff, audit procedures, and... checklist adopted. Mr. Vimal especially understand the requirement and provide solution not only technical feasibility and also considered budgeting. We’re confident in their abilities.read more
    Mohammed L
    Mohammed L
    08:07 05 Jun 20
    We have been working closely with them on payroll services for quite sometime.They provide very professional... services,experts in domain and excellent support. Would recommend them.Cheers.read more
    ROY ROSHAN VIVIAN
    ROY ROSHAN VIVIAN
    06:32 04 Jun 20
    Very professional team. Vimal has always given us good solution advice for various Software and IT Infra projects. We... are very Extremely satisfied working with him and his team. Wishing them success.read more
    Basil Daniells
    Basil Daniells
    05:55 03 Jun 20
    I have worked with HLB as a partner of Sage for about 2 years, they were dedicated to the success of the partnership... and kept aligned with the business plan that was agreed between our two companies. They are always ready to go the extra mile for a customer and don’t shy away from challenging circumstances. Keep up the good work and wish you all the success in the future.read more
    Amar Kashyap
    Amar Kashyap
    19:28 02 Jun 20
    Team of well qualified and organised professionals. Their reports are not based on numbers first they will understand... their client and their business. They are highly recommended and trust worthy.read more
    Radz de Jesus
    Radz de Jesus
    16:03 02 Jun 20
    We're glad to have found HLB Hamt to conduct the IT audit and risk assessment for our organization. We have learned a... lot from their team during that first project. And since then, we've continued to be in touch with them. Mr. Vimal especially is very good at presenting technical concepts in simple yet interesting ways that non-IT and business people alike would easily catch. We are very happy with the professionalism and quality of service they provide. They leave their clients nothing short of satisfied. Highly recommended.read more
    Next Reviews
    js_loader

    Get in touch

    Whatever your question our team will point you in the right direction

    Start the conversation
    Get in touch
    x
    x

    Share to:

    Copy link:

    Copied to clipboard Copy