The UAE Cabinet has reportedly rolled back the 5 per cent Value Added Tax (VAT) on gold and diamond sectors at the wholesale level. Retailers will continue to impose 5 per cent on all jewellery transactions taking place at their shops.

The removal of VAT on precious metals trade at the business-to-business level comes into immediate effect. The UAE Cabinet adopted the law to introduce a “VAT reversed charge” mechanism for investors in gold, diamond and precious metals.

According to state news agency WAM, the step aims to allow investors in gold, diamond and precious metals to conduct business with ease and will contribute to stabilising the gold and diamond sector in the UAE as well as stimulating investment in the sector.

Doing so will “contribute to stabilising the gold and diamond sector in the UAE as well as stimulating investment in this sector”, a statement said following the Cabinet decision.

Under the earlier VAT rules, gold investment bars and loose diamond stones were “zero rated”. But all other transactions, wholesale and retail, came under the 5 per cent VAT regime.

The said VAT rollback - even though a partial one – is expected to be significant as Dubai is known for gold jewellery. The 5 per cent VAT plus the 5 per cent import duty had reportedly affected much of the price advantages jewellers had compared to what they were in India and the rest of the subcontinent.

Source: Arabian Business & Gulf News