The UAE's Federal Tax Authority (FTA) has published a Value Added Tax (VAT) Public Clarification (VATP029) on the consideration received by gold jewelers for ‘making charges’, which are the charges relating to the service component (e.g., production and design) of their supplies of gold jewelry.
As per Cabinet Decision No. 25 of 2018, suppliers must not charge VAT on supplies of gold, diamonds, and any products where the principal component is gold or diamonds made to VAT-registered recipients in the UAE who intend to resell the goods or use them to produce or manufacture gold or diamond products as described above. Instead, the recipient must apply domestic reverse billing to such purchases. Cabinet decisions regulate which requirements must be met.
A new public statement states that where the supply of gold and its associated service components is a single compound supply ( the price of the gold itself and the service component are not separately charged or identified, the service component is inherent to the product, and the gold and service component are supplied by the same supplier ), Full consideration for the product is subject to domestic reverse billing.
Where the gold and the service component are multiple supplies (i.e. the supplier charges separate consideration for the gold and service component, or identifies the prices of the gold and service component separately), the supplier is required to charge VAT on the service component. The recipient would not apply the domestic reverse charge on the service component (i.e., the domestic reverse charge would only be applicable on the consideration relating to the gold).
The Cabinet Order's national counter-claim provisions apply to gold and diamond products, but the FTA states that VATP029 applies only to gold and products that consist primarily of gold. In addition, VATP029 does not apply to gold which is subject to zero-rating (e.g. exported or in the form of investment precious metal).