Skip links
        
  • Insights

call us now+971 4 3319501

MCA UAE
Published in: Taxation

Indirect Tax Alert: Reverse Charge on Precious Metals and Stones

Author
Published on:

Based on Federal Tax Authority (FTA) Public Clarification VATP043

In February 2025, the UAE Federal Tax Authority (FTA) issued Public Clarification VATP043, replacing VATP032, to provide updated guidance on the Reverse Charge Mechanism (RCM). The clarification outlines how RCM applies to supplies of precious metals, stones, and related jewelry between VAT-registered persons in the UAE, aiming to enhance clarity and ensure consistent VAT treatment in the sector.

Key Highlights

  • Scope of Application: Applies to B2B domestic supplies between VAT-registered entities in the UAE.
  • Covered Items
    • Precious metals: gold, silver, platinum, and palladium
    • Precious stones: natural and synthetic diamonds, pearls, rubies, sapphires, and emeralds
  • Jewelry Inclusion: Applies to jewelry made primarily from precious metals/stones , where their component value dominates.
  • Making Services: Making charges/services are covered only if they form part of a single composite supply with the items.

Scope & Conditions for RCM Application

Goods Covered

  • Category A
    • Precious Metals: Gold, Silver, Palladium, Platinum.
  • Category B
    • Precious Stones: Diamonds (natural/ synthetic), Pearls, Rubies, Sapphires, Emeralds.
  • Category C
    • Jewelry: Jewelry made from category A & B, where these components form more than 50% of value.

Conditions for RCM Application

Where all criteria are satisfied, the supplier does not account for VAT, and the recipient is obliged to self-account under RCM.

  • Recipient is registered for VAT in the UAE.
  • Goods are intended for resale or production of further taxable supplies.
  • Written declaration from the recipient is submitted prior to supply, confirming both VAT registration and intended use.
  • Supplier must validate TRN and retain documentation evidencing compliance.

Exclusions

RCM is not applicable under the following conditions:

  1. Recipient is not VAT-registered in the UAE.
  2. Declaration is not furnished or not provided in a timely manner.
  3. Goods are exported (zero-rated under Article 45 of the VAT Law).
  4. Transaction occurs before 26 February 2025, excluding gold and diamonds previously governed by Decision No. 25 of 2018.
  5. Supply takes place in or is transferred to a Designated Zone.

 

Consequences of Non-Compliance:

  • Supplier becomes liable to charge and remit VAT.
  • Buyer loses eligibility to recover input VAT, even with tax invoice.
  • Potential for regulatory scrutiny, penalties, and audit exposure.

Treatment of Making Charges and Composite Supplies

Making Charges (i.e., labor for manufacturing or assembling jewelry) may form part of a single composite supply if all of the following are met:

  • The primary supply is the precious goods.
  • Making charges are incidental and inseparable.
  • A single, consolidated price is charged.
  • Supply is executed by the same VAT-registered supplier.
Implications
  • If composite: RCM applies to the total value.
  • If separate: Goods may be RCM-eligible; services are standard-rated.
Required Documentation
  • Compliant Tax Invoice detailing single consideration.
  • Statement indicating RCM application.
  • Document any evidence retention for both parties.

The classification between composite and multiple supplies is critical. Misclassification may lead to incorrect VAT treatment and compliance risk.

Strategic Considerations and Compliance Framework

Supplier Obligations
  • Confirm buyer’s VAT status via FTA’s TRN tool.
  • Collect, verify, and retain recipient declarations.
  • Ensure goods meet “precious” material threshold.
  • Issue Article 59-compliant tax invoices.
Recipient Obligations
  • Maintain valid VAT registration.
  • Submit required declarations before supply.
  • Accurately account for RCM VAT.

Operational Readiness Checklist

  • Integrate RCM checks into ERP and invoicing systems.
  • Conduct internal VAT training and staff awareness sessions.
  • Review historical contracts and pricing mechanisms.

Our Comments

FTA’s VATP043 introduces structured RCM requirements for the supply of precious goods in the UAE. Compliance hinges on robust documentation, proper classification of supplies, and proactive engagement with tax obligations. Businesses operating in sectors such as jewelry, bullion trading, and luxury retail should consider systematic implementation of controls to ensure alignment with the new provisions.

Download MCA Flyer (PDF)

Please feel free to contact us for any further clarification/impact assessment.

Contact Details

Email: mcatax@mcagulf.com
Telephone (Dubai UAE): +971 4 3319501
Mobile/WhatsApp: +971 50 5528079
Working Hours: 9AM – 6PM, Monday to Friday

You may also like