This Public Clarification offers guidance on the application of VAT legislation with regards to making charges received by gold jewellers. As a general principal Gold Jewellers receive a consideration to cover the cost of supplying the jewellery as well as its making charges. At times, taxable persons supplying gold jewellery reflect the gold price and making charge separately on the tax invoice issued for the supply, and in other cases both are reflected as a total price. which applies only to gold as well as the products consisting mostly of this metal which are collectively referred to as gold items.
Taxable individuals are not supposed to impose VAT on the supply of gold or products which consist of gold unless they meet the Cabinet Decision No. 25, in which case VAT in respect of the gold is accounted for under a special reverse charge mechanism. This mechanism only applies to a registrant on the supply of goods.
Important components to note in the clarification are:
1. Reverse Charge Mechanism
The VAT shall not be imposed on the tax registrants supplying gold items if the recipient is registered for it and retains a written declaration from the recipient which confirms that the recipient will be using it to produce other items made out of it or for the purpose of reselling them received, the recipient is registered for VAT on the date of supply, the recipient shall be accountable for the VAT on these that are supplied to him.
2. Single Composite Supply
If the supplier charges a single price for these as well as the making charge, the supply will be regarded as a single composite if it consists of the gold item as well as the making charges or in a case where it is impossible to split them, their price, as well as the making charges, are not separated and if the these, as well as the making service, are supplied by the same supplier.
3. Multiple Supplies
If the supplier charges separately for these as well as making service, or if the price of these components is separately reflected, the supplier would be regarded as making multiple supplies. In both of these cases, the supplier is required to treat each of these components as a separate supply and apply the suitable tax treatment for each of these components.
4. Correction Of Errors
In situations where the supplier applied incorrect VAT treatment, the supplier is liable to submit a voluntary disclosure. Further guidance on the process and requirements to submit a voluntary disclosure is available in the Voluntary Disclosure User Guide.
Read the read complete details on Public Clarification issued by the Federal Tax Authority below:Public Clarification on Gold
BS Auditing of Accounts has keen understanding of VAT laws and any changes made by the authorities. Our skilled personnel have full grasp on all issues and laws, and have the uncanny ability to provide the best guidance in these matters. Feel free to contact us:
• Office # 0641, Tamani Arts Offices, Business Bay, P.O. Box 111390, Dubai, UAE
• +971 4 570 7357
• +971 58 108 5690
