Introduction
The UAE Cabinet has enacted Cabinet Decision No. 127 of 2024, establishing a Reverse Charge Mechanism (RCM) for transactions involving precious metals and precious stones among VAT-registrants. This regulatory amendment, issued on December 16, 2024, will come into force on February 15, 2025. The objective of this legislative measure is to enhance VAT compliance, streamline tax remittance responsibilities, and optimize adherence to regulatory standards by shifting the VAT obligation from suppliers to recipients.
In alignment with evolving tax policies, this Decision explicitly repeals Cabinet Decision No. 25 of 2018, which previously governed VAT applicability on gold and diamonds. Additionally, any contradictory provisions in prior regulations are annulled to maintain statutory consistency.
Application of the Reverse Charge Mechanism on Goods
The Reverse Charge Mechanism applies when a registered supplier sells precious metals or stones to a registered recipient intending to resell, produce, or manufacture such goods. The following provisions apply:
Obligations of the Recipient
Prior to the date of supply, the registered recipient is required to provide a written declaration to the supplier confirming that the goods will be used for resale or manufacturing purposes. Additionally, the recipient must confirm their VAT registration status in the UAE through a written declaration.
- The recipient is responsible for accounting for VAT on the supplied goods.
- The recipient must ensure compliance with all tax obligations and account for due tax.
- The recipient is responsible for accounting for VAT on the supplied goods.
Obligations of the Supplier
The supplier must ensure compliance by obtaining and securely maintaining the recipient’s written declaration Prior to the date of supply. Furthermore, the supplier is responsible for verifying the recipient’s VAT registration status using Federal Tax Authority (FTA)-approved validation methods.
- The supplier is not required to account for VAT on the transaction.
- The supplier must not report the tax in their VAT return.
- The supplier is not required to account for VAT on the transaction.
If the supply qualifies as zero-rated under Article 45(1) of Federal Decree-Law No. 8 of 2017, the provisions in relation to RCM will not apply.
Consequences of Non-Compliance
If the recipient fails to submit the required declarations prior to the date of supply, the UAE VAT Reverse Charge on Precious Metals & Stones will not be applicable. The supplier will then be responsible for charging and accounting for VAT on the transaction. The recipient will not be allowed to consider the goods as being used for resale, production, or manufacturing.
At RVG Chartered Accountants, we offer comprehensive VAT advisory services to help businesses navigate the complexities of UAE tax laws. Our experts are well-equipped to assist companies in understanding RCM obligations, ensuring proper documentation, and optimizing VAT compliance. Whether you require tailored tax planning, VAT filing assistance, or strategic financial consulting, RVG Chartered Accountants is here to support you at every step of the way. Contact us today to safeguard your business from compliance risks and maximize efficiency in your VAT processes.
