The United Arab Emirates (UAE) has announced a major update to its Value Added Tax (VAT) system with the issuance of Cabinet Decision No. (127) of 2024, which introduces new VAT regulations for the precious metals and stones sector. This decision marks a significant expansion of the Reverse Charge Mechanism (RCM), impacting suppliers, traders, and jewelry manufacturers across the country.

Under the new rule, the Reverse Charge Mechanism now applies to a wider range of goods, including precious metals such as gold, silver, palladium, and platinum, as well as precious stones like natural and manufactured diamonds, pearls, rubies, sapphires, and emeralds. The scope also includes jewelry products made from these materials, as long as the value of the precious metals or stones exceeds that of the other components in the item.

This new decision repeals Cabinet Decision No. (25) of 2018, which previously limited the Reverse Charge Mechanism to transactions of gold and diamonds between VAT-registered dealers. The updated legislation simplifies compliance by extending RCM to a broader category of goods, reducing the administrative burden on suppliers, and enhancing liquidity in the industry.

Under the revised mechanism, VAT-registered suppliers are no longer required to charge or collect VAT on qualifying supplies covered by this decision, as long as both the supplier and the buyer are VAT-registered in the UAE and the stated conditions are fulfilled. Instead, the buyer is responsible for accounting for the VAT on both the sale and purchase of goods within their VAT return. This change ensures accurate VAT reporting while improving cash flow efficiency for businesses operating in the sector.

The Ministry of Finance stated that this initiative aligns with the UAE’s ongoing commitment to enhance the competitiveness and transparency of the precious metals and stones trade, which remains a vital part of the country’s economic landscape. By simplifying VAT compliance and minimizing the cash flow impact of VAT payments, the UAE continues to strengthen its position as a global hub for precious metals and gemstone trading.

In summary, the new Cabinet Decision No. (127) of 2024 reflects the UAE government’s proactive approach to regulatory modernization, supporting both compliance and economic growth in one of the nation’s most valuable industries. Businesses dealing in precious metals, stones, and jewelry are encouraged to review the new rules carefully and ensure they are fully compliant before the implementation takes effect.