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VAT impact on gold, diamonds to be reduced between registered dealers, says FTA
The Federal Tax Authority, FTA, has asserted that the new Cabinet Decision issued to regulate Value Added Tax, VAT, incurred by gold and diamond dealers registered with the FTA seeks to establish the adequate legislative environment and infrastructure for the gold and diamonds sector to thrive.
The Decision also improves cash flow among registered suppliers of gold and diamonds, reduces their tax burden, helps them maintain smooth commercial operations, and cements the UAE’s status as a leading global hub for the gold, diamond and jewellery trade sector.
In a press statement issued today, the Authority noted that the decision only pertains to commercial transactions between registered dealers. As per the reverse charge mechanism, registered dealers shall not charge VAT when supplying another tax registered merchant with gold, diamonds or products where the principal component is of gold or diamonds, as long as the latter intends to resell such products, or use them to manufacture gold, diamonds or products where the principal component is of gold or diamonds. The registered recipient must include such supplies in his tax returns.
The Cabinet Decision maintains that Taxable Persons are generally entitled to deduct the tax they incur on their inputs in their tax returns; hence registered gold and diamonds recipients can recover the tax they incurred on their purchases in the same tax return in which they calculate their due taxes, thus maintaining liquidity and cash flow.
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