The introduction of Value Added Tax (VAT) in the UAE through Federal Decree-Law No. (8) of 2017 marked a significant shift in how goods and services are taxed in the country. While the general VAT rate stands at 5%, certain goods and services enjoy a 0% tax rate or are exempt altogether. One frequently asked question in this context is: Are gold and precious metals zero-rated under UAE VAT?
This blog provides a detailed overview of VAT treatment of gold and precious metals in the UAE, explains what qualifies for zero-rating, outlines documentation requirements, and highlights compliance measures needed for businesses in this sector.
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1. VAT Categories in the UAE: Standard vs. Zero-Rated vs. Exempt
Before diving into the treatment of gold and precious metals, it is essential to understand the three categories of VAT treatment in the UAE:
- Standard-rated (5%) – Applies to most goods and services.
- Zero-rated (0%) – Applies to specific goods/services where VAT is charged at 0%, but input tax recovery is allowed.
- Exempt – No VAT charged and input tax recovery is disallowed.
The sale of gold and precious metals may fall under either standard-rated or zero-rated categories depending on specific conditions defined by law.
2. What Does the UAE VAT Law Say About Gold and Precious Metals?
According to the UAE VAT Executive Regulations (Cabinet Decision No. (52) of 2017), the supply of investment-grade precious metals is zero-rated. This is applicable only if the metals meet certain purity and trading standards. All other forms of gold and metal supplies are subject to standard VAT.
3. Definition of Investment-Grade Precious Metals
For VAT to be charged at 0%, the supply must be of “investment-grade” precious metals, which are defined as follows:
- Gold of purity not less than 99%, tradable on global bullion markets
- Silver of purity not less than 99%, tradable on global bullion markets
These metals must be in a form typically used for investment purposes, such as bars, ingots, or coins. Jewelry and ornaments, even if made from high-purity metals, do not qualify for zero-rating.
4. When Is the Supply Zero-Rated?
Supply of gold or silver is zero-rated only if:
- The metal meets the purity criteria (99% or more)
- The supplier obtains written confirmation from the buyer that the metal is intended for investment
- The metal is in a tradable form recognized by global bullion markets
If any of these conditions are not met, the transaction is subject to the standard 5% VAT rate.
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5. VAT on Jewelry and Precious Stones
Unlike investment-grade bullion, jewelry, ornaments, and articles made from gold or precious metals are always subject to standard VAT (5%). Similarly, the trade of diamonds, pearls, and other gemstones does not qualify for zero-rating unless part of a specific supply chain that meets other qualifying criteria such as reverse charge mechanism or export rules.
6. VAT Reverse Charge Mechanism on Gold
The UAE VAT law provides a reverse charge mechanism (RCM) for gold and related supplies in certain B2B transactions. Under RCM, the responsibility to account for VAT shifts from the supplier to the recipient, which helps streamline business operations without creating cash flow burdens.
This mechanism is typically used in:
- B2B wholesale supply of gold or gold products
- Supplies between VAT-registered businesses with proper agreements and documentation
Suppliers must clearly state on the invoice that the reverse charge applies, and buyers must self-account for VAT.
7. Input Tax Recovery for Gold Traders
Gold dealers and wholesalers can claim input VAT on their purchases if the end product is sold as a taxable supply (standard or zero-rated). However, if part of their business involves exempt transactions, they must apportion input tax accordingly.
Accurate VAT treatment ensures optimal tax credit recovery and reduces compliance risk.
8. VAT on Gold Imports and Exports
Imports: Gold brought into the UAE is usually subject to import VAT. However, registered importers can apply the reverse charge mechanism to avoid upfront VAT payment at customs.
Exports: Export of gold outside the GCC is generally zero-rated provided documentation such as shipping records and customs declarations are maintained. This applies to both raw bullion and certain finished products.
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9. Documentation Requirements
Businesses supplying investment-grade precious metals at 0% VAT must maintain:
- Certificates confirming metal purity
- Signed buyer declarations confirming investment intent
- Invoices indicating zero-rating and supporting calculations
- Proof of supply (e.g., delivery notes, export documents)
Failure to maintain accurate records can result in denial of zero-rated treatment during audits.
10. Conclusion
In conclusion, only investment-grade gold and silver meeting 99% purity standards are zero-rated under UAE VAT, and only if used for investment purposes. Jewelry, ornaments, and most precious stones remain subject to standard VAT. The VAT treatment also varies depending on whether the transaction is a B2B supply, a retail sale, an import, or an export.
Correct VAT classification and documentation are crucial in avoiding penalties and benefiting from available VAT relief mechanisms like zero-rating and reverse charge.
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