Retailers in the UAE reported that trade has declined by as much as 60% following the introduction of VAT in January.
Gold and diamond merchants in the UAE have welcomed the country’s move to adopt a law to introduce a value-added tax [VAT] reverse charge mechanism for investors in gold, diamond and precious metals.
As part of the mechanism, which was announced on Wednesday, there will only be documented entries of 5 percent VAT in the books of both buyers and sellers, but there will be no payment of the fee.
According to UAE authorities, the move is designed to allow facilitate investors for investors and contribute to the stabilisation of the country’s oil and diamond sector, as well as stimulate investment.
Retailers in the UAE reported that trade has declined by as much as 60 percent following the introduction of VAT in January.
“We welcome the move of VAT exemption by the UAE cabinet on the gold and diamond trade in the B2B market,” said Firoz Merchant, the founder and chairman of Pure Gold Group.
“One of the major tourist attractions of the UAE is the jewellery sector that generates billions of dollars in revenue every year, and by exempting tax, the benefits to the business and the overall economy are immense.
“I hope that the UAE government extends a similar exemption to the retail sector, which will not only benefit the jewellery retailers but also tourists and consumers,” he added.
Merchant’s call to extend the law to consumer was echoed by Shamlal Ahamed MP, the managing director of international operations for Malabar Gold and Diamonds.
“Dubai is known for gold and jewellery and it is the effort of over 20 years that the industry has come to this level, but we are losing ground due to taxation,” he said.
“If consumers also benefit from the exemption, then the business will come back to its previously high level. Sales are now down by 30 to 40 percent.”
Another merchant, Chandu Siroya, the vice chairman of the industry association Dubai Gold & Jewellery, said last month that jewellery sales in Dubai fell between 50 and 60 percent in Q1 2018 following the implementation of VAT.
According to the World Gold Council, gold demand in the UAE has yet to recover from the 2008 financial crisis and dropped to a 20 year low in 2017