VAT Treatment on Gold and Making Charges in UAE (VATP029)

The UAE Federal Tax Authority (FTA) issued Public Clarification VATP029 to guide gold jewelers, suppliers, and registered dealers on how VAT applies to the supply of gold items and making charges. This clarification is mainly applicable to gold items that consist primarily of gold and don’t qualify for zero-rating under Cabinet Decision No. 25 of 2018. Since the export of gold items and supply of precious metals for investment purposes aren’t eligible for the special VAT reverse charge mechanism this clarification addresses, they fall outside its scope.

This guide covers how VATP029 classifies gold supplies, the two treatment categories, why the reverse charge mechanism matters practically, and a worked example comparing both scenarios.

Also check: VAT Consultants in UAE

Scope of VATP029: Composite vs. Multiple Supply

Whether VAT treatment on a gold item is determined as a single composite supply or as multiple separate supplies depends on how the supplier structures and prices the transaction. The reverse charge mechanism applies to a supplier that has obtained written confirmation from the FTA that the recipient of the supply is VAT-registered in the UAE on the date the supply is made. The purpose of the supply must also be for resale, manufacture, or production, with the recipient responsible for calculating VAT on the acquisition.

Why the Reverse Charge Mechanism Matters Here

Under the standard VAT mechanism, a supplier charges VAT to the buyer and remits it to the FTA. Under reverse charge, that responsibility shifts, the VAT-registered recipient self-accounts for the VAT directly, rather than paying it upfront to the supplier. For gold and precious metals transactions specifically, this exists to reduce cash flow strain across the supply chain, particularly relevant given the high value typically involved in gold transactions, and to reduce the administrative burden of collecting and remitting VAT at every stage between registered dealers.

Must check: VAT Registration Services

1. Single Composite Supply

If a supplier sets a single rate for the gold product that already factors in the making charge, the supply is treated as a single composite supply where all three of the following conditions are met:

• The supply consists of one primary component (the gold item) and an ancillary or incidental element (the making service), so closely linked that splitting them would be unnatural or artificial
• There’s no distinction between the price of the gold item and the making charge
• The same supplier provides both the making service and the gold item

Where all three conditions are satisfied, the gold item together with its making service is treated as a single composite supply, potentially eligible for the reverse charge mechanism under Cabinet Decision No. 25 of 2018. Both the supplier and recipient need to retain sufficient supporting evidence, including a valid tax invoice reflecting a single consideration and stating that the reverse charge mechanism has been applied.

2. Multiple Supplies

A supplier is considered to be making multiple supplies where the gold item and the making charge are priced individually, or where the pricing structure differentiates the two components from each other. In this case, each component is treated as a distinct supply, with the appropriate VAT treatment applied separately to each.

For multiple supplies, only the VAT associated with the gold item itself can be accounted for using the reverse charge mechanism, provided the requirements under Cabinet Decision No. 25 of 2018 are met. The making service charge doesn’t qualify for reverse charge treatment in this scenario, the VAT-registered supplier must account for VAT on the making charge directly, issuing a valid tax invoice for that specific portion of the supply.

Worked Example: Composite Supply vs. Multiple Supplies

A jeweler sells a gold ring for AED 10,500 to a VAT-registered dealer purchasing for resale. If the jeweler sets one all-in price of AED 10,500 with no separate making charge shown, and both parties satisfy the composite supply conditions, the entire AED 10,500 supply is treated as a single composite supply, and the recipient dealer self-accounts for VAT on the full amount under reverse charge, no VAT is added to the invoice price by the jeweler.

If instead the jeweler itemizes the sale as AED 9,500 for the gold content and AED 1,000 for the making charge, this becomes multiple supplies. The AED 9,500 gold portion can still be reverse charged, with the recipient self-accounting for that VAT. But the AED 1,000 making charge doesn’t qualify for reverse charge, the jeweler must charge 5% VAT on it directly, AED 50, and issue a separate tax invoice reflecting that amount. The two structures produce genuinely different compliance obligations for the same underlying transaction value, which is exactly why suppliers need to be deliberate about how they price and invoice gold sales.

Frequently Asked Questions (FAQs)

How Farahat & Co. Can Help

Farahat & Co., a trusted Tax Firm in UAE, helps gold suppliers and dealers correctly classify composite versus multiple supplies, apply the reverse charge mechanism accurately, and maintain compliant invoicing.

Contact Farahat & Co. today to discuss your gold and precious metals VAT requirements.