Cabinet Decision No. 127 of 2024: Reverse Charge Mechanism for Precious Metals and Precious Stones (Effective from 15 February 2025)
Date of Issue: 16 December 2024
Effective Date: 15 February 2025
The UAE Cabinet has issued Cabinet Decision No. 127 of 2024, introducing updated provisions for the application of the Reverse Charge Mechanism (RCM) on precious metals and precious stones, including jewelry, when traded between VAT-registered entities in the UAE. This Decision also repeals Cabinet Decision No. 25 of 2018, which previously governed the VAT mechanism on gold and diamonds.
Key Highlights of Cabinet Decision No. 127 of 2024:
1. Scope of the Decision:
- Applies to supplies of Precious Metals, Precious Stones, and Jewelry made of such materials when the value of these materials exceeds that of other components.
- Precious Metals include: Gold, Silver, Palladium, Platinum.
- Precious Stones include: Natural and synthetic diamonds, pearls, rubies, sapphires, emeralds.
2. Reverse Charge Mechanism (RCM) Application:
- RCM applies when:
- – A VAT-registered supplier supplies Goods to a VAT-registered recipient.
- – The recipient intends to resell or use the Goods for producing or manufacturing other Goods.
- Under RCM:
- – Supplier is not required to charge or report VAT on the supply.
- – Recipient must account for VAT and comply with all VAT obligations related to the supply.
3. Exceptions to RCM:
- RCM will not apply if the supply of Goods is zero-rated under Article 45 (Clause 1) of the VAT Law (e.g., export of goods).
4. Compliance Requirements:
- Recipient’s Obligations:
- – Before the supply date, the recipient must provide the supplier:
- 1. Written declaration confirming the Goods are intended for resale or manufacturing.
- 2. Written confirmation of VAT registration status.
- Supplier’s Obligations:
- – Before the supply date, the supplier must:
- 1. Receive and retain the above declarations.
- 2. Verify recipient’s VAT registration status through FTA-approved means.
- Failure to comply with these conditions means RCM will not apply, and VAT must be charged normally.
5. Repeals and Replacements:
- Cabinet Decision No. 25 of 2018 is repealed.
- Any provision inconsistent with Cabinet Decision No. 127 of 2024 is also repealed.
6. Implementation and Effective Date:
- Minister of Finance will issue further decisions as needed for implementation.
- Decision takes effect 60 days from its publication, i.e., effective from 15 February 2025.
Conclusion:
Cabinet Decision No. 127 of 2024 introduces a clear and structured Reverse Charge Mechanism for transactions involving precious metals and stones, enhancing compliance, reducing administrative burdens, and streamlining VAT treatment among registered traders. Businesses engaged in trading, manufacturing, or dealing in jewelry and precious commodities should ensure proper contractual arrangements, VAT registration verification, and documentation to comply with these updated rules.
KGRN Chartered Accountants can assist businesses in interpreting and implementing this Decision, including reviewing supply chains, contracts, and ensuring readiness for VAT compliance on precious metals and stones transactions.
