Several months have passed since the implementation of VAT (value added tax) that was aimed to drive the economy of UAE towards diversification. In order to gain maximum benefit and equally put the burden on all sectors, the tax was applied on wider scale on most of the products and services and very few sectors were exempted from the tax. But it was also ensured to provide relief to businesses and common people and the tax rate was quite low at just 5%. But even in this low rate, few business sectors were facing problem and their growth was halted after paying VAT.
Now it seems the government has decided to exempt few important sectors from this tax in order to reduce burden that is difficult for them to withstand. One such important sector is the trading of gold, diamond and precious metals. Before the start of VAT on 1st January 2017, this sector was booming and it achieved the growth rate of 13% in 2016. But its performance was badly affected by the newly implemented tax and its trade declined by 60% after the implementation of VAT in January 2018.
After viewing this negative trend, the government of UAE has now decided to review its decision for implementing VAT on the trade of gold, diamond and other precious metals. Now the UAE cabinet has adopted a law in order to introduce the VAT Reversed Charged mechanism for traders and investors of gold, diamond and other precious metal. Now, the affected traders and investors will enter the 5% VAT in the books of buyers and sellers but there will be no payment due on them. The purpose of this step is to stimulate investment in the country as the jewelry sector in UAE generate billions of dollars every year in the country’s economy and the tax was really depriving UAE from this precious money.
Therefore, it was utmost necessary for the government to encourage the trading and investment in the jewelry sector. The government was quick to analyze the situation and took important measure at the right time. This will not only boost the morale of traders and investors of the said sector but this will also open the chances for other sectors that are facing problems amid VAT. If any other important sector is also shrinking, then it is possible that UAE might eradicate or reduce VAT on that sector.
This recent decision will certainly improve the condition of jewelry sector in the country and it also highlights the decision-making capabilities of the rulers of UAE. This provides best opportunities for those who want to invest in the high-earning jewelry market of UAE. For this purpose, we can assist you in getting visa services and trade license in Dubai and other emirates of UAE.
By Brenda, thank you for your blog post.