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UAE Jewellers Hope Planned VAT Will Only Be Levied On Fabrication Cost

There is still some uncertainty in the United Arab Emirates (UAE) about how the government there will levy the planned 5 percent value added tax (VAT) on jewellery. While some stakeholders think it will be on the total value of the piece, others are hoping that the levy will be imposed only on the fabrication cost of the jewellery and not on the cost of the gold used.

Industry watchers say that the UAE authorities will not levy any VAT at all  on ‘investment metals’ — mainly gold and silver bullion — and this then leaves open the question of whether any gold used in the fabrication of jewellery will be subject to VAT.

Chandu Siroya, Vice-Chairman of Dubai’s Gold & Jewellery Group has been quoted as saying, ”As we know, VAT on pure gold will be zero-rated, it would be ideal if it could be levied only on the value addition (fabrication cost).”

Even if VAT is applied to the total cost of the jewellery, Joyalukkas Group Chairman Joy Alukkas has said that a 5 percent rate is low compared to the levies in other countries and the UAE should remain a very cost-competitive jewellery market. According to him the government is also looking at refunding the VAT to tourists when they exit the UAE.

The UAE jewellery community say that either way, the jewellery market in the Middle Eastern market will remain extremely cost-competitive, particularly to Indian shoppers, for whom jewellery in their home market has become more expensive with the introduction of the goods and services tax (GST).

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