The Reverse Charge Mechanism for precious metals and stones

A significant shift in VAT application for the precious metals and stones sector is underway in the UAE, directly impacting registrants. Cabinet Decision No. 127 of 2024, issued on December 16, 2024, introduces a revised Reverse Charge Mechanism (RCM) for supplies of precious metals and precious stones between VAT-registered businesses. This decision is poised to become effective on February 26, 2025.

Key Changes

• Repeal of Previous Framework
  • Cabinet Decision No. 127 of 2024 expressly repeals Cabinet Decision No. 25 of 2018.
  • Marks a policy refinement to ensure clarity and efficiency in VAT administration.
• How the New RCM Works
  • The VAT liability shifts from the supplier to the recipient (buyer) when certain conditions are met.
  • Aims to prevent tax fraud and reduce administrative burden for suppliers.
• Scope of Application
  • Applies to transactions involving precious metals (gold, silver, platinum) and precious stones.
  • Limited to B2B transactions between VAT-registered entities.

Compliance Considerations

• Documentation
  • Recipients must maintain valid VAT registration certificates and issue self-invoices under RCM.
  • Suppliers must retain proof that the buyer is VAT-registered.
• Cash Flow Impact
  • Suppliers avoid output VAT collection, while buyers account for VAT through their own returns.
  • Proper system updates and internal controls are essential to avoid errors.
• FTA Clarification
  • Public Clarification VATP043 provides further guidance on how to apply the new RCM.
  • Emphasizes readiness for the effective date: February 26, 2025.

Why It Matters

• Strengthens integrity of VAT administration in a high-value sector prone to fraud.
• Offers simplified compliance for suppliers while ensuring VAT is still properly accounted for.
• Requires proactive action by businesses to update accounting systems, processes, and staff training.

summary

Get ready for the new Reverse Charge Mechanism for precious metals and stones! Cabinet Decision No. 127 of 2024, effective February 26, 2025, is a game-changer. Learn what it means for your business.

Disclaimer: The Content offer general guidance and should not be considered legal, financial, or tax advice. Consult qualified professionals for personalized guidance. While efforts have been made to ensure accuracy, no guarantee is provided for completeness or applicability to individual situations. Users are responsible for their interpretation and actions based on this information, at their own risk.

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