Broadening domestic reverse charge VAT anti-fraud measures
On 30 April 2025, the UAE Federal Tax Authority (FTA) issued Public Clarification VATP043, marking a significant update in the application of the domestic reverse charge mechanism for Value Added Tax (VAT). The reverse charge means the supplier does not collect VAT from their customer to avoid the opportunity of VAT fraud.
The changes took effect on 26 February 2025.
The UAE also applies the mobile IT devices reverse charge on B2B supplies which have been targeted by fraudsters.
Expanded Scope Beyond Gold and Diamonds
Previously, the reverse charge mechanism under Cabinet Decision No. 25 of 2018 applied only to transactions involving gold and diamonds between VAT-registered entities within the UAE. The new Cabinet Decision No. 127 of 2024 not only replaces the older decision but significantly expands the scope to include a wider array of precious metals and stones, as well as jewellery made from them.
Now, the specified precious metals covered include gold, silver, palladium, and platinum. The precious stones list has been expanded to encompass both natural and synthetic diamonds, pearls, rubies, sapphires, and emeralds. However, the reverse charge only applies when the value of the precious metal or stone in the product exceeds the value of all other components combined.
Conditions for Applying the Reverse Charge
To apply the reverse charge, several key conditions must be met:
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The recipient of the goods must be registered for VAT in the UAE.
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The recipient must intend to resell the goods or use them in the manufacture of other qualifying precious goods.
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The recipient must provide a written declaration before the date of supply confirming their VAT registration and intended use of the goods.
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The supplier must obtain and retain this declaration before the supply and verify the VAT registration status of the buyer through approved FTA means.
It’s important to note that this mechanism applies strictly to the supply of goods, not to services associated with the making or manufacturing of jewellery — unless the services are part of a single composite supply that includes the precious goods themselves.
Implications for Business
By shifting the responsibility for accounting for VAT from the supplier to the buyer, the revised reverse charge mechanism simplifies compliance for VAT-registered suppliers. Businesses no longer need to charge VAT on qualifying business-to-business transactions. Instead, buyers self-account for VAT in their returns.
This change is designed to enhance liquidity and reduce administrative burdens, especially in sectors dealing with high-value goods such as precious metals and stones. The update aligns the UAE’s VAT treatment more closely with international practices and is seen as a move to support the growth and competitiveness of the country’s precious metals and gemstones industry.
Public Clarification VATP043 and Cabinet Decision No. 127 of 2024 represent a significant evolution in UAE VAT compliance for the precious goods sector. With the reverse charge mechanism now encompassing a broader range of materials, businesses are advised to carefully assess their supply chain practices and ensure that declarations and VAT registrations are properly documented. This update not only streamlines operations but positions the UAE as an increasingly attractive jurisdiction for the precious metals and stones trade.
