Value added tax on gold in the Emirates
Rashid Al MarriBullion desk editorValue added tax applies to most gold purchases in the Emirates at the standard rate of five per cent. A separate regime exists for investment-grade precious metals with a purity threshold, and that threshold and its exact treatment are set out in federal legislation. The threshold itself is a figure this page points to rather than quotes: it is set in that legislation, and the seller is required to know which side of it a purchase falls on.
The standard rate
The standard rate of value added tax in the Emirates is five per cent, and it applies to most gold purchases. The tax is added to the till total, after the metal price and the making charge, and it is collected by the shop on behalf of the government. A buyer who wants to know the tax on a purchase must multiply the till total by the rate, and that is a simple sum.
The tax is not a part of the gold price; it is a separate charge, and it is the same for every buyer. A buyer who is not resident in the Emirates may be able to claim a refund on the tax, but that is a separate process and not covered here.
The investment-grade exception
A separate regime exists for investment-grade precious metals with a purity threshold. That threshold and its exact treatment are set out in federal legislation, and the exact threshold belongs to that legislation rather than to a page like this one. The regime is designed to treat investment gold differently from jewellery, because investment gold is a financial asset rather than a consumer good.
The exception is not automatic; it depends on the purity of the metal and the form it takes. A buyer who wants to know whether a purchase qualifies must check the legislation or ask the seller, and the seller is required to know. The exception is a real part of the tax system, but it is not a detail to guess at.
What the tax applies to
The tax applies to the till total, which is the metal price plus the making charge. The making charge is subject to tax, because it is a service, and the metal price is subject to tax, because it is a good. The tax is not a percentage of the metal price alone; it is a percentage of the total, and that total includes the making charge.
A buyer who wants to know the tax on a purchase must know the till total, and that requires the shop to itemise the making charge. Without the itemisation, the buyer cannot know the tax, and the tax is a cost that cannot be negotiated.
The threshold and the legislation
The threshold for investment-grade precious metals is set out in federal legislation, and it is a purity threshold. The legislation also sets out the exact treatment of investment gold, including whether it is zero-rated or exempt. The exact figure is not reproduced here: a threshold quoted second-hand is worth less than the legislation it comes from, and the consequence of a wrong one falls on the buyer.
The legislation is public, and a buyer who wants to know the threshold can read it or ask a tax adviser. The seller is also required to know, and a seller who cannot say whether a purchase qualifies is not a seller to trust.
The tax on a finished piece versus a bar
The tax on a finished piece is higher than on a bar, because the making charge is higher. The tax is a percentage of the till total, and the till total includes the making charge. A finished piece with a high making charge will therefore carry a higher tax than a bar with a low making charge, even if the metal price is the same.
The investment-grade exception may apply to a bar but not to a finished piece, because the exception depends on the purity and the form. A buyer who wants to avoid the tax on investment gold must buy a form that meets the threshold, and that is a question for the legislation.
What a buyer should have in hand
A buyer should have in hand the itemised till total, including the metal price and the making charge, before the tax is added. That is the only way to know what the tax is and whether the purchase qualifies for the exception. The buyer should also have the seller's word on the purity and the form, and the seller should be able to point to the legislation.
The tax is a cost that cannot be negotiated, but it can be anticipated. A buyer who knows the till total and the rate can compute the tax, and a buyer who knows the threshold can know whether the exception applies. That is the simple truth of tax on gold in the Emirates.
The tax in brief
Next question
Questions about weight and price
What is the standard rate of VAT on gold?
The standard rate is five per cent, and it applies to most gold purchases. The tax is added to the till total, after the metal price and the making charge.
Is there an exception for investment gold?
Yes. A separate regime exists for investment-grade precious metals with a purity threshold. The threshold and its exact treatment are set out in federal legislation.
Why does this site not state the threshold?
Because the figure belongs to the legislation that sets it, and a threshold repeated second-hand is the kind of detail that changes without notice. The legislation is public, the seller is required to know which side of the line a purchase falls on, and a tax adviser can confirm it for a specific purchase.
Does the tax apply to the making charge?
Yes. The making charge is a service, and it is subject to tax. The tax is a percentage of the till total, which includes the making charge.
How can I know if my purchase qualifies for the exception?
Check the federal legislation or ask the seller. The seller is required to know whether a purchase qualifies, and a seller who cannot say is not a seller to trust.
A position on gold that never goes on a scale
An FxPro account deals in the price of gold rather than the metal: nothing is weighed, nothing is delivered and no making charge is added, because there is no piece to make. It is a different proposition from buying at a counter, and worth understanding as one before it is mistaken for the other.