FTA issued Public Clarification (VATP029) on Gold Making Charge

Gold jewelers generally receive consideration for the supply of gold jewelers to cover the price of the gold as well as for a making charge.

In some instances, taxable persons supplying gold jewelry reflect the gold price and make a charge separately on the tax invoice issued for the supply, and in other cases, both are reflected as a total price.

This Public Clarification provides guidance on the application of the VAT legislation with regards to making charges received by gold jewelers

Tax registrants supplying gold are not required to impose VAT on the supply of gold and products which mostly consist of gold if the conditions of Cabinet Decision No. 25 of 2018 on the Mechanism of Applying Value Added Tax on Gold and Diamonds between Registrants in the State (“Cabinet Decision No. 25”) are met. In such instances, VAT in respect of the gold is accounted for under a special reverse charge mechanism which requires the registered recipient to account for VAT on the supply instead of the supplier.

The reverse charge mechanism only applies to the supply of goods by a registrant.

If the supplier charges separate considerations for the gold and the making service or reflects the price of these components separately, the supplier is required to impose VAT on the service component.

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