The United Arab Emirates is not only known for its emerging business landscape but also for its high-end gold market. Primarily, Dubai is known as a ‘City of Gold’ due to its abundance of gold reserves and the high-quality artisanal gold products sold in the market.
In an uncertain geopolitical landscape like ours, gold prices are soaring to new heights. In the current scenario, people tend to invest in gold to generate higher profits & safeguard themselves from losses.
Today, in this article, we will discuss the significance of gold in the UAE, its tax implications, and what buyers, traders, and travellers need to know.
Relevance of Gold in the UAE
As we mentioned at the beginning of this article, the UAE has substantial gold reserves. Notably, Dubai is known as the 'City of Gold' not just because of its high-quality gold production, but also for its historic gold trade, which includes the famous Dubai Gold Souk, a renowned jewellery market.
Since gold holds significant cultural value in Dubai, the UAE accounts for a substantial percentage of the world's gold that passes through annually. The following are a few key reasons explaining the significance of gold in the UAE.
The Gold Souk in Dubai
The ancient Deira market offers the choice of buying gold from a large number of gold dealers. It stands among the largest retail and wholesale jewellery marketplaces worldwide.
Hub for International Trade
The city was once a pearl fishing town that has slowly evolved into an important global hub for jewellery and gold, as it is claimed to handle anywhere between 20% and 40% of the world's gold stock annually.
Cultural Importance
Gold holds immense cultural value in Dubai and is often regarded as both an investment and an ornamental material. There’s also a ritual of exchanging gold as gifts during wedding ceremonies or major occasions.
Historical Origins
Gold has been associated with the city since the 18th century; thus, the working tradition began to find expression through the alternative character and flair of Dubai as a primary hub for jewellery.
Gold Tax in the UAE: An Overview
The United Arab Emirates introduced VAT (Value Added Tax) in 2018. There was no VAT in the country before 2018. The gold comes under the same taxation system.
While the UAE does not impose personal income tax, VAT applies to various goods and services, including gold. However, the VAT model for gold in the UAE is different and offers certain advantages for buyers and traders.
Tax rates and conditions applicable in the United Arab Emirates are governed by the nature of gold and its intended use. Here’s how it works:
- VAT on Gold Jewellery
Gold Jewellery is considered a luxury item and is subject to the standard VAT rate of 5%. This means that buyers must pay 5% tax on their purchases, which is added to the retail price. This VAT tax applies to all types of gold jewellery, including necklaces, bracelets, rings, and other adornments.
- VAT on Investing in Gold
Certain cases are exempt from VAT on investment-grade gold, including gold bars and coins. To get this exemption, gold must be at least 99% pure and sold in a controlled manner. The zero VAT advantage in the UAE has become a primary reason for investors to purchase gold as a financial asset.
- Unique Situations for UAE Gold Trading
VAT is levied throughout the supply chain for gold dealers and distributors except when the purchaser is VAT-registered and acquires the gold for business reasons. In certain situations, the reverse charge method may apply, whereby the VAT liability of the seller is transferred to the buyer.
What Travellers Need To Know?
The collection of jewellery gold is exempt from departure taxes and customs in the UAE. However, an individual needs to declare objects above a certain value:
- When entering or leaving the country, you must declare any gold or cash in excess of the AED 60,000 limit. This limit constitutes a mixture of money, gold, jewels, or precious stones.
- Up to 10 kg of gold is allowed on a traveller's person for personal use, without having to carry a business license. Customs unofficially looks at this threshold as a general guideline.
- Expedite the airport procedure by using the Afseh online pre-declaration system.
Whether you visit the UAE as a tourist to shop in the souks or travel for business purposes to make a high-value gold purchase, getting the tax treatment right is crucial. With the right guidance and documents, you can leverage the UAE's gold-friendly benefits without any risks.
Are you seeking support regarding business setup, VAT registration, or a trading license? Get in touch with us at Markai Corporate Services and make a successful venture into the legal world.
