Some gold shops in Dubai absorb 5% VAT

Dubai: Effective January 1 this year, buyers of gold and diamond jewellery in the UAE are supposed to pay a 5 per cent value-added tax (VAT), but it looks like some of them won’t have to pay for the extra charge.

A few retailers in the country have decided to waive the 5 per cent VAT to cushion consumers against further inflationary pressures, according to a source at the Dubai Gold and Jewellery Group (DGJG), which has about 500 merchant members in the emirate.

“They’re doing this as part of their marketing efforts. Some of them have absorbed the fees, but the majority of the retailers are passing the 5 per cent VAT to their customers,” the source told Gulf News.

Among the retailers, Pure Gold Jewellers announced on Wednesday that shoppers who walk into their outlets won’t have to worry about paying a tax, whether they’re looking for gold coins, bracelets, necklaces or diamond rings.

“The new UAE laws introduced on January 1, require all gold and jewellery purchases to be subject to 5 per cent VAT. [But] at Pure Gold Jewellers, for the month of January only, we are absorbing it on behalf of our customers,” said Karim  Merchant, group CEO and managing director of Pure Gold Jewellers.

“In this sense, we are actually paying the VAT for the first month of the year, so our customers don't have to.” 

Gold consumption in the UAE is the highest in the Middle East region. According to the World Gold Council, each person in the country buys about 5 grams of gold, as of 2016.

People from Kuwait are the second-biggest spenders on gold, with per capita demand standing at 3.1 grams per person, followed by Saudi Arabia at 1.9 grams and Egypt at 0.3 grams.

Beginning 1 January 2018, however, buyers in the country faced the prospects of having their budgets squeezed with the introduction of VAT.

Merchants across the UAE started charging a 5 per cent VAT to their customers who purchase goods and services across the UAE, including utilities, private transport, electronics, jewellery and entertainment.

At today's prices, a 5 per cent VAT would cost gold buyers alone an extra charge of Dh7 to Dh8 per gram.

“This charge will affect every resident and tourist when buying goods and services, except customers [who purchase from us],” Pure Gold said.

The company said the 5 per cent tax will be waived for the full month of January. “This means that customers will not have to pay the increased prices.”