“They’re doing this as part of their marketing efforts. Some of them have absorbed the tax, but the majority of the retailers are charging the 5 per cent VAT from their customers,” they said.
Among the retailers, Pure Gold Jewellers has announced 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 that introduced VAT on January1 require all gold and jewellery purchases to be subject to 5 per cent tax. But at Pure Gold Jewellers, for the month of January, we are absorbing it on behalf of our customers,” said Karim Merchant, group CEO and managing director of Pure Gold Jewellers.
“We are paying the VAT for the first month of the year from our pockets, so our customers don’t have to pay in January.”
A 5 per cent VAT would cost gold buyers an extra of Dh7 to Dh8 per gram at current prices of the precious metal.
Gold consumption in the UAE is the highest in the Middle East region. According to the World Gold Council (WGC), each person in the country buys about 5 grams of gold, a 2016 data reveals.
People from Kuwait are the second-biggest spenders on gold, with per capita demand standing at 3.1 grams, followed by Saudi Arabia at 1.9 grams and Egypt at 0.3 grams.
Merchants across the UAE started charging a 5 per cent VAT to their customers who purchase goods and services across the country, including utilities, private transport, electronics, jewellery and entertainment. Residents as well as tourists have to pay the newly introduced tax.
Saudi Arabia and the UAE introduced the value added tax (VAT) on January 1, a first for the region which has long boasted itself on its tax-free, cradle-to-grave welfare system. Saudi Arabia compounded the New Year blow for motorist with an unannounced hike of up to 127 per cent in petrol prices. They are the latest in a series of measures introduced by Gulf oil producers over the past two years to boost revenues and cut spending as a persistent slump in the world prices has led to ballooning deficits.
The five per cent sales tax applies to most goods and services and analysts project that the two governments could raise as much as $21 billion in 2018, equivalent to 2 per cent of GDP.
But it marks major changes for two super-rich countries, where the mall is king. Dubai has long held an annual shopping festival to draw bargain hunters from around the world to its glitzy retail places.