VAT is not applicable if the supply matches the following conditions:
- The buyer must be registered for VAT at the time of supply.
- The buyer must make the purchase with the intention to resell the supplies or to make products where the primary component is gold or diamonds.
- The buyer must declare in writing to the supplier that they are registered for VAT on the date of supply and that their intention is to resell the supplies or make products where the primary component is gold or diamonds.
- The buyer must state their intention to report taxes on these supplies in their tax returns.
When do these supplies incur VAT?
These supplies incur VAT when:
- The supplier was aware (or was supposed to be aware) that the buyer was not registered for VAT at the time of supply
- The supplier has not verified whether the buyer is registered for VAT
- The supply is classified as zero-rated
Does the supplier need to report taxes for the supply of gold and diamonds?
No, if the registered buyer intends to resell the supplies or use them to make products where the primary component is gold or diamonds, then the supplier will not be responsible for reporting taxes for that particular supply. The buyer will still be required to account for the tax in their tax return.
If I buy gold and diamonds in order to resell them, can I recover the VAT on the supply?
Yes, as long as your intention is to resell them or manufacture products where the primary component is gold or diamonds, you can recover the VAT for your purchase on the corresponding VAT return.
What format should I follow for my written declaration when purchasing gold and diamonds?
The template for the written declaration shall be provided by the NTA.
Are there penalties for these supplies?
If the supplier was aware or was supposed to be aware that the buyer was not registered for VAT at the time of supply, the supplier and the buyer will both be liable for any tax due and penalties applied on the supply.