What are the Income Tax rules of selling Jewellery for a Jewellery Store in Dubai?

 Income Tax Rules for Selling Jewellery by a Jewellery Store in Dubai, UAE

Dubai is globally recognized as a leading hub for gold and jewellery trade, attracting buyers and investors from all over the world. With its strategic location, tax-friendly policies, and well-regulated markets like the Dubai Gold Souk and Dubai Multi Commodities Centre (DMCC), the city has become a hotspot for jewellery businesses.

However, despite its reputation as a tax haven, jewellery stores in Dubai must still comply with certain financial, tax, and regulatory obligations. This article provides a comprehensive yet brief overview of the Income Tax and related tax rules applicable to jewellery businesses operating in Dubai, United Arab Emirates (UAE).

1. Income Tax in Dubai: Key Overview

a. No Personal Income Tax

As of now, Dubai (UAE) does not levy personal income tax on individuals, including business owners. This makes it an attractive destination for entrepreneurs and investors.

✅ Individual owners of jewellery stores do not pay income tax on their personal income from the business.

b. Corporate Tax Introduced (From June 1, 2023)

While the UAE was previously known for having no corporate tax, a new corporate tax regime came into effect on June 1, 2023.

Key Corporate Tax Features:

  • Standard Rate: 9% on taxable income exceeding AED 375,000.

  • Exemption: Income up to AED 375,000 is tax-free to support small businesses and startups.

  • Applicability: Applies to businesses and commercial activities, including jewellery stores operating under a trade license.

2. Applicability of Corporate Tax to Jewellery Stores

Jewellery businesses operating in Dubai — whether as a mainland company, free zone entity, or branch of a foreign company — are generally subject to corporate tax on net business income, unless exempted.

a. Mainland Jewellery Stores

  • Fully subject to corporate tax.

  • Must register with the UAE Federal Tax Authority (FTA).

  • Required to file annual corporate tax returns.

b. Free Zone Jewellery Businesses

Some jewellery stores operate within Free Zones such as:

  • DMCC (Dubai Multi Commodities Centre)

  • Dubai Airport Free Zone

  • JAFZA (Jebel Ali Free Zone)

If they meet certain criteria (e.g., Qualifying Free Zone Person), they may benefit from a 0% corporate tax rate on qualifying income.

However:

  • Non-qualifying income is taxed at 9%.

  • Transactions with the mainland are subject to regular corporate tax.

🔸 Free zone jewellery stores must assess their eligibility for tax exemptions carefully.

3. Value Added Tax (VAT) – 5% on Jewellery Sales

Since January 1, 2018, the UAE implemented Value Added Tax (VAT), which is directly applicable to the sale of jewellery.

VAT Rules for Jewellery Stores:

  • VAT Rate: 5% on the selling price of gold, silver, diamonds, and precious jewellery.

  • VAT applies to:

    • Gold and diamond jewellery

    • Making charges

    • Services like repair or customization

Special Rule for Investment-Grade Gold:

  • Investment-grade gold (purity 99% and tradable in global markets) is zero-rated.

  • Jewellery-grade gold is subject to 5% VAT.

VAT Compliance Requirements:

  • Register for VAT (if annual taxable turnover exceeds AED 375,000).

  • File VAT returns quarterly or monthly (as notified).

  • Maintain detailed sales, purchase, and inventory records.

4. Customs Duties on Import of Jewellery

Jewellery stores in Dubai often import raw gold, diamond, or finished products. The customs duty structure is:

  • Gold Bars and Raw Gold: Generally exempt or very low duty.

  • Finished Jewellery: Subject to 5% customs duty on declared value.

  • Goods from GCC countries: Duty may not apply under GCC Unified Customs Law.

🛃 Stores operating in Free Zones often benefit from customs duty exemptions.

5. Economic Substance Regulations (ESR)

Jewellery stores engaged in relevant activities (e.g., trading, holding company operations) must comply with UAE’s Economic Substance Regulations, which require:

  • Annual ESR notification

  • Substance test if applicable

  • ESR reporting (if relevant activity exists)

6. Transfer Pricing Rules

With the introduction of corporate tax, the UAE has implemented transfer pricing (TP) regulations. Jewellery stores that are part of a group or conduct related-party transactions, such as:

  • Selling to a sister concern

  • Buying from a related entity

  • Inter-company loans or services

... must ensure transactions are conducted on arm’s length basis and maintain Transfer Pricing documentation (Master File and Local File, where required).

7. Anti-Money Laundering (AML) and Know Your Customer (KYC) Obligations

Due to the high-value nature of jewellery transactions, especially in gold and diamonds, the UAE mandates strict AML compliance, particularly for Designated Non-Financial Businesses and Professions (DNFBPs), which include jewellery businesses.

Jewellery Stores Must:

  • Conduct customer due diligence (CDD) for high-value transactions.

  • Report suspicious transactions to the Financial Intelligence Unit (FIU).

  • Register on the goAML platform.

  • Maintain AML policies and train staff.

🔍 Jewellery stores are required to report cash transactions above AED 55,000 under AML regulations.

8. Record Keeping & Audit Requirements

All jewellery stores, especially those registered for VAT or subject to corporate tax, must maintain:

  • Sales and purchase ledgers

  • Tax invoices

  • Import/export documents

  • Bank statements

  • Inventory records

These records must be preserved for at least 5 years and made available during audits by the Federal Tax Authority (FTA).

9. Business Licensing and Renewals

Jewellery stores must obtain and renew trade licenses from:

  • Dubai Department of Economy and Tourism (DET) (Mainland)

  • Or relevant Free Zone Authorities (DMCC, JAFZA, etc.)

Failing to comply with licensing, tax filings, and AML rules may lead to license suspension, penalties, or business closure.

10. Penalties for Non-Compliance

Nature of Non-ComplianceGoverning BodyPenalty Range
Failure to register for VATFederal Tax AuthorityAED 10,000+
Late VAT return filingFTAAED 1,000 (first offense), then AED 2,000
Not issuing tax invoicesFTAAED 5,000 per violation
Failure to register for Corporate TaxFTAAED 10,000+
AML non-complianceMOE/GoAMLUp to AED 1 million or more
ESR non-filing or false reportingMOFAED 20,000 – AED 50,000

Conclusion

While Dubai offers a tax-friendly environment for jewellery businesses, the landscape has evolved with the introduction of corporate tax, VAT, and compliance requirements.

Key Takeaways:

  • No personal income tax, but corporate tax (9%) applies on business profits exceeding AED 375,000.

  • VAT @5% is applicable on most jewellery sales (except investment-grade gold).

  • Jewellery stores must comply with AML laws, ESR, and record-keeping rules.

  • Businesses in Free Zones may still enjoy 0% tax on qualifying income — but need to meet strict conditions.

Given the complexity of new tax laws, it is highly recommended that jewellery store owners in Dubai consult with qualified tax advisors or consultants to ensure full compliance and avoid penalties.

FAQs

Q1: Is there income tax on selling gold jewellery in Dubai?
No personal income tax applies. However, if your jewellery store is making profits above AED 375,000 annually, corporate tax at 9% applies.

Q2: Do I have to pay VAT on selling jewellery?
Yes, jewellery sales (excluding investment-grade gold) are subject to 5% VAT. You must register and comply if your turnover exceeds AED 375,000/year.

Q3: Can a customer pay cash for gold in Dubai?
Yes, but any cash transaction above AED 55,000 must be reported under AML laws, and proper KYC must be done.

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