- Worth benefit of Dubai gold comes from zero-tax regime on gold bar imports
- For gold jewelry, solely a flat tax of 5% applies; different nations have a lot greater import taxes
- VAT refund for vacationers additionally provided to guests on the airport
Dubai: If in case you have no imaginative and prescient of the long run, the saying goes, you’ll be left with reminiscences of the previous — and all its issues.
Why are we going all philosophical? Properly, as a result of it transpires that this adage holds simply as true for the gold enterprise.
To reply the query within the headline as to why do gold charges are usually cheaper within the UAE, is an evaluation that results in one simple conclusion: a daring imaginative and prescient.
Let’s break this down. Because the emirates noticed potential roadbumps, authorities established guidelines for tax-free gold imports, particularly on uncooked supplies resembling gold bars.
This instantly translated to a slash in gold charges for retail patrons.
This is the proof, which will be discovered when evaluating the speed of yellow steel between India and Dubai. A gram of 22-karat gold in Dubai as of November 11 (4.20pm UAE time) was set at Dh166.75 per gram.
On the identical second, the gold fee in Mumbai was Rs3,715 per gram, which is equal to Dh190 per gram.
The conclusion? Gold in Dubai is a minimum of 14.45 per cent cheaper than gold in Mumbai.
Actual time worth distinction of revealed gold charges between Dubai and Mumbai, with Dubai being decrease
Nevertheless it’s not simply individuals in India, or the remainder of the Subcontinent, who come to Dubai to purchase the honeyed steel. And it is not nearly costs, both.
The standard and number of ornaments on supply has lured many an avid gold lover to retailers.
Nonetheless, going again to the center of the pockets. There’s additionally one other level to think about. Tawhid Abdulla, Chairman – Dubai Gold and Jewelry Group, explains: “Fluctuations in gold charges don’t have an effect on the making cost of jewelley in Dubai.”
So why is not my jewelry cheaper?
“There isn’t any import obligation tax on uncooked supplies like gold bars and TT bars,” explains Shamlal Ahmad, Managing Accomplice of Malabar Gold. Due to this, merchants are ready to herald the dear yellow steel from anyplace on this planet, tax free.
Nonetheless, whereas gold bars do not want any tax to be paid, jewelry imports include an import obligation of 5 per cent. And on the ornaments, a 5 per cent VAT can be relevant.
Now, right here is the excellent news: tourists visiting the UAE and buying gold (or other items) here, can claim a VAT refund at any airport in the UAE.
So effectively, there is only a 5 per cent import tax on gold jewellery, which is very economical compared to rest of the world.
But for jewellery, there need to be certain other steps taken to ensure the gold’s purity.
Ensuring gold purity
According to Dubai Municipality, there are 804 registered jewellery shops in Dubai alone.
Why is gold measured in karat
It is spelled carat outside the United States but should not be confused with the unit used to measure the weight of gems, also called carat.
A gold karat is 1/24 part, or 4.1667 percent, of the whole, and the purity of a gold alloy is expressed as the number of these parts of gold it contains.
Thus, an object that contains 16 parts gold and 8 parts alloying metal is 16-karat gold, and pure gold is 24-karat gold.
To keep traders in check, there’s a high-tech gatekeeper that looks after it.
An array of ultra-modern laboratory instruments with trained technicians are tasked to carry out a strict regime of gold inspections, covering both retailers and wholesalers in Dubai.
As for why take the trouble? It all boils down to a long-term vision and to establish Dubai, and the UAE, into a global trading hub.
A report published in July 2019 shows that the UAE’s gems and jewellery market stood at $8.4 billion in 2018. It is projected to grow at a compound annual growth rate of around 8 per cent, to cross $13 billion, by 2024.
To put that in perspective, the entire lot of gold deposits of the Philippines is estimated to be worth $11.6 billion. There are 240 metric tonnes estimated gold left in Philippines mines, based on Philippine Statistics Authority data.
With rising disposable incomes, changing consumer lifestyles, growing e-commerce and organised retail channels, coupled with innovative and premium product launches by leading jewellery players in the UAE, the market is only expected to grow.
It’s a rare combination
There are free zones serving all sorts of industries everywhere in the UAE, and in this case, the Dubai Multi Commodities Centre is the free zone for jewellery trade.
So customers benefit, why are the traders doing it?
The UAE has an “open skies” policy. The country has no income tax, in addition to tax-free gold imports for raw materials. It’s savings all around.
Besides, says Malabar Gold’s Ahmad, “If you take the example of India, the country cannot import from anywhere in the world because the steep import taxes. For example, jewellery from Finland to India come with an import tax of around 24-25 per cent.” Together, these elements make for a convincing sell-in-UAE argument.
Some leading jewellery retail chains in the UAE, which have made their mark internationally, are the likes of Joyalukkas, Malabar Gold and Diamonds, Pure Gold Jewellers.
A brief history of jewellers in particular reveals that these are UAE-grown brands.
Take Joyalukkas, for example. It is a household jewellery brand name, especially in India. The company’s chairman, Joy Alukkas, a successful jewellery magnate based in the UAE.
Alukkas’ net-worth stands at an admirable $1.3 billion. He is regarded a pioneer in setting the trend for a jewellery chain in the country. He is credited for introducing classic “desi” designs into the local market.
The Joyalukkas group records an annual turnover of $2 billion with a presence in UAE and 10 other countries. Plans are to reach a turnover of $3 billion in 2020 and expand the business to 20 countries with 200 retail outlets.
Malabar Gold and Diamonds also has grown massively in the UAE. The $4.5 billion Malabar Group enjoys a high turnover from its gold and jewellery segment, making up for 85 per cent of the overall company turnover.
As for Pure Gold Jewellers, there are 157 stores with a presence in 12 countries located in the Middle East and Asia. The company records an annual revenue of Dh1 billion per annum.
Pure Gold Jewellers also operates state-of-the-art factories in Dubai, India and China, providing employment to 3,500 people.
The company’s founder and chairman, Firoz Merchant, has plans to expand the number to 250 retail stores by 2020. His net worth is said to run in hundreds of thousands of dirhams. And to think that he achieved all this here in the UAE says a lot about the gold and gemstone industry.
“We are ahead of the game because of the import duty. The other factor why people flock to Dubai to buy gold is because they trust the gold purchased here, whether it is for the quality or the purity. It is indeed very encouraging. Second is that the quality is taken care in this market. The government is doing a lot in terms of quality control,” said Karim Merchant, Group CEO and Managing Director of Pure Gold Group.
How do retailers price their gold rates?
According to Tawhid Abdulla, Chairman of Dubai Gold and Jewellery Group, it’s the group that suggests the price for retail gold jewellery in Dubai. This is given to the Group’s 450 members who make up 80 per cent of gold and jewellery traders in Dubai. “The price is set as per the mandates set by the Department of Consumer Protection at the Dubai Economic Department.”
“The retail price is calculated based on the ounce rate for gold in the international markets and published in local currency to ensure uniformity and transparency,” he said.
He also pointed out that “the making charge is fixed per gram by the retailer and is lower than [in] India and other parts of the world.”
The suggested retail gold rates are updated three times a day according to international markets. These rates are displayed in digital screens (centrally controlled by the Group) in retail stores.
Gold rates: How they are set
Malabar Gold’s Ahmad said the rates are fixed based on the dynamic international gold price, which changes almost every second.
“The worth[s] out there on-line are relevant for on-line buying and selling. Whereas the worth for bodily gold buy is fastened by bullion sellers incorporating the associated fee related [with it],” Ahmad defined.
“For Dubai retail, recommended retail worth is really helpful by the Dubai Gold and Jewelry Group below supervision from the Shopper Safety Part of Dubai Financial Division (DED), primarily based on the worldwide costs and the overhead incurred in several commerce leads. Because the price is very volatile, it [is] fixed three times a day,” he defined.
Insurance coverage value
Ahmad added: “The insurance coverage value for holding gold inventory in Dubai can be cheaper than the remainder of the world. With the import obligation on uncooked supplies being nil and on gold jewelry minimal, we’re in a position to import from anyplace on this planet.
“Due to our worth benefit, we’re in a position to import gold jewelry from anyplace on this planet.”
Key nations exporting gold and gold jewelry to the UAE are stated to be India, Singapore, Italy, Bahrain, Singapore, Malaysia.
“Turkey and Spain jewelry too are getting well-liked within the UAE.”
Security and logistics
Alukkas, of Joyalukkas Group, stated: “The UAE is certainly the most secure nation to do gold enterprise. We now have a clear economic system and this helps in working the gold enterprise. It’s positively the most secure atmosphere to do enterprise.
“Added to this, Dubai is a hub for transit guests. And so they like to see and purchase gold from the UAE. It’s simple to regulate your jewelry enterprise within the UAE.”
“The gold market is such that you just can’t maintain inventory for lengthy. It’s a excessive worth funding, and so there needs to be quicker logistics and supply. Dubai is one of the best location for that,” stated Alukkas.
Service provider, of Pure Gold Group, echoed these ideas: “We’re working in a rustic the place transparency is prime. There’s transparency in pricing, within the inspections and the gold which you purchase and promote. And transparency within the purity of gold you purchase. Added to this, the Dubai Municipality could be very supportive to the gold trade.”
On the finish of the day, all these factors boil down to at least one factor; a daring imaginative and prescient for the long run.