A Saudi VAT-registered bullion dealer sells 1-kilogram gold bars, each independently assayed at 99.5% purity and supplied in a form recognised for trading on the global bullion market, to another VAT-registered dealer. Under the Saudi VAT Implementing Regulations, how is this supply generally treated for VAT purposes, and would the answer differ if the same dealer instead sold gold jewellery of the same 99.5% purity?
- The bullion sale is zero-rated because the gold meets the 99% minimum purity threshold and is supplied in an investment form (such as bars, ingots, or coins) tradable on the bullion market; the jewellery sale would not qualify for zero-rating because jewellery is an ornamental, not investment, form even at the same purity
- Both sales are zero-rated identically, because purity alone determines VAT treatment in Saudi Arabia and the physical form of the gold is irrelevant
- Both sales are subject to the standard 15% VAT rate, because Saudi Arabia does not offer any zero-rating relief for supplies of precious metals
- The bullion sale is exempt (not zero-rated) from VAT, meaning the dealer cannot recover related input VAT, while the jewellery sale is zero-rated instead
Why A? And why not the others?
Correct answer: A. The bullion sale is zero-rated because the gold meets the 99% minimum purity threshold and is supplied in an investment form (such as bars, ingots, or coins) tradable on the bullion market; the jewellery sale would not qualify for zero-rating because jewellery is an ornamental, not investment, form even at the same purity
Under the Saudi VAT Implementing Regulations' special treatment for qualifying investment metals, a supply of gold, silver, or platinum is zero-rated only when it meets both a purity test, at least 99% purity, and a form test, being in a form acceptable for investment such as bars, ingots, or coins tradable on the global bullion market. The 1-kilogram gold bars here satisfy both tests, so the sale between two registered dealers is zero-rated. The jewellery, even at the same 99.5% purity, fails the form test because jewellery is fabricated for ornamental or personal use rather than as a tradable investment instrument, so it does not qualify and instead receives standard VAT treatment. The option treating purity as the sole determinant, ignoring form, is wrong because both conditions must be met together. The option denying any zero-rating for precious metals at all is wrong because the qualifying-metals rule specifically creates that relief. The option reversing the outcome, exempting the bullion while zero-rating the jewellery, is wrong on both counts: it is the bullion that qualifies for zero-rating, not exemption, and the jewellery that receives ordinary VAT treatment.
Source: Saudi VAT Implementing Regulations, provisions on qualifying investment metals (gold, silver and platinum of at least 99% purity in investment form); ZATCA guidance on VAT treatment of precious metals