The Diamond Industry in UAE
07 February, 2019
"Diamonds are girls' best friends."
As the gold economy strengthens the world over, UAE economy is also shining, thanks to the gold and diamonds industry.
UAE has emerged as one of the world largest diamond trading hub. The free trade policies have encouraged traders from all over the world to set base in Dubai including most of the large diamond companies in India. Until now, the diamond trading has become one of the leading imports in Dubai.
For all the ladies who love diamonds, Dubai would be an excellent choice. You can purchase quality diamonds here but with up to 50% cheaper price than anywhere else. The UAE gold, diamond precious metals market doesn't apply to the 5% VAT law at the wholesale level, and the UAE's strategic location makes it easier for the diamond transportation from South Africa and India. No one could reject the diamonds at such an appealing price.
Dubai has attracted tourists from all over the world to come and purchase gold, diamonds or other precious metals. The "Dubai Gold Souk" is the cheapest destination to purchase precious jewelry in the "legends". Shopper from all over the world flock to Dubai to purchase all these little, shining treasures.
How is the quality control of diamonds there?
What is the key factor in diamond trading?
If you google "how to check the quality of diamonds I bought", there may be thousands of answers that introduce you the "4Cs" - Carat weight, Cut, Clarity and Color. However, it's extremely difficult for someone without professional experience and technical assistance to check.
The European leading diamond certification authority - HRD Antwerp - recently signed a contract with Dubai-based retailer Stargems to open its first diamond jewelry grading lab in the Middle East. The grading lab will locate in Dubai, DMCC free zone.
Under this collaboration, the sophisticated technology and extensive expertise of Antwerp would be used to certify Stargems's entire inventory, further enabling customers to be assured about the quality and authenticity of their jewelry. The cooperation would lead to a new and higher standard of Dubai, UAE jewelry industry.
Dubai Diamond Exchange is the trade regulator and market maker for diamond and colored stones businesses. It is the only bourse in the Middle East affiliated with the World Federation of Diamond Bourses (WFDB).
For companies trading, manufacturing, cutting and polishing jewelry, pearls and precious stones in DMCC, they would automatically acquire the DDE membership. Through the DDE membership, the traders, manufacturers and the service providers are under a global governance and trade practice framework.
Besides the support services for their members' daily transactions, DDE also provides networking and trade Lounge, boiling and polishing, gemological services and education for them and their guests.
How is the diamonds corruption in UAE?
"Blood Diamonds", one special kind of diamonds that are mined and sold illegally for the purpose of financing movements against the government.
You can never imagine what criminals would do for their evil purpose.
In this case, "Kimberly Process" was introduced in 2003, to combat the "blood" diamond trades, increase the transparency and oversight in the diamond industry.
The UAE was the first Arab country to implement the Kimberley Process Certification Scheme and is the only GCC country which requires compliance with the scheme. The DMCC free zone is the only place in the UAE to import and export for rough diamonds within the UAE. The government always aims to enable the diamond trade in a secure and beneficial environment.
One of the most critical issues in the industry is diamond valuation, especially for the rough diamonds. It means specific profits earns or loss for diamond exportation countries. As part of the Kimberly Process, the UAE government intend to establish a regulation system and due diligence requirements for the industry.
The UAE has been working from the financial transparency, supply chain traceability, cross-border trade and data collection aspects to combat the corruption.
Where to do diamonds business in UAE? And how?
There are 2 choices, Dubai Multi Commodities Centre, and the Dubai Gold and Diamond Park, both located in Dubai.
The DMCC Free Zone
Dubai Multi Commodities Centre (DMCC) established in 2002, located in the heart of Dubai. It is crowned as the "Global Free Zone of the Year" by Financial Times. It is a trade and commerce hub for all kinds of ventures. Diamond, gold and other precious metals trading are one of the major business there.
DMCC offers its investors the benefits as below:
- No corporate or personal taxer
- 100% company ownership
- Total repatriation of profits and capital
- 24/7 secure business environment
- Well-built infrastructure and facilities
- Trade in the particular free zone and outside the UAE without any limitations
The incorporation process for setting-up in DMCC is simplified and straightforward:
1. Pre-approval: apply for the name reservation from DMCC authority, conduct due diligence investigation.
2. Registration: submit required documents to the authority, including proof of trade name, detailed business plan, and etc.
3. License: apply required license for trading business and pay the fee.
Dubai Gold and Diamond Park
Dubai Gold and Diamond Park was established in 2011 focusing on the jewelry business. It has become one of the attractive spots for local residents and foreign tourists. It aims to provide a collection of all the precious jewels in the world under a single roof and a convenient environment for trading gold and diamonds. It consists of a manufacturing block and a retail center.
The investors could enjoy all the benefits of the Dubai free zone incorporation from the park, together with additional benefits like:
- Assistance for all government-related issues
- Free to hire foreign expatriates
- One-stop shop for jewelry manufacturing, trading and buying
- Hallmarking facilitated by Dubai Municipality
- Convenient transportation and shuttle bus
The setting-up process is similar to the incorporation in other free zones, but with different authorities of each free zone.
What kind of License can I apply for diamond trading?
Dubai provides various licenses for its investors:
1. Trading license: enable the holder to carry out any type of trading activities
2. Manufacturing License: allows an individual or a firm to carry out manufacturing activities
3. Retail License: an individual could have his/her own retail outlet by leasing the same in the Gold and Diamond Park, Dubai
4. Service License: for providing professional services
5. E-commerce License: allow the owner to sell any commodities online and provides services online through a website
6. National Industrial License: grant its holder the permission to open up an industry anywhere in the free zone
Can I trade diamond in Mainland of UAE? And how?
Of course, you can do diamond business within the UAE Mainland, but with a local/mainland company.
A local company allows you to do business and sell products directly to the UAE market, as well as any other jurisdictions. The UAE government actually provides more freedom to a local company:
- No obligation to do audit
- Rent the workplace anywhere
- All commercial or professional licenses choice
- No limitation on visas, the number of visas based on the office size
- Mainland has no currency restrictions for checking account
The mainland company, unlike a free zone company, is an onshore company licensed by the Department of Economic Development (DED) of each emirate. While enjoying more freedom with a mainland company, there are some restrictions for its formation.
- At least 1 director is UAE resident
- The local sponsor must hold the majority (51%) of the company shares.
- Mandatory tenancy agreement on physical premises
- File audited accounts annually
Generally, it may take 6 steps and 4 weeks upon the receipt of full documentation to set-up a mainland company in UAE.
1. Decide business activities, get prior name approval
2. Choose a local partner or service agent
3. Apply for initial approval certificate
4. Prepare the court notarization and MOA
5. Choose an office location and obtain tenancy contract
6. Submit all the documents, obtain the approvals and license
7. Apply for the membership from the chamber of the commerce in the related emirate
Why UAE and Dubai?
When it comes to Dubai, people always connected it with one "expensive shinning" word - Gold.
The country used to be famous for its "black gold" - oil and gas; and now, it's again well-known as a leading international gold trading center in the world.
The strategic location on the trade routes of East and West makes Dubai an important gateway that connects the producing countries, the major manufacturing centers and the largest consuming markets in the world.
In the eight months of 2018, the Dubai Diamond Exchange had recorded a remarkable increase in total sales of approximately USD 152 million, up by 70% compared to USD 45 million it achieved in the whole of 2017. The Dubai Diamond Exchange plays an importance role in this incredible increasing, as a platform that attracting buyers and executive tenders.
Doing business in Dubai and UAE enables investors to enjoy many benefits as below:
- World-class infrastructure and business services,
- The pro-business regulations,
- Talented and diverse labor pool,
- Excellent network of double tax treaties
- No income tax, no corporate tax, etc.
Especially, for a free zone company, the investors are able to enjoy 100% foreign ownership, free exchange and profit repatriation. They can also apply for a resident visa through a free zone company, which could be used to apply a tax residence certificate.
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