Sales taxes, VAT and capital gains tax can put many investors off precious metals, adding premiums to their purchases and making it very difficult for them to profit from those purchases. After all, if you’re paying a premium upon purchasing and you’re also handing over some of your profits, then you need the value of gold to increase substantially just to earn a meager return. Luckily, knowledge is power, and there are ways to get around these taxes. In this article we’ll look at taxes on gold (buying, storing and selling) in the US, in Canada, in the UK and in India.
Gold Bullion Taxes in the US
In the United States, the tax laws differ from state to state and even region to region. You might be forced to pay 10% on your bullion purchase in one state, and nothing in the next, just as you might have to pay 10% in one county and 5% in the next. These are all sales taxes, and apply to everything that you buy, and not just precious metals.
There are exceptions in some states. For instance, in Texas and New York, you can avoid paying sales tax if you spend more than $1,000 on a single precious metal purchase. There are also tax-free states, including:
- North Dakota
If you want to get around sales taxes, should they apply in your state, you can simply purchase from an online bullion dealer located in a tax-free state, such as Texas-based JM Bullion or Michigan-based SD Bullion.
There is also a capital gains tax in the United States and one that can go as high as 28%, but as with the sales tax, this differs from state to state.
Gold Bullion Taxes in the UK
In the United Kingdom, there are some frustrating laws regarding precious metals, and ones that put many investors off. Simply put, you need to pay a 20% VAT on silver, platinum and palladium, and even if you buy overseas, pay those hefty shipping charges and avoid taxes, they can still sting you. In this case, the items are checked as they arrive in the country and the recipient receives a note telling them that they need to pay an additional 20% on their order, as well as a fee imposed by the delivery service.
There are no such charges for gold bullion, but you will be forced to pay capital gains tax, which is what you pay on the profits that you make from the sale of bullion. Basically, if you buy gold for £1,000 and sell it for £1,200, regardless of when you sell it or whom you sell it to, you will need to pay a 28% tax on that £200. You can get around this by sticking to legal tender bullion, including coins like the Gold Britannia and Gold Sovereign, as well as other coins produced by the Royal Mint.
Gold Bullion Taxes in Canada
Canada is a little more forgiving when it comes to taxes on precious metals, but only when you’re buying coins and bars with a high purity. That’s because there are no taxes on gold that is at least .995 pure, which should apply to most forms of gold. In fact, .995 is a minimum specification for gold on the Good Delivery list, so it covers you for these as well. There is a similar rule concerning silver.
However, Canada does have a fairly sizeable capital gains tax. This is as high as 50% of the individual’s income tax rate, which means that the rate you pay will depend on your income.
Gold Bullion Taxes in India
India is one of the biggest gold buying markets in the world, but it also imposes a country-wide tax on gold bullion. For gold that is imported, this is as high as 10%, and there are also taxes on gold used in jewellery, which increased in 2016.
Many believe that the Indian government wants to reduce the amount of money that its people spend on gold bullion and on gold in general, which is why these taxes have been increasing, and why they may continue to increase in the coming years.
Wherever you are, you should be able to trade and store gold without incurring any sales taxes, so if you’re faced with a substantial tax bill, then you might be better off with a service like BullionVault or GoldBroker. In the case of BullionVault and other trading programs, you’re trading spot price bullion quickly and effortlessly, without actually getting your hands on your purchase. In the case of GoldBroker, your gold is being stored in a secure vault, out of the reach of a central bank.
In neither case do you need to pay additional taxes. However, with GoldBroker you will need to pay a subscription fee, so it’s usually only viable if you are storing a significant amount of bullion.