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Buying and selling precious metals in Russia involves the need to pay various taxes, depending on the chosen investment option. Profit from an investment, taking into account taxation, can be completely negated if this issue is not worked out in advance. Before deciding on a gold investment option, you need to carefully study the following information:
- Type of gold tax corresponding to the chosen investment method.
- Possible methods of reducing tax burden when buying and selling precious metals.
- How to sell gold without VAT within the framework of current legislation.
VAT accompanying the purchase of gold
Government taxes on gold investments are required to be paid when you:
- you purchase bullion from a bank - the price will already include VAT, and in fact you will pay 20% more for the purchase;
- If you purchase coins made of precious metals that are not included in the official means of payment of the issuing country, you will have to pay VAT when purchasing gold. If, on the contrary, you sell precious metal to a bank, then there is no need to pay VAT.
Personal income tax associated with the sale of gold
Personal income tax must be paid when selling precious metals from a brokerage account, as well as when selling gold coins or bars. Its size is 13%. There are various possibilities to reduce or even completely avoid paying this tax on gold investments.
Firstly, if you have owned a precious metal for more than three years and are in no hurry to sell it, then you are entitled to a tax benefit that exempts you from paying personal income tax.
If the period of ownership of the precious metal is less than three years, there is an option to use the property deduction for sale. The fact is that gold metal is the same property as a house or car, and paragraph 2 of Article No. 130 of the Civil Code of the Russian Federation gives you the right to appropriate preferential taxation.
There are two ways to reduce the gold tax:
- Reported income from the sale of precious metal can be reduced by the amount of expenses incurred, calculated by the purchase price of the yellow metal.
- Tax losses can be offset by a possible annual deduction for the sale of property in the amount of 250,000 rubles.
For example, you made a purchase of gold in the form of an investment in an impersonal metal account in the amount of 100,000 rubles. After a year, you managed to sell the precious metal at twice the price. — What is the best way to pay taxes on investments in gold? If the money acquired from the sale is reduced by the amount of costs, the net income will be 100,000 rubles. The tax on this amount will be 13,000 rubles. It is possible to take advantage of the property deduction and not pay taxes on gold at all. But only if the amount of profit from the sale of the precious metal is less than 250,000 rubles.
In this case, it is better to use the scheme described below.
Suppose someone purchased gold using an impersonal metal account in the amount of 300,000 rubles. The following year, the cost of the precious metal increased to 400,000 rubles. The sale will provide an income of 100,000 rubles, and the tax will be 13,000 rubles (personal income tax 13%).
The property tax deduction only applies to 250,000. On the balance of 150,000 you will have to pay a tax of 19,500 rubles upon sale.
As you can see, in this case, paying personal income tax according to the usual scheme is much more profitable than using property deductions.
Tax minus
The Ministry of Finance initiated the abolition of VAT on gold bullion, the ministry told Izvestia. As a means of accumulation, this is a promising area, but when purchasing metal from a bank, a citizen must pay a tax at a rate of 20%, and when selling an ingot, the amount of VAT is not returned to the investor, the department explained. All this makes investing in metal unattractive; the abolition of the tax should change the situation. The ministry also believes that this could support sanctioned Russian refineries (enterprises specializing in the processing of industrial semi-finished products, concentrates and alloys in order to extract high-purity precious metals). At the same time, there are no plans to abolish VAT for jewelers.
Gold
When purchasing metal from a bank, a citizen must pay a tax at a rate of 20%, and when selling an ingot, the amount of VAT is not returned to the investor
Photo: RIA Novosti/Pavel Lisitsyn
In May 2021, it became known that the Yekaterinburg non-ferrous metals processing plant lost its Good Delivery status from the London Association of Precious Metals Market Participants due to problems related to the owner. As Reuters reported, the plant is part of the Renova group of Viktor Vekselberg, who became a person on the US sanctions list. Currently, the page on the plant’s website dedicated to disclosing information about it “is under reconstruction.” At the time of publication, the company’s press service did not answer Izvestia’s questions about the consequences of the abolition of VAT.
Author of the quote
Russians can buy gold bars at a bank - such a depositor is assigned a specific bar, which is stored for a fee. However, the tax and the need to close the account completely in the case of physical gold bullion make it a very inconvenient way to save. Therefore, during periods of instability of the ruble exchange rate in Russia, the demand for foreign currency and deposits denominated in it increases.
Citizens' investments in precious metals fell by 12.5%
The decline in the attractiveness of virtual gold is explained by the slowdown in its price growth
The Central Bank, the Federal Tax Service and Rosfinmonitoring did not promptly answer Izvestia’s questions about the volume of Russians’ investments in gold, the amount of budget revenue from their taxation and possible consequences; they sent inquiries to the top 10 refining companies in Russia, but they were unable to comment on the initiative and its implications for the industry. However, it was precisely the refinery companies that several years ago advocated the abolition of VAT on gold bullion.
What is important to know about taxes on gold when buying and selling it
- When buying or selling precious metal through brokerage houses or banks, completing and filing a tax return is the responsibility of the investor.
- If the investor has owned the precious metal for less than three years, then a return must be filed, even if the estimated tax is zero.
- The moment of purchase or sale, as well as the costs incurred, must be documented.
- In recent years, the government has been considering, but will not accept, changes to legislation related to the abolition of VAT for individuals when purchasing gold bullion.
Tax on coins, bars and compulsory medical insurance
You need to know that the tax on coins, gold bars and other precious metals and compulsory medical insurance must be paid specifically on income, and the tax is called - personal income tax (NDFL). Income on all instruments with precious metals, be it coins, bars or unallocated metal, arises only at the time of their sale.
If you buy intensively, but do not sell, then you do not generate income and, accordingly, do not have to pay taxes. But if you sold coins, bars, metal with compulsory medical insurance, then calculate how long you owned them. If it’s more than three years, then you can relax - you don’t have to pay anything to our state and you don’t have to report on your sales either.
If the metal was owned for less than three years, then you need to determine the tax base and multiply it by the tax rate.
If you are a resident, then the tax rate is 13%, if you are a non-resident - 30%. A tax resident is considered to be someone who spent more than 183 days in Russia during the year. If a citizen traveled abroad for study or treatment for a period of less than six months, then this period is not taken into account. Military personnel and government officials who are abroad on duty are considered residents regardless of their stay abroad.
Taxes when investing in gold through ETFs
Securities of gold ETFs are not classified as property assets. Therefore, personal income tax of 13% will apply only to the income received upon sale. A tax reduction in this case is possible in the following cases:
- ETF securities are owned by the investor for less than three years, which reduces the amount subject to gold tax by 3,000,000 rubles for each year.
- The purchase of ETF assets was made into an individual investment account of the second type, which is completely exempt from sales tax.
- It is possible to use tax loopholes that do not contradict the law.
Since the broker acts as a tax agent, when working with ETFs, there is no need to fill out a declaration yourself and pay tax on investments.
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conclusions
- In most cases, buying and selling precious metals or precious metal-based investments requires filing a tax return.
- When selling yellow metal within 250,000 rubles annually, you can avoid paying personal income tax by taking advantage of the property deduction.
- Owning the metal for more than three years is completely exempt from gold tax. The most favorable tax conditions apply to investments in ETFs or impersonal metal accounts.
- Because of VAT, investing in bullion may not be as profitable as you would like, and the liquidity of bullion is not that simple. The situation is different with investment coins: there is no VAT, good liquidity and other advantages - more details here.
How to report to the tax authorities
Banks or other buyers to whom you sold coins, bars of precious metals and metal with compulsory medical insurance are not required to withhold and pay taxes for you, that is, in this case they do not act as tax agents and you will have to report the tax yourself.
You will need to submit your tax return (3-NDFL) to your tax office no later than April 30 of the next year and attach supporting documents to it.
For failure to submit a declaration or late, the tax office has the right to fine the violator. The penalty is 5% of the unpaid amount of tax payable on the basis of the declaration for each full or partial month from the date established for its submission, but not more than 30 percent of the specified amount.
The minimum fine is 1,000 rubles; it is paid if the tax amount is very small or equal to zero.
