Gold tax in Russia - bars, coins, compulsory medical insurance, ETF | 3 ways to reduce taxation

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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.

Important information

Banks and brokers are not tax agents when dealing with gold. Therefore, you will have to file a return, calculate and pay taxes yourself.

If the period of ownership of gold is less than 3 years, filing a declaration is required. Even if there is no tax to pay.

It is imperative to keep all documents. To confirm the date of purchase and the amount of expenses incurred.

For several years now, a bill on the abolition of VAT on the purchase of gold (in bullion) for individuals has been floating around. Until now it remains only on paper. The government has already sent it for revision several times (read “not accepted”).

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:

1. 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.
2. 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.

Less will go abroad

The abolition of VAT on gold will give an impetus to the growth of the attractiveness of this asset for citizens, especially for that conservative category that is still in no hurry to enter the stock market, agrees Mikhail Dorofeev, Chairman of the Board of CPC Obnovlenie. For them, buying gold without additional “markups” will become an alternative to buying foreign currency and depositing funds when rates on them give a small premium to inflation or do not give it at all. Despite the possibility of opening impersonal metal accounts, exchange-traded funds for gold, as well as purchasing investment coins that allow you to bypass VAT requirements, this group of the population can focus exclusively on the precious metal in its physical embodiment.

But it is not possible to assess the impact of purchases in the event of a hypothetical abolition of VAT on gold at the beginning of 2022, the expert says. No one collects data on the turnover of investment gold in Russia. In the third quarter, demand for bullion and bullion coins jumped 49% year-on-year to 222.1 tonnes in the third quarter, limiting the decline in total demand for the precious metal to its lowest level since the third quarter of 2009 by 892.3 tonnes, according to the World Gold Council.

There is also no clarity on the implementation of this initiative, adds Mikhail Dorofeev. It is no coincidence that Deputy Minister of Finance Alexei Moiseev made a reservation that a control system with labeling must first be introduced. But it must be taken into account that the sale of gold abroad after the Bank of Russia abandoned purchases to replenish gold and foreign exchange reserves, became an important source of foreign currency inflow into the country in the context of falling prices and physical supplies of energy resources and played a stabilizing role in the foreign exchange market. Waiving VAT on gold purchases could moderate these flows and reduce such a beneficial effect.

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.

The Central Bank and banks were taken “out of bounds”

On March 1, 2021, Government Decree No. 270 “On certain issues of control over the circulation of precious metals, precious stones and products made from them at all stages of this circulation and amendments to certain acts of the Government of the Russian Federation” came into force. The resolution approved the operating rules and defined the stages for connecting precious metals market participants to the GIIS DMDK starting from March 1, 2021. But the document does not mention important market participants.

“The Bank of Russia and credit organizations, as stated in the Resolution, are not subject to the provisions of the rules. The Ministry of Finance has prepared a draft amendment to the Resolution, which provides for the extension of the provisions of the Resolution to the Bank of Russia and credit organizations, as well as the establishment of a procedure for the provision of information by the Bank of Russia and credit organizations to the GIIS DMDK, their interaction with the specified system. Based on the results of the consideration by the Bank of Russia and the SRO NFA of the said project, proposals for its refinement were sent to the Ministry of Finance,” said Vasily Zablotsky, president of the SRO NFA (National Financial Association).

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:

1. 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.
2. The purchase of ETF assets was made into an individual investment account of the second type, which is completely exempt from sales tax.
3. 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.

In interaction mode

According to Arina Samokhina, head of the precious metals department of the ICB, access to the first part of the system’s functionality has been open since March; organizations wishing to take part in the voluntary labeling of jewelry and their tracking at all stages of circulation can begin working in it.

But the NFA’s answer leaves no doubt: the banking community is concerned about the current situation. The market requires a Government Resolution with a clear description of the processes and deadlines for the implementation of the GIIS DMDK, as well as “technical requirements developed by federal executive authorities with the participation of the Bank of Russia, which should reflect the specifics of the activities of credit institutions in the precious metals market and contribute to their uninterrupted operational work in this market segment ", Vasily Zabolotsky is convinced.

The NFA initiated a discussion of problems with the implementation of the GIIS DMDK with the Russian Ministry of Finance, Goznak and the Central Bank of the Russian Federation, and prepared proposals.

“We hope that in the third quarter of this year Goznak will begin a detailed discussion with technical specialists of banks about the technical specifications for the system, taking into account the specifics of credit institutions,” said the head of the SRO. “The Ministry of Finance also expressed its readiness to send employees of the ministry and the Federal Assay Office to participate in such discussions.”

When asked by B.O whether the opinion of the banking community is taken into account during the implementation of new tools, the NFA responded that “interaction is carried out on a constant basis.”

“Yes, it is definitely taken into account,” Arina Samokhina is sure. “It is impossible to create such a system and ensure its long-term operation without the active involvement of federal authorities and business representatives. That is why the stages of system construction are often the subject of discussion at various sites.”

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.

System with spaces

So far, bankers have no clarity on what they should prepare for, since there are no documents with a clear description of the processes and terms of connection. At the same time, it is planned that control standards through the Federal Assay Office will begin to apply as early as January 2022, including for refineries. Market participants are not sure that banks will be able to begin to fully use the system by this time.

“Marking of jewelry has been postponed until 2022, but marking of bars will begin on September 1,” said Alexey Vyazovsky, vice president of the Golden Coin House company. “We can’t talk about equality among market participants yet.”

Presumably, the expanded draft of the Resolution will be presented no earlier than the third quarter of this year. Then it will take time to agree and approve it. And in the remaining time, less than six months, banks will not have time to carry out all the necessary implementations on their side, organize tenders, register software, and undergo certification by security authorities. The issue of access to bank secrecy also arises.

Mikhail Sheibe, strategist for operations on commodity markets at SberCIB Investment Research, added that before introducing new legislation, one should ensure the safety and effective functioning of the GIIS DMDK.

Real gold, digital ruble

In connection with plans to introduce a digital ruble in Russia, another question arises: is it possible that in the future investment gold can only be purchased for cryptorubles? Alexey Vyazovsky believes that there are no such prerequisites. The story with the digital ruble “so far looks like a tribute to modern financial fashion, but not as something that will be really in demand by the market and the population.”

“The rules for using the digital ruble will be established by the Bank of Russia. We do not expect that the Bank of Russia will introduce restrictions in relation to settlements in the established current format,” said Vasily Zabolotsky.

At the same time, Anna Samokhina does not rule out that in the future gold in Russia can only be purchased for digital rubles.

The Federal Tax Service announced the conditions

The Ministry of Finance, the Central Bank and participants in the precious metals market, according to Vasily Zabolotsky, support the expediency of abolishing VAT on bullion. But the discussion of this issue began back in 2021, and there is no end in sight. The corresponding bill was submitted to the State Duma in the summer of 2021, but after a couple of months it was withdrawn for revision, or rather, “shelved.”

The Federal Tax Service is slowing down the process due to loss of income and risks of fraud with precious metals on the part of individuals. In January 2021, the department announced the conditions for consent to the abolition of VAT, and they are not at all limited to the control of goods through the system.

“All cases where initially there is a certain product that arrives without VAT, and then it is turned into a “VAT-free” product, potentially contain risks,” said Sergei Semenov, head of the VAT department of the legal entity taxation department of the Federal Tax Service. At the same time, according to the official, the tax service understands how important this step is for the development of the precious metals market.

A representative of the Federal Tax Service named measures to compensate for lost income:

• refusal of special taxation regimes;
• introduction of a precious metals marking system;
• introduction of tax agents.

Prerequisites for dedollarization

Supporters of the abolition of VAT on investment precious metals refer to countries where positive experience has already been accumulated. It is true that the causes and effects of precious metals tax reforms vary across economies.

“There is no gold mining sector in the EU, so here, with the abolition of VAT, they solved a specific problem, namely, to put an end to scams with VAT refunds on gold and silver bars,” said Alexey Vyazovsky. “Because of this, EU countries lost significant funds every year. With the abolition of VAT, the problem was partially resolved (although problems with money laundering through transactions with precious metals still remained).”

The goals pursued by the authorities of China and Hong Kong (dedollarization of the savings sector, development of their own gold mining by stimulating private demand) are similar to those set by the Russian government (especially now - during the aggravation of trade wars and the formation of new currency zones in the world). The changes will also lead to a reduction in the size of foreign currency deposits (increasing the risks of devaluation of the national currency).

Today, gold as an investment instrument occupies only the sixth position in Russia. Alexey Vyazovsky notes that the examples of China, Hong Kong, and EU countries show: with the abolition of VAT, the popularity of precious metals from an investment point of view is sharply gaining momentum.

“It is important to note the investment and speculative inertia that provokes an increase in demand after the abolition of VAT,” said Mikhail Shaibe. “The current legislation regarding the circulation of precious metals in China has been in force since 1994, the Chinese economy has grown more than 25 times since then, and accordingly the demand for gold (which has increased significantly in price).”